CONVENIENCE FOOD INDUSTRIES (PVT.) LTD., KARACHI VS SECRETARY, REVENUE DIVISION, ISLAMABAD
2009 P T D 2011
[Federal Tax Ombudsman]
Before, Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman
Messrs CONVENIENCE FOOD INDUSTRIES (PVT.) LTD., KARACHI
Versus
SECRETARY, REVENUE DIVISION, ISLAMABAD
Complaint No. 1991-K of 2008, decided on 28/08/2009.
Sales Tax Act (VII of 1990)---
----Ss. 10 & 55---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3) & 10(3)---Maladministration---Allegation of maladministration had been made against the Sales Tax Authorities for, not deciding fourteen Sales Tax refund claims filed several years ago; arbitrarily refusing to accept five other refund claims; and not sanctioning some refund claims which were referred back by Collector (Appeals)---Complainants were also aggrieved on account of inordinate delay in thirteen customs duty drawback claims pending decision before the Customs Authorities of the Export Collectorate of Customs House---In view of the peculiar circumstances explained in the complaint involving allegations of undue delay in settling refund and duty drawback claims and misplacement of files by the Tax Authorities, the late submission of complaint, was entertained under S.10 of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 for investigation---Complaint was accordingly referred to the Revenue Division for reply--Authorities gave reply and in the light of that reply recommendations were made to the effect that cases being of grave maladministration, responsibility for excessive delay in settling refund claims and misplacement of files etc., had to be fixed and disciplinary action had to be taken under the Removal from Service (Special Powers) Ordinance, 2000---Besides, the Collector Sales Tax and Collector Customs (Exports) were to be directed to put their houses in order to save the taxpayers from available hassles and hardship in getting their refund claims decided---Responsibility be fixed for overpayment---Necessary action be completed within specified period etc.
M. Mubeen Ahsan, Advisor, F.T.O's. (Dealing Officer).
Muhammad Aleem Khan, Authorized Representative of the Complainant.
Aamer Rashid, Dy. Collector of Customs (Exports), S. Hasan Askari, Assistant Collector of Customs (Exports) and Syed Mohsin Ali Shah, Asstt. Collector of Sales Tax, Departmental Representatives.
FINDINGS/RECOMMENDATIONS
DR. MUHAMMAD SHOAIB SUDDLE, FEDERAL TAX OMBUDSMAN.---The allegation of maladministration has been made against the Sales Tax Authorities, Karachi for (i) not deciding fourteen A (14) sales tax refund claims filed several years ago, (ii) arbitrarily refusing to accept five other refund claims, and (iii) not sanctioning some refund claims which were referred back by the Collector (Appeals). The Complainants are also aggrieved on account of inordinate delay in thirteen (13) customs duty drawback claims pending decision by the Customs authorities of the Export Collectorate of Customs House, Karachi.
2. The case of the complainant is briefly stated in the following paragraphs:-
3. Fourteen (14) sales tax refund claims for the months of October and December, 2003, May, 2004 and June to December, 2004, January, March and June, 2005, and June, 2006, filed with the Collector of Sales Tax Karachi, have not been decided, thus creating financial difficulties for the complainant.
4. Five sales tax refund claims for tax period of March, July, September and December, 2006 and July, 2007 were filed along with the requisite soft copy (CD) well in time but the Counter Clerk of Sales Tax Refund returned them with the verbal remarks that there were errors which needed correction and that they should resubmit the claims after doing the needful. When the files were resubmitted after removing the objections, they were informed that the software had been changed and they should prepare the claims on the basis of new software. According to the complainant, this was a time-consuming process and, due to power crisis, the office remained without electricity daily for 6 to 8 hours. Under these circumstances, the work was completed late, and so the claims were not accepted being time barred. However, nothing was given to them in writing. The complainants claim that they approached the Deputy Collector, Mr. Jehangir. He also declined to entertain their claims.
5. The complainants further stated that they contacted the Chairman, Federal Board of Revenue, concerning the above-mentioned pending sales tax refund claims on phone. His PA advised them to report the matter to Member (Sales Tax ) and an application dated 27-4-2007 was sent to Member (Sales Tax ) for condoning time bar under the circumstances explained above. The afore-said Member directed them to approach Secretary (FBR), Mr. Abdul Hameed Memon, who, in turn, sent a copy of FBR letter No.S(1)ST-L&P/2000 dated 28-12-2006 advising them to approach Collector, Sales Tax for condonation of time bar as FBR had already empowered the Sales Tax Collectors to condone time bars in deserving cases. They accordingly approached the Deputy Collector incharge of the Refund Claim Receipt Counter of the Sales Tax Collectorate on 27-3-2008 and 10-5-2008. The Deputy Collector replied vide letter No.1/Misc. FTO.Comp.Cell/Ent/08/2609 dated 22-5-2008 that the claims had been filed after the expiry of the amnesty period on 29-2-2008 allowed by FBR vide letter No.3(3)ST-L&P-Pt, dated 25-1-2008 and were, therefore, barred by time.
6. The complainants argued that FBR and Collector, Sales Tax should facilitate the aggrieved tax payers as powers have been vested under section 55 of the Sales Tax Act, 1990 to FBR to issue instructions for the removal of difficulties just as under section 224 of the Customs Act, 1969 provisions have been made for removal of difficulties and extension of time limit. They requested that FBR/Collector Sales Tax concerned be directed to accept the claims because the delay occurred due to load-shedding and introduction of new software and there was no slackness on the part of the complainants.
7. In respect of eleven (11) sales tax refund claims, appeals were allowed by the Collector (Appeals) directing Assistant Collector, Sales Tax to process the claims as all invoices and other documents were available on the STARR. This order was not implemented and the claims were not sanctioned and were not even traceable.
8. Thirteen (13) customs duty drawback claims relating to the years 1999, 2002, 2003, 2004, 2005 and 2007 filed in the Customs House Export Collectorate were not settled by the Customs Authorities. The complainant statedly met the Collector of Customs (Exports) with the request to look into the matter as it was reported that some claims were missing from the dealing section and some were shown as rejected. According to him, it seemed that the lost claims had been shown rejected in the computer. The Collector of Customs asked him to submit duplicate claims for processing, which were submitted but they were still lying unsettled in the Export Collectorate of Customs House, Karachi.
9. The contents of the complaint were duly examined in the FTO's Regional Office. In view of the peculiar circumstances explained in the complaint involving allegations of undue delay in settling, refund and duty drawback claims and misplacement of files by the tax authorities, the late submission of complaint was entertained under section 10(3) of the FTO Ordinance for investigation in the interest of justice. The complaint was accordingly referred to the Revenue Division for reply.
10. In their reply to the complaint, the Sales Tax authorities did not make any mention of the undecided 14 claims whose registration numbers had been mentioned in the complaint. They only referred to the five delayed refund claims for the tax periods of March to July, 2006 filed vide letter dated 10-5-2008 in the light of FBR's letter C.2(1)ST/L&P/2000PT, dated 28-1-2008. It was also stated that since the claims were filed after the expiry of amnesty date of 29-2-2009, their request for condonation of delay was rejected vide afore-mentioned letter dated 22-5-2008. It was also stated that if there was any problem with the counter clerk, the complainants could have contacted the senior management for redressal of their problems either in writing or in person. Moreover, the RCPS (Software) was also not changed during the period.
11. The Sale Tax authorities further stated in their written reply that it was incorrect to say that the Collector (Appeals) had recommended that the documents be reprocessed/reverfled through STARR and paid if admissible. The Collector (Appeal) had rather held that if a claim was not validated from the STARR the same shall be treated as finally rejected. The Department advised the complainants to provide necessary documents with a view to complying with the order of the Collector (Appeals). The complainant submitted the supporting documents pertaining to the tax periods November, 2003, January, March and April, 2004, January, February, May and June, 2005. The claims were processed and an amount of Rs.693,795 verified from STARR was allowed to the complainants and claims of Rs.588,328 not validated/ verified from STARR were finally rejected.
12. The Authorized Representative (AR) of the complainant and the Departmental Representative (DR) of the Sales Tax Department were personally heard by the Advisor in the Regional Office Karachi. The AR contested DR's statement that refunds of Rs.693,795 had been sanctioned as they had neither received any cheques nor formal O-in-O's were received for rejected cases. The DR, however, reiterated that refund claims for Rs.693,795 had been sanctioned, but cheques would be issued when details of bank account were furnished by the complainant. For the rejected claims, he promised to send a formal letter to the complainant in accordance with the decision of Collector (Appeals).
13. The AR and DR were both asked to intimate the existing position of 14 sales tax refund claims during 2003 to 2006 as per the statement enclosed with the complaint. It was agreed by both that payments in 10 claims were made and part of the claims were rejected after scrutiny of the documents. However, the decision about rejection was not received by the complainants. The DR promised that in each such case an appropriate order of rejection shall be sent to the complainants. It was also promised by DR that the claim of Rs.273,664 for October 2003, Rs.74,953 from the claims of August, 2004 to January, 2005, and Rs.129,731 for March, .2005 would be sanctioned soon. DR agreed that for the partial amount rejected in these cases, appropriate rejection order(s> shall be issued. He further informed that an appeal for the refund claim for June, 2006 was pending before the Appellate Tribunal. It was also observed, that in one case, Rs.1,002,251 were over paid to the complainants.
14. In respect of thirteen (13) duty drawback claims filed with the Customs Exports Collectorate, the DR (Customs) informed: (i) four duty drawback claims were missing, (ii) five claims had been sanctioned and cheques issued, and (iii) four claims were rejected. While duplicate documents of the missing claims were obtained about six months ago, the matter relating to five sanctioned claims, cheques for which were not received by the complainants, was under investigation by the Export Collectorate. The State Bank of Pakistan had been asked to provide names of recipients of these cheques. The DR (customs) could not however plausibly explain the four Claims rejected in January, 2005, in which the complainants did neither receive the show-cause notice, nor were they allowed the opportunity of hearing, nor did they receive the adjudication orders. Besides one rebate claim filed in 1999 was held up in Accounts Section without any reason. The DR also stated that one claim (SR2 No.21718 dated 5-3-2002) related to Messer's Rujby Industries to whom a cheque had already been issued. AR however contended that this claim belonged to the complainants. DR invited the AR to his office to sort out whether this claim belonged to the complainants or otherwise. In respect of three claims, included in missing category, AR accepted that the cheques had been received by the complainant and that these cases were included by the complainant in the list of pending cases by mistake.
15. AR reiterated the submissions already made about sales tax refund claims for 2006, 2007, which were not accepted by the Counter Clerk. Eventually when his request for condonation of time bar found favour with FBR, it was too late. The amnesty period allowed by the FBR had expired on 29-2-2008 and thus the claims continued to be barred by time. The AR stated that the complainants had specifically sent an application dated 27-4-2007 to Member (Sales Tax) FBR and so should not have been hit by time bar.
16. The above position of the sales tax refund claims and customs duty drawback claims portrays a bleak picture of the working of the Sales Tax and Customs Departments and brings into sharp focus the difficulties, problems and frustrations the taxpayers have to face in dealing with these Departments. What is more disturbing is the apathy of the senior officers and their failure to sort out taxpayer problems. They Customs Department's claim that they had sent cheques in some cases, which did not reach the claimants, is extremely disturbing. Duplicate claims filed in relation to missing cases have remained pending for more than six months without any action. A duty drawback claim is pending in the Accounts Branch of the Export Collectorate for no reason. Collector (Appeals) issued certain orders which have not been fully implemented (no orders were issued to the complainant in the rejected cases). It is thus obvious that the Sales Tax and Customs Departments have long delayed the refund claims. The charges of maladministration on account of excessive delay, neglect, inattention, incompetence, and ineptitude in the administration of taxes as defined in the Establishment of the Office of the Federal Tax Ombudsman Ordinance, 2000 are clearly established against the Sales Tax Department and the Collectorate of Customs (Exports), Karachi.
17. As regards claims barred by time, the complainant's statement that they presented the claims to Counter Clerk of Sales Tax Refund who initially returned these verbally indicating some shortcomings and again for revising the CD due to change in the software are not supported by any documentary proof. Why the company presented incomplete claim in the first instance and why they informally accepted the return of these documents by the Counter Clerk a second time on the plea of change of software indicates that 'there is something wrong with the in-house capacity of the complainant to handle their refund claims efficiently and effectively.
18. It is accordingly recommended that:-
(i) In respect of 14 sales tax refund claims filed during, 2005 and 2006 it be specifically clarified to the complainants as to which of their claims had been decided, the amounts sanctioned and paid.
(ii) The claims for October, 2003, August, 2004 to January, 2005 and March 2005 be decided on merit and the admissible amounts paid to the complaints and, for the amounts rejected, appropriate orders communicated to them.
(iii) About the eleven sales tax refund claims which the Collector (Appeals) recommended for reprocessing after re-verification through STARR, it has been stated that claims for Rs.693,795 were sanctioned and those for Rs.588,328 rejected. The sanctioned claims have not been paid for non-availability of Bank Accounts which seems palpably mischievous. The Collector be directed to ensure payment of the sanctioned amount and issue appropriate orders for the rejected claims.
(iv) As regards the five time-barred cases, it is recommended that the delay involved in these cases be condoned and the FBR direct the Collector of Sales Tax to process the afore-said five claims and decide the same on merit.
(v) Some duty drawback claims are missing. In some cases refund was sanctioned but the complainants did not receive the cheques. Three cases were rejected in January 2005 of which the complainants were totally unaware. One claim filed in 1999 was lying in the Accounts Section for no plausible reason. The Collector (Exports) be directed by FBR to expeditiously dispose of thirteen (13) duty drawback claims against which the complaint has been made.
(vi) These being cases of grave maladministration, responsibility for excessive delay in settling refund claims and mis placement of files etc. be fixed and disciplinary action taken under the . Removal from Service (Special Powers) Ordinance, 2000. Besides, the Collector Sales Tax, Karachi and Collector Customs (Exports) Karachi be directed to put their houses in order to save the taxpayers from avoidable hassles and hardships in getting their refund claims decided.
(vii) Responsibility be fixed for overpayment of Rs.1,002,251 paid in excess in one case to the complainant and necessary disciplinary action initiated against the defaulter(s).
(viii) Security and safety of live files/records be ensured through a foolproof system.
(ix) An urgent effort be made by all Collectorates and Regional Tax Offices to clearly list delayed refund cases and to settle them in accordance with the provisions of law within next three months.
(x) FBR to devise a comprehensive strategy to avoid recur rence of such ugly examples of maladministration in future.
(xi) Necessary action be completed within ninety days; and
(xii) Compliance reported to this office within fifteen days there-after.
H.B.T./132/FTOOrder accordingly.