Rana MANZOOR HUSSAIN VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2008 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 536 (2005)

Sales Tax Act (VII of 1990)---

----Ss.57, 7(1) & 2(14)---Sales Tax Act (III of 1951), Ss.27(1) & 2(12)--Customs Act (IV of 1969), S.194B(2)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---C.B.R's. Order C.No.7(7)C & I/84, dated 25-11-1984---Correction of clerical errors, etc.---Reward---Complainant moved an application to Central Board of Revenue that the case against assessee decided by Appellate Tribunal be rectified under the provisions of S.57 of the Sales Tax Act, 1990 as the Appellate Tribunal had the power to correct errors; that the case be reopened after rectification of the Appellate Tribunal's order to make recovery of the amount already paid; that his reward may be paid in terms of the Reward Order; that department had committed `maladministration' by not appealing against the Appellate Tribunal's judgment---And payment of reward to complainant as claimed in his application submitted to the department---Validity---Federal Tax Ombudsman's jurisdiction did not extend to Appellate Tribunal's order---Federal Tax Ombudsman's forum was unable to analyze or comment on the Appellate Tribunal's order as to whether or not the Appellate Tribunal had passed its order under the provisions of Sales Tax Act, 1990 and not under provisions of Sales Tax Act, 1951---No ground was available for filing appeal in High Court nor were any errors apparent from the record needing rectification by the Appellate Tribunal---No reward was admissible to the complainant in view of the failure of the case prepared by him against the assessee---Central Board of Revenue may sanction special reward to the officers who rendered meritorious services---Meritorious services included displaying exceptional overall results in detection of evasion of central excise/sales tax and it was for the Central Board of Revenue to decide whether or not the complainant had rendered any meritorious service---Complainant's letter addressed to the Secretary, Sales Tax, did not appear to have been responded by the Central Board of Revenue---Not possible for Federal Tax Ombudsman to attribute `maladministration' in the case---Central Board of Revenue may give a suitable reply to complainant's letter, which also raised the question of admissibility or otherwise of monetary reward claimed by the complainant-Complaint was disposed of accordingly.

Muhammad Akbar, Advisor, Dealing Officer.

Rana Manzoor Hussain for the Complainant.

Zulfiqar Hussain Khan, D.C. Sales Tax, Rawalpindi for Respondents.

DECISION/FINDINGS

JUSTICE (RETD.) MUNIR A. SHAIKH (FEDERAL TAX OMBUDSMAN).---Facts of the complaint, as narrated by the complainant, are that Messrs ICI, Pakistan Limited had applied to the Sales Tax Department for refund of sales tax paid on `Coke' amounting to Rs.7,918,803 contending that `Coke' was partly `manufactured goods' for `Soda-Ash'. As the aforesaid company had falsely claimed the subject refund the complainant working then as an officer of Central Excise and Sales Tax Department, instituted a contravention case against it vide contravention report dated. 20-7-1990 for violation of provisions of section 27(1) read with section 2(12) of the Sales Tax Act, 1951. Adjudicating the case, the A.C., Sales Tax, Rawalpindi, upheld the contravention and subsequently Collector (Appeals) rejected the appeal filed by Messrs ICI. It was due to his extraordinary anti-evasion effort that a huge amount of Rs.7,918,803 was saved by the Government. He had also submitted an application dated 5-1-1993 to Collector, Central Excise and Sales Tax, Rawalpindi for payment of his reward in terms of C.B.R's. order C.No.7(7)C & I/84 dated 25-11-1984. While pursuing his reward case he learned that the Appellate Tribunal (Customs, Central Excise and Sales Tax) Islamabad Bench, before whom the aforesaid company had preferred an appeal, had allowed it refund of sales tax of the subject amount vide its order dated 25-9-1995. The Central Excise and Sales Tax Department, Rawalpindi, did not scrutinize the appellate order passed by the Tribunal for determination of propriety and justifiability of filing appeal or making reference to the High Court in compliance of paragraph 2 of General Order No. 2 of 1995 dated 12-7-1995 and resultantly failed to file appeal in the High Court against the unlawful order passed by the Appellate Tribunal. `Coke' being only a fuel and not `partly manufactured goods' as defined under section 27(1) of Sales Tax Act, 1951, Messrs ICI were not entitled to payment of refund of sales tax paid on it, as allowed by the Tribunal. Viewed in the light of section 2(12) of the Sales Tax Act, 1951 only salt and limestone were `partly manufactured goods' and not coke, hence sales tax paid on coke was not refundable under the provisions of section 27(1) of the Sales Tax Act, 1951. While the appellate order proved that coke was an input of Soda-Ash it did not prove that Coke was `partly manufactured goods'. Whereas the provisions of Sales Tax Act, 1951 were applicable to the subject case the Tribunal had passed its order in terms of section 7(1) read with section 2(14) of the Sales Tax Act, 1990 ,as was clear from the Tribunal's observation that ".... The appellant had validly claimed deduction of input tax in respect of Coke used in the manufacture of Soda Ash from 1-7-1998 to 31-10-1990". The provisions of sections 27(1) and 2(12) of the Sales Tax Act, 1951 are reproduced as under:---

"27(1) Refund (1) where "partly manufactured goods" are purchased by a manufacturer and the tax has been paid on those goods on importation or on any previous sale, a refund of the amount of the tax so paid shall be made to the manufacturer."

"2(12) Partly manufactured goods means only goods which are to be incorporated into and from a "Constituent" or competent part of an article which is subject to the tax."

The appellate order passed by the Appellate Tribunal, therefore, suffered from various clerical errors (listed out in Para III of the complaint) apparent on the face of record requiring correction/rectification. The errors could be corrected by the Appellate authority at any time under the provisions of section 57 of the Sales Tax Act, 1990. Once the Appellate Tribunal's order was rectified the department could file an appeal in the High Court against rectified order, which would help recover a huge amount of refund already paid. It is also pleaded that complainant's case for payment of reward may be considered and sanctioned in terms of C.B.R's. reward order dated 25-11-1984.

2. In reply, the respondents have submitted that the complainant had moved an application to the Chairman C.B.R. that (i) the case against Messrs ICI decided by the Appellate Tribunal be rectified under the provisions of section 57 of the Sales Tax Act, 1990 as the Tribunal had the power to correct errors, (ii) the case be reopened after rectification of the Appellate Tribunal's order to make recovery of the amount already paid, (iii) his reward may be paid in terms of the Reward Order referred to above. The Collectorate had examined his request and submitted a reply to the C.B.R. vide its letter dated 23-12-2004. With reference to the complaint submitted to the F.T.O. the Collectorate was of the view that the judgment of the Appellate Tribunal had attained finality and no amendment/rectification could be made in it under section 57 of the Sales Tax Act, 1990 because under the aforesaid section only an officer of sales tax could amend/correct an order/decision and that the Member or Chairman of the Appellate Tribunal were not Sales Tax Officers under the Act. For the same reason no action could be taken by the Board under the provisions of section 45A of the Act. A rectification/amendment, however, could have been made by the Tribunal under subsection (2) of section 194E of the Customs Act, 1969 (applicable in sales tax cases under subsection (1) of section 2 of the Sales Tax Act, 1990) but only within a period of three years, which too had already expired.

3. During the hearing., the complainant reiterated the points advanced in his written complaint emphasizing that whereas the Tribunal was supposed to have decided the case under the provisions of Sales Tax Act, 1951 it decided it in terms of the provisions of Sales Tax Act, 1990, especially when one considered that the term `input tax', used by the Tribunal in its Appellate Order was not even defined in the Sales Tax Act, 1951. The Appellate Tribunal's order suffered from clerical errors. The department could get the same corrected in terms of the provisions of section 57 of the Sales Tax Act, 1990 under which a Sales Tax Officer was competent to correct the mistake without any time limit. After rectification of mistake apparent from the record of the case the Tribunal's rectified order would become appealable and the department should then appeal against the rectified order in the High Court. The complainant cited Lahore High Court's order in case titled `Sahaf Woollen General Textiles Mills, Lahore v. C.I.T.' where it was held that the Tribunal was right in holding that the order passed by the Sales Tax Officer under section 30 of the Sales Tax Act, 1951 was appealable. The respondents had committed `maladministration' by not appealing the Appellate Tribunal's judgment. The department should pay his reward as claimed in his application submitted to the department as far back as on 15-1-1993.

4. The D.R. submitted that the A.C. and the Collector (Appeals) had, no doubt, decided the case in department's favour but the Appellate Tribunal after taking into consideration the views of contemporary authorities on the subject ruled in its order that `Coke' was a raw material and an input for Soda-Ash as some ingredients of Coke made an integral part of the chemical compound (CO<sub>2</sub>) which eventually resulted in the manufacture of Soda-Ash. He further submitted that the Tribunal's judgment had attained finality. No amendment/rectification could be made under the provisions of section 57 of the Sales Tax Act, 1990 as the Member/Chairman of the Tribunal were not Sales Tax Officers. He, however, opined that the Tribunal could perhaps modify the order under the provisions of subsection (2) of section 194B of the Customs Act, 1969 (as applicable to sales tax cases under subsection (1) of section 2 of the Sales Tax Act, 1990) but that too could have been done only within a period of three years, which had long since expired. The D.R. further added that there was neither any mistake apparent from the record of the appellate decision nor was there any legal infirmity from which the Tribunal's order suffered, hence no appeal was filed before the High Court. As to the payment of reward to the complainant, the D.R. argued, that no reward could be paid because the contravention case, prepared by the complainant and instituted against Messrs ICI; though initially sustained by the A.C. and Collector (Appeals), was finally quashed by the Appellate Tribunal who allowed payment of refund to Messrs ICI on the ground that it had validly claimed deduction of input tax in respect of `Coke' used in the manufacture of Soda-Ash for the period in question.

5. The arguments of the parties and the record of the case have been considered and examined. It is observed that the Appellate Tribunal's order was passed as far back as on 25-9-1995. It was for the concerned Collectorate of Sales Tax to scrutinize the Appellate Tribunals order for appealing against it before the High Court. During the complaint proceedings, however, the D.R. submitted that the Appellate Tribunal's order did not suffer from any legal infirmity nor were there any mistakes apparent from record warranting rectification of mistakes or filing of appeal. Even otherwise, he added, the time for rectification of the so-called clerical errors and for filing of appeal in the High Court had expired: the appeal could be filed in the High Court within sixty days of the service of order which period had long since expired and similarly the period for rectification of so-called clerical errors i.e. three years as stipulated under subsection (2) of section 194B of the Customs Act, 1969 (Applicable in sales tax under subsection (1) of section 2 of the Sales Tax Act, 1990) had also expired.

6. F.T.O's. jurisdiction does not extend over Appellate Tribunal's order. That being the position, this forum is unable to analyze or comment on the Appellate Tribunal's order as to whether or not the Tribunal had passed its order under the provisions of Sales Tax Act, 1990 and not under the provisions of Sales Tax Act, 1951, as alleged by the complainant. It is, however, observed that in Para 6 of its order the Tribunal, by referring to the departmental representative's contention before it that the provisions of section 27(1) of the Sales Tax Act, 1951 were not attracted because Coke was not a partially manufactured goods used in the manufacture of Soda-Ash, had ruled that "since in the preceding para we have held this position of the learned Assistant Collector as untenable and declared Coke as an input of Soda-Ash this contention of the respondents loses validity". Considering the D.R's. stand that there was no ground for filing an appeal in the High Court and nor were any errors apparent from the record needing rectification by the Tribunal it is not appropriate for this forum to interfere in the matter.

7. As for complainant's claim for payment of reward the D.R's. contention that no reward was admissible to the complainant in view of the failure of the case prepared by him against Messrs ICI stands to reason. As for payment of special reward in terms of para.7 of Reward Order dated 25-11-1984 (on record) it is observed that according to para.7 of the Reward Order ".... the C.B.R. may sanction special reward to the officers who rendered meritorious services....". Meritorious services included displaying exceptional overall results in the detection of evasion of central exercise/sales tax. It was, therefore, for the C.B.R. to decide whether or not the complainant had rendered. any meritorious services. It appears that complainant's letter dated 3-1-2005 addressed to the Secretary, Sales Tax, does not appear to have been responded to by the C.B.R. While it is not possible for this forum to attribute `maladministration' in the case the C.B.R. may give a suitable reply to complainant's letter dated 3-1-2005 (on record), which also raises the question of admissibility or otherwise of monetary reward claimed by the complainant.

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

C.M.A./559/F.T.O. Order accordingly.