TAXILA TEXTILE INDUSTRIES, LAHORE through Ch. Muhammad Ali VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2008 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 776 (2003)

Sales Tax Act (VII of 1990)---

----S. 21---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9 & 11---Delay of 10 months in deciding complainant's application seeking deregistration for having ceased to carry on business---Validity---Respondent had neither produced evidence regarding extension in time of four months for taking decision on such application nor had shown whether any dues were outstanding against complainant---No notice under S.21(4) of Sales Tax Act, 1990 had been issued to complainant---Audit of complainant had been completed---Four months had passed since filing of application---Such conduct of respondent would amount to maladministration---Federal Tax ombudsman recommended to Revenue to process application promptly on merits in accordance with law.

Muhammad Akbar, Advisor (Dealing Officer).

Ch. Abdul Razzak for the Complainant.

Ms. Azmat Tahira, D.C. (Refunds), Sales Tax, Lahore for Respondent.

DECISION/FINDINGS

JUSTICE (RETD.) SALEEM AKHTAR (FEDERAL TAX OMBUDSMAN).---This is a complaint of `maladministration' against the Collectorate of Sales Tax and Central Excise, Lahore for not deciding the complainant's application dated 24-10-2002 for deregistration of his unit.

2. Facts of the complaint are that the complainant intending to close down the business had applied for registration of his unit vide application mentioned above. The respondents asked him to produce the relevant documents required for the purpose of the deregistration and also for conducting audit for the period preceding the application for deregistration. The complainant complied with the requirements on the basis of which audit report was prepared. However, the auditors did not report any liability against the complainant. The unit should have been deregistered but deregistration was verbally denied on the pretext that it could not be done because the names of both the complainant and of his supplier were included in the list of `Suspicious Units', issued by the C.B.R. The so-called list of suspect units issued by the C.B.R. does not carry any legal sanction. The respondents may be asked to deregister the unit.

3. In reply the respondents have stated that the complainant had produced proof of payment to the supplier as required under section 73 of the Sales Tax Act, 1990 only in the month of June 2003 and thereafter the audit report was completed. The case of deregistration was being processed keeping in view the list of suspect units as well as under proviso to subsection (4) of section 21 of the Sales Tax Act, 1990. The complainant had been filing nil sales tax monthly returns, which also confirmed respondents' suspicion, and needed scrutiny. Deregistration has not been disallowed. The case is being processed. No undue delay has occurred. The complaint may be dismissed.

4. During the hearing, the A.R. reiterated the points as advanced in the written complaint contending that the application for deregistration had to be decided within four months under the provisions of section 21 of the Sales Tax Act, 1990. The complainant had provided proof of payment under section 73 of the Sales Tax Act, 1990 way back in June 2003 and audit of the unit had also been completed yet the unit had not been deregistered. The complainant filed nil returns because he had closed down the business. The contention that the supplier was also a suspect unit whose name was included in the suspect unit list is not correct as his supplier's address was known to the respondents and even the change in address was duly intimated to the department. The supplier was not fake.

5. The D.R. denied maladministration. She submitted that the complainant was asked vide department's letter dated 13-8-2003 to apply to the Collector, Sales Tax, Lahore for deletion of his name from the list of suspect units. The power to delete names from the blacklist has now been delegated to the Collectors. This matter will also be processed by the Collectorate. The D.R. contended that the supplier was not available at the given address. In fact, on inspection, it was found that a school was operating in the premises. Filing nil returns during the period 1/2001 onwards also raised suspicion. The complainant should file application for exclusion of name from the list of suspect units and that application together with the application for deregistration would be processed and decided promptly. Audit has been completed. The proof of payment under section 73 of the Sales Tax Act was given only in June 2003. The department's letter dated 13-8-2003 was not responded. The A.R. rebutted that there was no law under which he could be forced to move an application for deletion of his name from the list of suspect units. The D.R. submitted that the Government has given the maintenance of blacklist a legal cover through amendment in the Budget for the year 2003-04.

6. The arguments of the parties and the record of the case have been considered and examined. According to section 21 of the Sales Tax Act, 1990 a registered person ceasing business can apply to the Collector for cancellation of registration. The Collector after satisfying himself (either through audit or otherwise) that no tax liability is outstanding against that person, may cancel the registration of that person "from such date as he may specify but not later than four months from the date of such application or the date all the dues outstanding against such person are deposited by him which ever is later". The period of four months could be extended by another two months subject to the conditions laid therein but the respondents did not put on record any evidence regarding extension in time for taking decision on the application for deregistration nor have they shown whether any dues are outstanding, paid or not. According to section 21(4) of the Sales Tax Act, 1990 referred to by the respondents if a registered person fails to file tax return for six consecutive months the tax officer can after issue of show-cause notice and providing opportunity of being heard to such person cancel the registration after satisfying himself that no tax liability was outstanding against such person. The respondents did not show whether any such notice had been issued to the Complainant. Admittedly the audit has been completed. Four months have passed since the filing of the application. The Collectorate should have processed the case after taking their satisfaction about whether or not any actions or dues were outstanding against the complainant, indicated the same to the complainant and taken a decision on application for deregistration on its merit. The Revenue Authorities were in a position to satisfy themselves as to whether there was any outstanding liability for the complainant to discharge, whether it was deposited or not and whether there were reasons for the respondents to maintain the name of the complainant in the blacklist for taking appropriate decision in accordance with relevant provisions of law. No decision has been taken on complainant's request for deregistration despite a lapse of 10 months. This is tantamount to maladministration, especially when the audit too has been completed. The respondent's should take a final decision on the application for deregistration and any other connected matter quickly because as it is an inordinate delay has occurred in deciding the complainant's case for deregistration. Accordingly, it is recommended that the C.B.R. direct the Collector concerned to:---

(i) Process the complainant's application for deregistration promptly on merit in accordance with the provisions of law on the subject.

(ii) Compliance be reported within 30 days.

S.A.K./185/FTOOrder accordingly.