SEVEN SEAS INDUSTRIES, SADIQABAD VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2009 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 879 (2008)

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

----S.10---Sales Tax Rules, 2006, R.28 (6)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9---Excess amount to be refunded---Complainant contended that claim of refund was rejected for failure to submit supporting documents within 60 days of the filing of return without considering the fact that complainant's case was required to be processed under Special Procedure for Processing of Refund claims filed by persons engaged in making zero rated supply of ginned cotton---Collector (Appeals) disposed of an other like case with the direction to re-process the refund claim in the light of Special Procedure for Processing of Refund Claims filed by the person engaged in making zero rated supply of ginned cotton whereas complainant's case was rejected as time bared---Validity---First Appellate Authority observed that "although the facts of that case which had already been decided in favour of the party and in the instant case were same yet the period involved in that case and in the instant case was different---In that ease period involved was prior to June, 2006 when the Refund Rules, 2006 were in field/enforced---Provision of Sales Tax Rules, 2006 were not applicable on the refund claims pertaining to period prior to 5-6-2006 and the benefit of that order could not be granted to the appellant/ complainant"---Federal Tax Ombudsman observed in the light of such observation that no `maladministration' had occurred and the order-in- original was passed on merits of the case---Collector (Appeals) had given clear cut findings on the main issue involved on the merits of the case and had passed an appealable order---Complainant had also filed appeal before Appellate. Tribunal raising therein the same issues as were being agitated in the complaint---First Appellate Authority having passed orders on the merits of the case in accordance with the provisions of law the complainant should pursue its appeal filed before the Appellate Tribunal to seek remedy of its grievances---Case involved questions of fact and law---Appellate authority, being competent to deal with points of facts and law, could examine the case in the light of facts of the case and the relevant provisions of law and pass a judgment on the merits of the case after considering the pleas of the complainant--Complaint disposed of by the Federal Tax Ombudsman with such observation.

(b) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---

----S.9---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Complaint was filed prior to filing of appeal before the Appellate Tribunal---Complainant's case was not subjudice before the Appellate Tribunal on the date when the complaint was filed in the Secretariat of Federal Tax Ombudsman---Contention that Federal Tax Ombudsman did not have jurisdiction in the case because it was a case in respect of which remedy of appeal was available, was misconceived because the Federal Tax Ombudsman was competent to take cognizance of matters in respect of which "maladministration" had been alleged.

Muhammad Akbar, Advisor, Dealing Officer.

Rana Muhammad Ishaq Khan for the Complainant.

Mian Muhammad Lateef, Collector, R.T.O. and Nadeem Ahmad, A.C., Sales Tax, Multan for Respondent.

DECISION/FINDINGS

The complainant, a cotton ginner, applied for refund of sales tax of Rs.216997 on 21-7-2007 for the period 2006-07. The Deputy Collector, Sales Tax (Refunds) instead of sanctioning the refund issued a show cause notice on 22-10-2007 to the complainant alleging that refund claim was time barred as the same was not applied on software (RCPS) within 60 days of the monthly return under rule 28(1), Chapter-V of Sales Tax Rules, 2006. Although the rules meant for cotton ginners were in force but the D.C. did not consider complainant's verbal and written contentions and rejected the claim as time barred vide Order-in-Original No.25/07, dated 1-1-2008. He committed `maladministration' as he had previously rejected the refund claim of Messrs Hamid Nawaz and Sons Cotton Ginners and also did not consider the fact that number of other cases were being processed and refunds were being issued subjected to furnishing undertakings by the claimants. Mr. Muhammad Lateef, Collector (Appeals), decided the case of Messrs Hamid Nawaz and Sons, Cotton Ginners, vide Order-in-Appeal No.220/08 dated 7-3-2008 on the basis of parawise comments filed by the D.C. In both cases, the allegations incorporated in the show cause notices were the same. It was held in the case of Messrs Hamid Nawaz and Sons Cotton Ginners that their case was not time barred and Collector (Appeals) directed the D.C. to reprocess the refund claim of the aforesaid unit in the light of Special Procedure for Processing of Refund Claim filed by persons engaged in making zero-rated supply of ginned cotton for the year 2006-07. The Collector (Appeals) did not record the arguments at the time of hearing and did not deal with the case himself. He left everything to Muhammad Ali Gold, Steno/Assistant to Collector (Appeals), Multan who handled the case as he wanted, which was an act of `maladministration'. In the complainant's case also, respondents Nos.1 and 3 announced that complainant's case would also be decided in the light of Order-in-Appeal No.220/C8 passed in the case of Messrs Hamid Nawaz and Sons, Cotton Ginners. However, the case was decided against the complainant contrary to the verbal announcement. Respondent No.4, Mr. Sardar Muhammad, Dispatcher, with the connivance of respondent No.3, tried to save Order-in-Appeal No.630/08 dated 15-5-2008 under dispatch dated 15-5-2008. The Order-in-Appeal was delivered to the complainant in the third week of June, 2008. It was done to save Order-in-Appeal No.630/08 from being barred by time. The dispatch record could be seen to determine the actual date of despatch. The impugned Order-in-Appeal No.630/08 was liable to be set aside, and cancelled as the appeal was filed on 6-2-2008 and the impugned order was issued on 15-5-2008/ 15-6-2008. The ginners were not governed by Sales Tax Rules, 2006 but were governed by Special Procedure for Ginners 2006-07. The impugned Order-in-Original No.25/07 dated 1-1-2008 and Order-in-Appeal No.630/08 may be set aside and cancelled and refund of Rs.216997 may be ordered to be issued.

2. In reply, the Collector (Appeals) has submitted that the complainant was required to file appeal against the Order-in-Appeal before the Customs, Sales Tax and Federal Excise Appellate Tribunal. The FTO had no jurisdiction in cases where legal remedy of appeal was available. In this regard section 9(2) of the FTO Ordinance, 2000 was quite clear. The President of Pakistan in C.No.1270-K/03 had held that since legal remedy of appeal was available to the complainant against Collector (Appeals) under the relevant legislation the FTO had no jurisdiction to investigate the matter. The facts in case of Messrs Hamid Nawaz & Sons, Cotton Ginner, referred to by the complainant were the same but the periods involved in that case and in the case of the complainant were different. In the case decided vide Order-in-Appeal No.220/08, the period involved was prior to June, 2006 when Refund Rules, 2006 notified under S.R.O.555(I)/06 dated 5-6-2006 were not in field/force. Therefore, the provision of Rule 28(1) of Chapter-V of Sales Tax Rules, 2006 (in which RCPS along with supporting documents were required to be submitted within 60 days of the filing of return) were not applicable to refund claims pertaining the period prior to 5-6-2006. Therefore, the benefit of Order-in-Appeal No.220/08 passed in the case of Messrs Hamid Nawaz & Sons, Cotton Ginners was not granted to the complainant. All the appeal proceedings were conducted by Collector (Appeals) himself. Mr. Muhammad Ali, Gold, Steno/Assistant, was not posted in the Collectorate of Appeals' office. During hearing proceedings, the complainant's counsel pointed out a case of similar nature of Messrs Hamid Nawaz & Sons, which was decided in favour of the aforesaid unit vide Order-in-Appeal No.220/08 but it was not announced that the complainant's case would be decided in favour of the complainant, as alleged. The facts of complainant's case were considered by Collector (Appeals) an' the appeal was disposed of/decided on merits as the period involved in the other case i.e. the case of Messrs Hamid Nawaz & Sons was different. In the case decided vide Order-in-Original No.220/08 the period involved was prior to June, 2006 notified under S.R.O. 555(I)/06 dated 5-6-2006. Therefore, the provision of Rule 28(1) of Chapter-V of Sales Tax Rules, 2006 (in which RCPS along with supporting documents were required to be submitted within 60 days of the filing of return) were not applicable in the refund claim pertaining to the period prior to 5-6-2006. Therefore, the benefit of Order-in-Appeal No.220/08 was not granted to he present complainant. The Order-in-Appeal was signed was not granted to the present complainant. The Order-in-Appeal was signed on 14-5-08 but the month in the Order-in-Appeal was inadvertently written as 15-4-2008 instead of 15-5-2008 by the Despatch Clerk. However, the Order-in-Appeal had been issued within 180 days i.e. within the prescribed period as the appeal was filed on 6-2-2008 and the Order-in-Appeal was issued on 15-5-2008. The complaint may be dismissed. If the complainant was aggrieved by orders passed by the appellate forum, it should file appeal before the Appellate Tribunal, Lahore under section 46 of the Sales Tax Act, 1990.

3. During the hearing, the AR submitted that the complainant had filed appeal against the O-I-A No.630/08 before the Appellate Tribunal on 18-7-08 after tiling the complaint in the FTO Secretariat on 8-7-2008. The respondents rejected complainant's case merely on mere technicalities. Show cause notice was issued by the D.C. after 93 days of the filing of refund claim and hence it was time barred. The respondents used to give the claimants receipts for refund claims receipts indicating that the same would be processed under Rules 5 and 11 of Refund Rules, 2002. The respondents were to process the case within ten days, which was not done. Against the aforementioned Order-in-Original No.25/07 dated 1-1-2008, the complainant filed appeal before Collector (Appeals) who rejected complainant's case vide Order-in-Appeal No.630/08 dated 15-5-2008. The D.C. rejected the claim as time barred for failure to file documents under Chapter-V Rules 28(8) of Refund Rules, 2006 whereas the claim of refund was to be processed under refund Rules, 2002. In other cases of similar nature, refunds were processed and sanctioned on furnishing of mere undertakings. In another case of similar nature namely that of Messrs Hamid Nawaz & Sons, Cotton Ginners, decided vide Order-in-Appeal No.220/08 it was held that Rules, 2002 were not applicable. The Collector (Appeals) in that case held vide Order-in-Appeal No.220/08 that the party's case should be processed under special procedure for cotton ginners but complainant's case was rejected as time barred despite the fact that both show cause notices contained the same allegations. Show cause notice issued to the complainant did not confront it with the period of refund (complainant's refund). Mr. Muhammad Ali, Steno/Assistant wrote the Order-in-Appeal. The AR submitted that he would not press the argument that Collector (Appeals)' order was time barred as the Collector (Appeals) had the power to extend the time limit.

4. Mr. Nadeem Ahmad, A.C., submitted that the case was decided vide Order-in-Original No.25/07 dated 1-1-08 after issuance of show cause notice to the complainant. He added that the complainant did not attend the three hearings held in the case. In comments filed by the complainant, before the adjudication officer, it was admitted that it could not file the refund claim in time and that it was merely a procedural mistake, which should be condoned. The case was decided on its merits in the light of provisions of law. If one looked at the date of the Order -in-Original i.e. 1-1-08 the present complaint was time barred as it was submitted before the FTO after six months of the passing of the Order -in-Original, which was passed on 1-1-2008, as aforesaid, whereas the complaint was filed on 8-7-2008. There was no `maladministration' as alleged against the adjudication authority. Both cases were rejected under Sales Tax Refund Rules, 2006. No refund was being allowed in time barred cases on undertakings, as alleged.

5. Mian Muhammad Lateef, the then Collector (Appeal) submitted that Order-in-Appeal was not time barred as it was passed within the prescribed period. He added that in the case decided in favor of Hamid Nawaz & Sons, Cotton Ginners, the period of refund claim was 09/05 to 02/06 whereas the period involved in the complainant's case was October, 2006 to March, 2007. Since the new rules had come into force on 5-6-2006 the same were applicable in complainant's case. The allegation that Mr. Muhammad Ali, Steno/Assistant wrote Orders-in-Appeal was baseless as the Steno/Assistant was not even posted in the Collectorate of Appeals at the time the Order-in-Appeal was passed. He added that the complainant's case was decided on its merits in accordance with the provisions of law after giving the opportunity of being heard.

6. Mr. Nadeem Ahmad, the other DR, submitted that had the complainant's case been not found time-barred, it too would have attracted Special Procedure for Processing of Refund Claims filed by persons engaged in making zero rated supply of ginned cotton for 2006-07, read with Sales Tax Refund Rules, 2006. He added that the receipt for claims received by the department produced, by the complainant was on an old format (not updated). The complainant's case was to be processed under the provisions of Refund Rules, 2006 read with Special Procedure for Cotton Ginners Rules.

7. The arguments of the parties and the record of the case have been considered and examined. The main contentions of the complainant are that (i) the D.C. Sales Tax (Refunds), Multan and Collector (Appeals), Multan rejected complainant's refund claim for failure to A submit prescribed supportive documents within 60 days of the filing of return in terms of rule 28(6) of Chapter-V of Sales Tax Rules, 2006 (in which RCPS along with supportive documents was required to be submitted within 60 days of the filing of return) without considering the fact that the complainant's case was required to be processed under Special Procedure for Processing of Refund Claims filed by persons engaged in making Zero rated supply of ginned cotton for 2006-07 rules, (ii) in an identical case of Messrs Hamid Nawaz & Sons, Cotton Ginners, despite the fact that the allegation in the show cause notice issued to it were the same as in the case of the complainant, the Collector (Appeals) disposed of the case of Hamid Nawaz & Sons, Cotton Ginners, with the direction to the respondent Collectorate to reprocess the refund claim in the light of Special Procedure for Processing of Refund Claims filed by persons engaged in making zero rated supply of ginned cotton for 2006-07 rules whereas complainant's case was rejected as time barred, (iii) the Collector (Appeals) did not apply his mind in deciding the case. He left it to one Muhammad Ali Gold, Steno/Assistant to Collector (Appeals), Multan who processed complainant's appeal and wrote the Order-in-Appeal, (iv) both respondents Nos.1 and 3 had declared during hearing that the complainant's case would be decided in the light of Order-in-Appeal No.220/08 passed in the case of Hamid Nawaz & Sons, Cotton Ginners, but the complainant was surprised to receive impugned Order-in-Appeal No.630/08 dated 15-5-2008 deciding the case against it contrary to verbal announcement, which amounted to `maladministration', (v) respondent No.4, Mr. Sardar Ahmad, Despatcher Collector (Appeals), in connivance with respondent No.3, tried to save Order-in-Appeal No.630/08 dated 15-5-2008 by pre-dating it as 15-4-2008 from being time barred. The O-I-A was in fact, despatched to the complainant on 15-6-2008 and hence it was time barred because the appeal in the case had been filed on 6-2-2008, (vi) the impugned Order-in-Original No.25/07 and Order-in-Appeal No.630/08 may be set aside/cancelled/amended.

8. The respondents, on the other hand, contend that (i) the complainant was required to file appeal against Collector (Appeals)' Order-in-Appeal No.630/08 dated 15-5-08 before Customs, Sales Tax and Federal Excise Appellate Tribunal. The FTO had no jurisdiction in cases where legal remedies of appeal were available in terms of section 9(2) of the FTO Ordinance, 2000. The President of Pakistan in complaint No.1270-K/03 had held that since legal remedy of appeal was available to the complainant against Collector (Appeals) under the relevant legislation, the FTO had no jurisdiction to investigate the matter raised in the complaint, (ii) the case of Messrs Hamid Nawaz & Sons, Cotton ginners, was distinguishable from the complainant's case because the period involved in the former case was different from the period of refund involved in the complainant's case. In the case decided by Order-in-Appeal No.220/08 (M/s Hamid Nawaz and Sons) the period involved was prior to June, 2006 when Refund Rules, 2006 issued under S.R.O.555(I)/06 dated 5-6-2006 was not in field/force. Therefore, the provisions of rule 28(1) of Chapter-V of Sales Tax Rules, 2006 (in which RCPS along with supportive documents were required to be submitted within 60 days of the filing of refund) were not applicable to refund claims pertaining to the period prior to 5-6-2006. As such the benefit of decision contain in Order-in-Appeal No.220/08 could not be granted to the complainant (iii) the Collector (Appeals) himself conducted all proceedings. Muhammad Ali, Steno/Assistant, was not even posted in the Collectorate of Appeals at the time of passing the order and as such the question of his processing the case and writing Order-in-Appeal did not arise, (iv) the facts of the complainant's case and the relevant legal position were considered while deciding the appeal on merits, (vi) the Order-in-Appeal was signed on 14-5-2008 but the month in the Order-in-Appeal was inadvertently written as April instead of May by the despatch clerk. However, the Order-in-Appeal was issued within 180 days i.e. within the stipulated period.

9. The complaint in this case was filed on 8-7-2008 prior to filing of appeal before the Appellate Tribunal on 18-7-2008. Thus the complainant's case was not subjudice before the Tribunal on the date the complaint was filed in this Secretariat. Respondents' contention that the FTO did not have jurisdiction in the case because it is a case in respect of which remedy of appeal was available is misconceived because the FTO is competent to take cognizance of matters in respect of which `maladministration' has been alleged. However, the position in this case emerges as under:--

The complainant had filed refund claim for an amount of Rs.216,977 for the period 2006-07. Its claim was rejected both by the D.C. vide Order-in-Original No.25/07 dated 1-1-2008 and by Collector (Appeals) vide Order-in-Appeal No.630/08 dated 15-5-2008.

`Maladministration' has been alleged on the ground that the complainant's appeal was processed and Order-in-Appeal was written by Muhammad Ali, Steno/Assistant and not by the Collector (Appeals) himself. The complainant's AR has not been able to/produce any evidence to establish this allegation. The then Collector (Appeals) who was present at the hearing categorically stated that Muhammad Ali, Steno/Assistant was not even posted in the Collectorate of Appeals at the time the impugned Order-in-Appeal was passed. The AR could not rebut this statement properly. In the absence of any evidence, the aforesaid allegation is not established nor has there been any `maladministration' on that account. The Collector (Appeals) also denied having announced during hearing of appeal that complainant's case would be decided along the lines of case of Messrs Hamid Nawaz & Sons. The complainant's AR could not produce any evidence to establish that such an announcement was ever made. The complainant has also alleged in the complaint that Collector (Appeals)' order was time-barred because it was passed by him beyond the period prescribed for passing such order in section 45B of the Sales Tax Act, 1990. During the hearing, however, the complainant's AR submitted that he would not press this point realizing that the Collector (Appeals) had the authority to extend the time limit under the aforesaid section. The complainant's AR quoted rule 5 of Sales Tax Refund Rules, 2002 under which the respondents were to decide the refund cases within 10 days, whereas, according to him, the show cause notice issued after expiry of 93 days of the filing of refund claim was time-barred. Asked to quote the rule under which show cause notice involving objections and contraventions was required to be issued by the D.C. within ten days, the complainant's AR could not cite any such rule and as such it is not possible to consider his contention on that account. As regards AR's allegation that the respondents were in similar cases allowing refunds on furnishing of guarantees, the respondents explained that no refund was being given on undertakings in time-barred cases. The complainant has alleged that whereas in the case of Messrs Hamid Nawaz & Sons, Cotton Ginners, the Collector (Appeals) had accepted that the case was not time barred and ordered vide Order-in-Appeal No.220/08 that the aforesaid unit's case may be processed under the Special Procedure for Cotton Ginners Rules, he did not give the same verdict in the case of complainant despite the fact that the cases were identical in nature. In regard the legal and factual position has been explained by the Collector in the impugned Order-in-Appeal, the relevant portion of which is reproduced below:--

"....The contention of the appellant that a case of similar nature had been decided in favour of the party vide Order-in-Appeal No.220/2008 by this forum, has been considered. It is observed that in the instant case the appellant were required to submit the refund claim on the prescribed software (RCPS) along with supporting documents whereas in the case referred by the appellant, the respondent-Collectorate admitted that they neither asked for submission of RCPS. Although the facts of that case which had already been decided in favour of the party and in the instant case are same yet the period involved in that case and in the instant case is different. In case decided vide Order-in-Appeal No.220/2008, the period involved was prior to June, 2006 when the Refund Rules, 2006 notified under S.R.O. No.555(I)2006 dated 5-6-2006 were not in field/enforced. Therefore, the provisions of Rule 28(1) of Chapter-V of Sales Tax Rules, 2006 (in which the RCPS along with supporting documents were required to be submitted within sixty days of the filing of return) were not applicable on the refund claims pertaining to period prior to 5-6-2006. Therefore, the benefit of Order-in-Appeal No.220/2008 cannot be granted to the appellant."

10. In view of the foregoing position, it is observed that no `maladministration' has occurred. The D.C. (Refunds) passed Order-in-Original No.25/07 dated 1-1-2008 on the merits of the case. Against the aforesaid Order-in-Original, the complainant had filed appeal before Collector (Appeals). The Collector (Appeals) has given clear-cut findings on the main issue involved on the merits of the case and has passed an appealable order. It is also observed that the complainant has also filed an appeal before Customs, Excise and Sales Tax Appellate Tribunal, raising therein substantially the same issues as are being agitated here. Since the D.C. (Adjudication) and Collector (Appeals) have passed orders on the merits of the case in accordance with the provisions of law, the complainant should pursue its appeal filed before the Appellate Tribunal to seek remedy of its grievances. The case involves questions of fact and law. The appellate authority, being competent to deal with points of fact and law, can examine the case in the light of facts of the case and the relevant provisions of law and pass a judgment on the merits of the case after considering the pleas of the complainant.

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

C.M.A./32/Tax/FTOOrder accordingly.