SHAHNAWAZ TEXTILE LTD., LAHORE VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2009 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 852 (2008)

(a) Sales Tax Act (VII of 1990)---

----S.74---Sales Tax Rules, 2006, R.28(2)---S.R.O. 1204(I)/07, dated 11-12-2007---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Preamble---Condonation of time limit---Refund file was returned by the department on the ground that its return, which was e-filed did not appear in the department's system---On verbal advice by the computer programmer, the complainant submitted a revised return as the data of earlier submitted and acknowledged returns was not available in the system and also applied for condonation of delay in filing of refund claim---Permission for condonation of delay in filing of return claim was not granted on the ground that condonation facility was not available in cases of revised returns according to the provisions of S.R.O. 1204(I)/2007, dated 11-12-2007---Validity---Claim of refund got complicated because of non-working of department's computer system despite the facts that return was a filed and it was acknowledged and the same was not uploaded in computerized system as a result of which the return data was not available for linking up the refund claim and that the complainant was misguided by the staff to file revised return---Competent authority should have considered the fact that the complainant had a-filed the original return in question and the supportive documents, which documents were also verified, within time i.e. within sixty days of the filing of return and entertained the claim for processing on merits---Even if complainant's case for condonation of delay was to be considered under the said S.R.O. then the condition at item (b) of the said S.R.O. was attracted because it was due to non-working of department's computer system that the data of return was not available in the system for linking up refund claim---Department's contention that condonation of delay was not allowed as the complainant had applied for revision of return, was not tenable because the department had not yet approved application for filing revised return and complainant had practically not filed refund claim against the revised return, which had to be first approved by the department---`Maladministration' was found on the part of department as the complainant's re-return was not uploaded in the department's computer and the supportive documents submitted within time and verified by the department, were returned and not retained for processing claim after uploading the data of return in computer system---No delay was involved requiring condonation as the complainant had filed the return as well as the supportive documents within the prescribed period of sixty days of filing of return---Even if department felt that there was delay in submission of claim, the complainant's case attracted item (b) of S.R.O. 1204(I)/07, dated 11-12-2007 for grant of condonation, specially when the department had not yet granted the' complainant's request for filing the revised return---Department failed to handle the case fairly, justly and competently, which amounted to `maladministration'---Federal Tax Ombudsman recommended that Revenue Division direct the competent authority to re-open order of D.C. (Refunds), rejecting complainant's application for condonation of delay in filing of refund claim, under S.45A of the Sales Tax Act, 1990, set aside the same and entertain complainant's refund claim on the basis of original e-return and the supportive documents, which were submitted by the complainant within sixty days of the filing of return, as prescribed under rules-.Even if the case is required to be examined and decided in terms of the provisions of S.R.O.1204(I)/07, dated 11-12-2007, the complainant should be allowed the benefit of item(b) of the said S.R.O. (non-working of department's computer system), especially when the department had not yet approved complainant's application for filing revised return---Refund claim, once entertained, would be examined and decided by the department on its merits in accordance with the provisions of law.?

Messrs Ehsan Yousaf Textiles Mills Ltd. v. A.C. Sales Tax GST 2003 CL 338; Food Consultant Limited v. Collector C.E. and S.T., Lahore and 2 others GST 2004 CL 507 and NP Water Proof Textile Limited v. Federal Government of Pakistan through Secretary Revenue Division and F.B.R. Islamabad and another GST 2005 CL 23 ref.

(b) Sales Tax Act (VII of 1990)---

----S.74---Sales Tax Rules, 2006, R.28(2)---S.R.O. 1204(I)/07, dated 11-12-2007---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Preamble---Condonation of delay---Grounds---S.R.O. 1204(I)/07, dated 11-12-2007 empowered the Collector of Sales Tax having jurisdiction to allow extension for furnishing refund claims on the prescribed software along with supportive documents, if delay in filing of the claim and documents was due to incorrect feeding of returns by the department; non-working of computer system in Collectorate or there was some error in the refund claim preparation software (RCPS); incomplete data in Computerized Risk-based Evaluation of Sales Tax (CREST) System or delay in getting certified documents from other department or agencies despite the fact that the registered person applied for the same in time---Extension shall not be allowed by Collector to registered, persons filing refund claims against revised returns and to blacklist registered persons.?

Muhammad Mehtab Chughtai for the Complainant.

Nadeem Ahsan, D.C., for Respondents.

DECISION/FINDINGS

JUSTICE (RETD.) MUNIR A. SHEIKH (FEDERAL TAX OMBUDSMAN).---The complainant claimed refund under section 10 of the Sales Tax Act, 1990 for the tax period September, 2007 vide sales tax return filed on 23-10-2007. On 13-12-2007, the complainant filed complete documents, which were verified by the concerned Deputy Superintendent Sales Tax and were forwarded for feeding of soft copy (RCPS) in the department's computer for further processing. The computer staff informed the complainant that the data of return was not available in the computer system. The complainant had e-filed sales tax return in time, got its acknowledgement from the C.B.R.'s website but sales tax return data was not available in department's computer at the time of submission of refund file. On 18-12-2007, the complainant requested the D.C. (Refunds) to resolve the issue of non-availability of data. The D.C. marked its request to computer programmer. The computer section advised the complainant to re-submit sales tax return and seek condonation of delay in submission of refund claim under section 74 of the Sales Tax Act, 1990. The application was submitted to the Collector of Sales Tax on 18-12-2007 for condonation of delay, which was due to problem with department's computer. The complainant also applied for permission to file revised return on the same date. The Collector had the authority to extend the time for 30 days in case of justified delay under sub-rule (2) of rule 28 of the Sales Tax Rules, 2006. Although there was no change in the data contained in the original return and in the re-submitted return, the complainant provided the documents on 22-4-2008 to the concerned D.C. for verification of the same in connection with new return. The complainant's surprise, it received a letter from D.C. (Refunds) Sales Tax on 8-5-2008 intimating that the department had vide letter, dated 31-1-2008 intimated the complainant disapproval of its application for extension in filing of refund claim under S.R.O. 1204(I)/07, dated 11-12-2007, which was received back un-delivered. The D.C. acted beyond jurisdiction because the complainant had never filed request under the aforesaid S.R.O. He acted without jurisdiction as the issue of condonation was pending before the Collector. The Collector's failure to exercise his powers under Refund Rules and under section 74 of the Sales Tax Act, 1990 amounted to `maladministration'. In a number of similar cases the Honourable Supreme Court, High Court and Appellate Tribunal had declared actions of the department void and unjustified being illegal, beyond jurisdiction and without lawful authority. In support of his contention, the complainant cited Lahore High Court's decision in the case of Messrs Ehsan Yousaf Textiles Mills Ltd. v. A.C. Sales Tax (GST 2003 CL 338), Lahore High Court's judgment in the case of Food Consultant Limited v. Collector C.E. and S.T., Lahore and two others (GST 2004 CL 507) where all proceedings and consequent actions were adjudged to be unlawful and without lawful authority, Sindh High Court Karachi's judgment in NP Water Proof Textile Limited v. Federal Government of Pakistan through Secretary Revenue Division and F.B.R. Islamabad and another GST 2005 CL 23 where it was held that the F.B.R. should take serious and immediate measures to ensure that the actions taken by the tax official were strictly in accordance with law and Appellate Tribunal, Lahore's judgment in Appeals Nos. 181 to 185/03 and 1277/03 where it was held that the appeals filed by unauthorized persons were not maintainable. It was not a fault of the complainant that the data of the return did not appear in the department's computer at the time of submission of refund claim. The computer staff did not take any action to redress the issue. The Collector did not use the authority vested in him under the Refund Rules and section 74 of the Sales Tax Act, 1990 to redress complainant's grievance. The respondents may be directed to issue necessary orders for condonation of delay and entertain the refund claim. D.C's order conveying disapproval of application seeking extension in for filing refund claim may be declared as being without lawful authority.

2. In reply, the Collector of Sales Tax and Federal Excise, Lahore has submitted that after manual verification the documents were not forwarded to the department rather the same were handed over to the complainant to enable it to complete further steps. Non-appearance of the particulars of monthly sales tax return might have been either due to improper dispatch of the same by a registered person or due to a fault in the system through which returns were e-filed. The complainant was required to follow the instructions displayed at the refund receipt counter regarding manual submission of claim. The complainant did not submit refund documents manually. Since the last date for filing refund claim supportive documents/RCPS had not expired, the complainant was asked to file the refund claim manually. The application for condonation was filed on 18-12-2007. The complainant had conceded that he was directed to resubmit the return, along with data of return for 9/07. To resolve the problem the complainant was addressed on 31-12-2007, at the given address, to submit the requisite documents for revised return but he did not respond. A reminder was issued on 9-4-2008 which was responded to on 22-4-2008 when the complainant informed the D.C. that the complainant had shifted his office to another place. In the meantime a period of 90 days for which the Collector 'was empowered under section 26(3) of the Sales Tax Act, 1990 to grant permission for filing revised return had expired. The F.B.R. vide S.R.O. 1204(I)/07, dated 11-12-2007, issued under section 74 of the Sales Tax Act, 1990, had empowered the Collector of Sales to condone the delay, upto 31-1-2008, in filing of refund claims supportive documents/RCPS for the tax period from 7/06 to 9/07 with conditions and restrictions mentioned therein. Since S.R.O. was issued on 11-12-2007 and the complainant had requested, for condonation of delay on 18-12-2007, therefore, the complainant's application was regretted, on 31-1-2008 because of submission of revised return. The complainant was informed of the decision vide letter, dated 31-1-2008 because earlier intimation was received back undelivered. The complainant in his application submitted earlier had requested for revised return but later on changed the stance by saying that it did not want any change of particulars/data in the return for September, 2007. This was done to challenge the decision of the competent authority which had disapproved the application for condonation of delay. The respondents complied with the provisions of the S.R.O. while dealing with complainant's request. The competent authority had disapproved the request of the complainant. The D.C. (Refunds), being member of the Committee constituted for the purpose, had been authorized by the competent authority (Collector) to convey the decision. That is why in the letter addressed to the complainant it was mentioned that the competent authority had disapproved the complainant's application for extension in filing supportive documents/ RCPS relating to refund claim for the tax period 9/07. The complainant not only failed to submit the sales tax return properly but also did not submit refund claim supportive documents manually nor did he provide the record for revised return in time. It was all complainant's fault for which the respondents cannot be blamed. The complainant's case for condonation of delay was no more pending in the Collectorate. The complaint may be rejected.

3. During the hearing, the AR reiterated the arguments advanced in the written complaint. He added that according to Rule 28(2) of Sales Tax Refund Rules, 2006 monthly sales tax return filed by the claimant had to be treated as refund claim once all the supportive documents, including the requisite information in the format/software, were received. The complainant submitted the software also at the time of submission of other documents. The aforesaid rule 28 of the said Rules also laid down that refund supportive documents would be submitted within 60 days of the filing of return. The complainant submitted the return on 23-10-2007 and supportive documents on 13-12-2007 within sixty days. However, the refund file was returned by the department to the complainant on the ground that its return, which was e-filed did not appear in the department's system. On 17-12-2007, the complainant addressed the D.C. (Refunds) to resolve the problem. The D.C. marked the papers to the computer programmer and the computer programmer verbally advised the complainant to submit a revised return as the data of return earlier submitted and acknowledged was not available in the system and also apply for condonation of delay in filing of refund claim. According to sub-rule (2) of rule 28 of Refund Rules, 2006, the Collector was competent to condone the delay in submission of refund claim for 30 days. On 18-12-2007, the complainant requested the Collector to condone the time for one month to enable the complainant to file refund claim for the month of September, 2007 but there was no response to this letter. In response to department's letter, dated 19-4-2008 calling for documents in connection with revision of return the complainant submitted the documents on 22-4-2008. Since there was no change in the data the revised return was never submitted nor did the department allow filing of revised return yet the complainant's application for extension in filing supportive documents/RCPS relating to its refund claim for September, 2007 was disapproved on the ground that the justification given by the complainant regarding delay in filing the said claim within stipulated period did not fall in the categories of reasons mentioned by the F.B.R. in S. R. O. 1204(I)/07, dated 11-12-2007. The D.C. who communicated disapproval was not competent to do so as the power vested in the Collector as mentioned earlier. The, aforesaid S.R.O. did include non-working of computer system in the Collectorate as one of the grounds for allowing extension, if delay in filing of the claim was due to it. The Collector was competent under the S.R.O., section 74 of the Sales Tax Act, 1990 and the Refund Rules (Rule 28(2)) to condone delay. He should have accepted complainant's request for condonation, especially when the return and the refund claim had been filed within the prescribed time limit.

4. The DR submitted that the complainant had filed application on 18-12-2007 for condonation of delay in submission of refund claim under section 74 of the Sales Tax Act, 1990. It also applied for permission to file revised return again on 18-12-2007. On 31-12-2007 the complainant was addressed to provide relevant records to examine the question of revision of return. The letter was dispatched at the given address but there was no response. The case was initially reviewed favourably but later on it was regretted on the authority of the Collector. At the relevant time the computer was not working properly. The complainant should have submitted refund claims manually as was being done by the other parties. The DR placed on record specimen of some of the parties, which had submitted claims manually. The AR argued that the letter was not received by the complainant. He submitted that the complainant was again addressed on 9-4-2008, which letter was responded to. The complainant provided documents on 22-4-2008 in connection with revision of return. The AR emphasized that there was no change in the data of return nor was the filing of revised return ever allowed.

5. The arguments of the parties and the record of the case have been considered and examined. The complainant contends that (i) it had a-filed its sales tax return for the month of September, 2007 on 23-10-2007, claiming refund of Rs.95,788 and the same was duly acknowledged by E-officer, Sales Tax and Federal Excise Computerized System, F.B.R., vide acknowledgement, dated 23-10-2007, (ii) subsequently, on 13-12-2007 the complainant submitted supportive documents for the said refund claim to the Collectorate, which documents were duly verified by the Deputy Superintendent Sales Tax Incharge, (iii) the documents were returned to the complainant on the ground that the data of return was not available in the department's system, (iv) on 18-12-2007 the D.C. (Refunds) was requested through a written letter to resolve the matter as the complainant had submitted the return and data within time. The D.C. referred the matter to the computer programmer, who asked the complainant to file revised return and also apply for condonation of delay, (v) as advised, the complainant on 18-12-2007 applied to the Collector for permission to re-submit the return and also to condone delay in filing of refund claim, (vi) the complainant submitted documents in connection with revision of return on 22-4-2008 in response to D.C's letter, dated 9-4-2008, (vii) the D.C. (Refunds) on 8-5-2008 intimated disapproved of extension in filing of refund claim despite the fact that the complainant had originally filed both sales tax, return and the refund claim within time as prescribed in the rules, (viii) it was not complainant's fault that the department's computer was not working and had failed to upload data of complainant's return.

6. The respondents, on the other hand, contend that (i) the complainant applied to the Collector on 18-12-2007 for permission to revise the return without providing the connected record, (ii) the permission for condonation of delay in filing of refund claim was not granted as the complainant had applied for revised return, (iii) according to the provisions of S.R.O. 1204(I)/07, dated 11-12-2007 condonation facility was not available in cases of revised returns, (iv) the complainant provided the required documents in connection with permission for revised return on 22-4-2008 when the period of 90 days prescribed for granting permission for revised return had expired. The case was sent to the F.B.R. for permission of revised return.

7. The scrutiny of the case record reveals that the complainant e-filed its sales tax return for the month of September, 2007 on 23-10-2007, claiming refund of Rs.95,788. The F.B.R. acknowledged receipt thereof (the acknowledgement receipt is on record). Subsequently, the complainant submitted refund supportive documents to the Collectorate on 13-12-2007 within sixty days of the filing of return as required under the rules. These documents were duly verified by the Deputy Superintendent Incharge. The complainant also vide letter, dated 17-12-2007 requested D.C. (Refunds) to let them file refund claim and resolve the issue as the complainant had already submitted its sales tax return, which was duly acknowledged by the F.B.R. The D.C. marked the file to the computer programmer who advised the complainant to file revised return and also apply for condonation of delay. The complainant subsequently filed application seeking permission to file revised return and condonation of delay in filing of refund claim The department has not denied that the complainant was advised by the departmental official to file revised return and seek condonation of delay, nor have they denied the receipt of return, which was filed on 23-10-2007 and the submission of refund supportive documents, which were submitted on 13-12-2007 within the prescribed time limit. Instead of advising the complainant to apply for revised return and to seek condonation of delay the respondents should have after receiving the refund supportive documents kept the refund file with themselves and should have waited for uploading data of return in the computerized system of the department, which return had been received and acknowledged by the P.B.R. On appearance of data in the computerized system of the department, the respondents could have processed the refund claim and decided it on its merit. The respondents failed to do so. Had they done so, they would have found the complainant's claim as filed within time i.e. within sixty days of the filing of return without involving any delay or condonation thereof. Unfortunately, that did not happen. The complainant was advised to seek permission for filing revised return and to seek condonation of delay in filing the refund claim. It was not complainant's fault that the data of original return submitted by it was not uploaded in the department's computer and the refund supportive documents submitted by the complainant were not retained by the department for processing the refund claim. Despite this, complainant's request for condonation of delay was rejected. While correspondence for permission to allow filing of revised return continued between the respondents and the complainant, its application for condonation of delay was considered and rejected under S.R.O. 1204(I)/07, which provided that the extension shall not be allowed by the Collector to registered persons filing refunds claims against revised returns. In the first place, the refund claim should have been entertained and processed as both the original return and the supportive documents had been submitted by the complainant within time and decided on its merits. Secondly, even if the department insists that there was delay in submission of refund claim, it was somewhat harsh to disapprove complainant's application for extension in time for filing the claim on the ground that the justification given by it regarding delay in filing the said claim within the stipulated period did not fall in the category of reasons mentioned by the F.B.R. in S.R.O. 1204(I)/07 for condonation of delay. The S.R.O. empowers the Collector of Sales Tax having jurisdiction to allow extension upto 31-1-2008 for furnishing refund claims pertaining to tax periods for 7 of 2006 to 9 of 2007 on the prescribed software along with supportive documents under Rule 28 of the Sales Tax Rules, 2006, if delay in filing of the claim and documents was due to:--

(a) incorrect feeding of returns by the department.

(b) non-working of computer system in Collectorate or there was some error in the refund claim preparation software (RCPS).????????

(c) incomplete data in Computerized Risk-based Evaluation of Sales Tax (CREST) System: or.

(d) delay in getting certified documents from other department or agencies despite the fact that the registered person applied for the same in time.

Provided that extension shall not be allowed by Collector to registered persons filing refund claims against revised returns and to blacklisted registered persons.

8. Clearly, the complainant's claim of refund got complicated because of the non-working of department's computer system as despite the facts that (i) the non-working of department's computer system as despite the facts that (ii) the return was e-filed and it was acknowledged the same was not uploaded in the computerized system as a result of which the return data was not available for linking up the refund claim and (iii) the complainant was misguided by the staff to file revised return. The competent authority, while dealing with complainant's case, should have considered the fact that the complainant had e-filed the original return in question and the supportive documents, which documents were also verified, within time, i.e. within sixty days of the filing of return and entertained the claim for processing on merits. Even if the complainant's case for condonation of delay was to be considered under the aforesaid S.R.O. then the condition at item (b) of the S.R.O. 1204(I)/07 was attracted in the complainant's case because it was due to non-working of department's computer system that the data of return was not available in the system for linking up complainant's refund claim. The respondents' contention that condonation of delay was not allowed as the complainant had applied for revision of return is not tenable because the department had not yet approved complainant's application for filing revised return and complainant had practically not filed refund claim against the revised return, which had to be first approved by the department. Clearly, there is `maladministration' on the part of the respondents in that the complainant's e-return, though submitted by it within time, was not uploaded in the department's computer and the supportive documents, though submitted within time and verified by the Deputy Superintendent Incharge were returned and not retained for processing complainant's claim after uploading the data of return in department's computer system. Thus in the first place, no delay was involved in complainant's case requiring condonation as the complainant had filed the return as well as the supportive documents within the prescribed period of, sixty days of the filing of return and, secondly, even if the department felt that there was delay in submission of claim (for no fault of the complainant), the complainant's case attracted item (b) of S.R.O. 1204(I)/07 for grant of condonation thereof, especially when the department had not yet granted the complainant's request for filing the revised return. Unfortunately, the department failed to handle the case fairly, justly and competently, which amounts to 'Maladministration'. Accordingly, it is recommended that the Revenue Division direct the competent authority to--

(j) Re-open D.C. (Refunds' order, dated 31-1-2008, rejecting complainant's application for condonation of delay in filing of refund claim, under section 45A of the Sales Tax Act, 1990, set aside the same and entertain complainant's refund claim on the basis of original e-return and the supportive documents, which were submitted by the complainant within sixty days of the filing of the return, as prescribed under the rules. Even if the case is required to be examined and decided in terms of the provisions of S.R.O. 1204(I)/07, dated 11-12-2007, the complainant should be allowed the benefit of item (b) of the aforesaid S.R.O. (non-working of department's computer system), especially when the respondents had not yet approved complainant's application for filing revised return. Needless to say, the refund claim, once entertained, would be examined and decided by the respondents on its merits in accordance with the provisions of law.

(ii) Compliance be reported within 30 days of the receipt of this order.

C.M.A./22/FTO?????????????????????????????????????????????????????????????????????????????????? Order accordingly.