GADOON TEXTILE MILLS LTD., INDUSTRIAL ESTATE GADOON AMAZAI, TEHSIL AND DISTRICT SWABI VS SECRETARY, REVENUE, DIVISION, ISLAMABAD, 2008 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 656 (2004)

Central Excise Act (I of 1944)---

----Ss.1(3) & 3-D(3)---S.R.O.(I)/99 dated 1-7-1999 & S.R.O. 805(I)/99 dated 15-7-1999--Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)(i)(a)---Imposition of excise duty---Withdrawal of excise duty---Contrary to law---Refund---Excise duty was imposed by S.R.O.(I)99, dated 1-7-1999 on manufacturers at Gadoon Amazi and it was withdrawn by S.R.O. 805(I)/99, dated 15-7-1999 with effect from 1-7-1999---Complainants had deposited Rs.1,00,000 in advance and their request for refund was accepted to the extent of Rs.19,780 and the claim of Rs.80,219 was rejected---Validity---Incidence of tax had not passed to the consumers---Complainants had produced documentary evidence, which was official document---Excise duty paid was not included in the value for purposes of calculating sales tax---Invoice was in the name of customers mentioned in the official document---Process adopted in rejecting the claim without hearing the complainants and without properly examining the evidence on record was contrary to law---Decision was made arbitrarily only on presumptions and not on evidence on record---Tax Ombudsman ordered the refund of Rs.80,219 be paid within 30 days.

Usman Gul for the Complainant.

Imtiaz Shaikh, DC-Sales Tax, Peshawar for the Complainant.

Amer Rashid, AC-Sales Tax, Mardan for Respondent.

DECISION/FINDINGS

JUSTICE (RETD.) SALEEM AKHTAR (FEDERAL TAX OMBUDSMAN).---The complainants are manufacturers at Gadoon Amazi. The excise duty was imposed by S.R.O.(I)/99, dated 1-7-1999 in pursuance of which they deposited in advance Rs.100,000. Subsequently the notification dated 1-7-1999 referred above was suspended till 31-7-1999 and ultimately by S.R.O. No.805(I)99 dated 15-7-1999 it was withdrawn w.e.f. 1-7-1999. The complainants filed application for refund of Rs.100,000 on 7-8-1999. Along with the application they submitted the bills with full details in support of their claim. The Adjudicating Officer by order, dated 17-11-2003 ordered for refund of Rs.19,780 and rejected the claim of Rs.80,219 on the ground that the incidence of tax duly has been passed on to the customer. The complainants have alleged that no hearing was afforded to them and the order was passed in contravention of law, rules and instructions of C.B.R.

2. The department in its reply admitted the payment of excise duty and withdrawal of notification. They averred that the incidence of tax was passed on to the consumer. It was further stated that at the time of withdrawal of Central Excise Duty an amount of Rs.19780.84 remained .unadjusted as, balance in Account Current Ledger ACL. It was further stated that the sales tax invoice did not mention the amount of Central Excise Duty and for purpose of assessment of the duty ARI is the proper document which clearly indicates the amount of Central Excise Duty while sales tax is paid on duty paid value plus Central Excise Duty. The retail price with reference of third schedule means the price fixed by the manufacture, inclusive of all charges and tax other than sales tax. This proves that the burden of tax had been passed on to consumer.

3. The fact that the order was passed without affording hearing was admitted by the DC, Sales Tax on 25-3-2004 while representing the case.

4. The main question for consideration is whether the complainant has passed on incidence of excise duty to the consumer. The burden of proof as provided by section 3-D of Central Excise Act is upon the person collecting the excise duty. To discharge the burden the complainants have produced documents namely Form ARI which is the official document signed by the authorized agent of the owner and the Central Excise Officer. Mr. Amer Rashid has contended that from this document it is clear that while calculating sales tax the complainants have not included the element of excise duty in the value of goods which is contravention of the law. This may be so but it is not relevant for the purpose of present controversy. This is an admitted position that Form ARI shows clearance of seven consignments in which the description of packages, duty of goods, weight or quantity, assessable value or retail price, duty paid value and amount of sales tax are mentioned. For purposes of present case it is thus established that although excise duty was paid by the complainant it was not included in the value for the purposes of calculating sales tax. Therefore, the value of the goods mentioned in ARI is fully established. The next step is to see whether incidence of central excise duty was passed on to the customer. In this regard Mr. Usman Gul has produced the invoices in respect of goods mentioned in Form ARI. The price in the invoice in the name of customers of these goods is the same as mentioned in Form ARI. It is thus established that no higher price has been charged from the customers which may represent the excise duty. Since the burden has been discharged that central excise duty has not been passed on to the customer, it was for the department to rebut it by cogent evidence to show that the invoices issued were not correct and the price mentioned in the invoices are higher than the price of the value of the goods mentioned in the Form ARI. The learned representative of the department endeavoured to argue that since sales tax has wrongly been calculated there is a breach of law but as stated earlier it does not affect the merit regarding refund of excise duty. Since the complainants have discharged their burden they are entitled to refund of the said amount. The process adopted in rejecting the claim without hearing the complainants and without properly examining the evidence on record is contrary to law. Decision has been made arbitrarily only on presumption and not on evidence on record. Maladministration is thus established.

5. It is therefore recommended:

(i) Refund of Rs. 80,219 be paid to the complainant within 30 days.

(ii) Compliance be reported within one week thereafter.

M.I./286/FTOOrder accordingly.