GERRY DNATA (PVT.) LTD. VS SECRETARY REVENUE DIVISION, ISLAMABAD
2011 P T D 1553
[Federal Tax Ombudsman]
BeforeDr. Muhammad Shoaib Suddle, Federal Tax Ombudsman
Messrs GERRY DNATA (PVT.) LTD.
Versus
SECRETARY REVENUE DIVISION, ISLAMABAD
Complaint No.185/ISD/CUS(21)/727/2009, decided on 25/03/2010.
Customs Act (IV of 1969)---
----Ss. 19 & 33---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9, 10 & 11---Exemption and refund claim---Mal administration---Complainant who imported ground handling equipment in 1998 claimed exemption which was refused on the ground that the goods were imported in second hand condition which was not permissible---Appellate Tribunal decided the case in favour of the complainant vide order-in-appeal, but refund due on the basis of said decision had not been paid by the customs in spite of lapse over two years despite several requests by the complainant---Authorities, instead of taking effective action had handled the matter in an inefficient and irresponsible manner and also in violation of the time limitation, which had constituted mal administration---Refund claim of the complainant had been inordinately delayed just for want of confirmationofrefundandinputadjustmentbySales Tax Authorities---Case presented a glaring example of gross inefficiency on the part of the Customs and Sales Tax Authorities which constituted mal administration---Recommendations were made to the Federal Board of Revenue to direct R.T.O. to verify within 7 days, whether or not the complainant had made any input adjustment in the case; customs at Airfreight Unit to decide the case in the light of the Appellate Tribunal's decision within 7 days about input adjustment; responsibility of non-implementation of Appellate Tribunal's decision, be fixed and the Customs and Sales Tax functionaries responsible for mal administration proceeded against under the relevant disciplinary rules; Deputy Collector Customs responsible for issuing unjustifiable call notices resulting in representative of complainant's uncalled for visit becalled upon to show-cause within 15 days as to why the expenditure incurred by said representative on travelling, boarding and lodging, may not be recovered from him; a list of similarly delayed cases be prepared and necessary steps put in place to dispose of all such cases within three months; regular and meaningful monitoring of delayed cases be done by Member (Legal) with monthly progress reports submitted to Federal Tax Ombudsman Secretariat; complainant be included as a case study in the training module of Training Directorates under Revenue Division and compliance of first two recommendations be reported within 21 days and compliance of rest of the recommendations be reported within 90 days.
Yasin Tahir, Senior Advisor Dealing Officer.
Farhat Nawaz Lodhi, Authorized Representative.
Saqif Saeed, D.C. Departmental Representative.
FINDINGS/RECOMMENDATIONS
Dr. MUHAMMAD SHOAIB SUDDLE, FEDERAL TAX OMBUDSMAN.---Messrs Gerry Dnata (Pvt.) Ltd., Islamabad imported ground handling equipment in 1998 and claimed exemption of input certain duties and taxes under S.R.O. 962(I)/1998 dated 8-9-1998 read with (the then) Senior No. 39 of the Sixth Schedule to the Sales Tax Act, 1990. The Customs declined the claimed exemption on the ground that the goods were imported in second hand condition which was not permissible. The matter went to the Appellate Tribunal, Islamabad, which decided the case in favour of the complainants vide Order-in-Appeal No.41/CU/ATIB/2005 dated 11-12-2007. But the refund due on the basis of this decision has not been paid by the Customs in spite of lapse of over two years and despite several requests by the complainants. It has therefore been contended by the complainants that:--
(i)non-payment of refund for the past over two years is maladministration. The Customs be directed to immediately refund the said amount along with compensation as per law without further delay; and
(ii)award the costs of the litigation and additional amount under section 67 of the Sales Tax Act, 1990. Any other relief, deemed appropriate by the honourable FTO may also be granted.
2.The complaint was referred for comments to the Revenue Division. Their parawise comments are reproduced below:--
"The judgement on the issue was passed vide Order-in-Original No.28 of 2004 dated 31-12-2004 by Collector (Adjudication), Rawalpindi. Messers Garry's Dnana (Pvt.) Limited, accordingly made the payment of duties and taxes at Karachi AFU/JIAP vide Cash No. 4879 dated 26-2-2005. Subsequently, Messrs Garry Dnana (Pvt.) Limited preferred an appeal against the orders of Collector (Adjudication) before the Appellate Tribunal, Islamabad. The Appellate Tribunal vide Judgment No.41/CU/ATIB/2005 dated 11-12-2007 allowed the benefit of exemption from Sales Tax to Messrs Gerry Dnana (Pvt.) Limited. Consequently, they filed refund claim of Sales Tax at Collectorate of Customs and Central Excise, Rawalpindi. As the payment of duties and taxes had been made at Karachi AFU, therefore, the refund claim was referred to that office. The AFU Customs sought confirmation from Collectorate of Sales Tax in order to ascertain whether or not the adjustment of input/refund of the said amount had been made by the Sales Tax authorities, as required under Sales Tax General Order No.3 of 2004 dated 12-6-2006. No reply has so far been received from Regional Tax Office, Karachi. However, the refund claim is being processed and is subject to completion of legal formalities. The case shall be finalized accordingly."
3.After receiving their written comments, the parties were heard on 16-3-2010. The Customs were represented by Deputy Collector Mr. Saqif Saeed, and the complainants by Advocate, Mr. Farhat Nawaz Lodhi. The DR admitted that the refund of Sales Tax was rightly due to be paid to the complainant. However this payment was subject to confirmation by the Sales Tax authorities that the complainants had neither obtained this refund previously nor made input adjustment of the claimed amount. These requirements have been stipulated under the Sales Tax General Order No.3/2004 dated 12-6-2004, relevant provisions of which are reproduced as under:--
"Before processing import-related refund claims, the concerned Collectorate of Customs must seek confirmation from the concerned Collector of Sales Tax that no adjustment of input/refund of the said amount has been claimed by the applicant or paid by the Sales Tax Department, to avoid double payment of refund. The concerned Collectorate of Sales Tax on receipt of a reference from Collectorate of Customs shall issue required confirmation within thirty days to the effect that no adjustment of input/refund of the amount involved has been claimed by the registered person in the Sales Tax Collectorate."
4.The DR informed that the Customs had been writing to the Sales Tax authorities for issue of required confirmation. In response, the Sales Tax Enforcement Division of RTO Karachi confirmed on 11-6-2009 that the complainants had not obtained refund of the Sales Tax involved in this case. However, to verify whether the complainant had made any input adjustment, confirmation of the Assessment and Processing Division of Sales Tax under RTO, Karachi, was still needed. Accordingly, the DR addressed a letter to the Assessment and Processing Division of Sales Tax, RTO, Karachi on 18-6-2009. A reminder was issued on 3-12-2009 and a further reminder was issued on 6-3-2010. But the Sales Tax authorities of the Assessment and Processing Division, RTO Karachi have yet to issue the requisite confirmation, although they were under obligation under the aforesaid STGO to do so within thirty days.
5.The RTO Karachi was also invited to the hearing to represent their position. They however sent a request for adjournment for one month vide their Letter No.CIR/EC-11/LTU/KHI/2010 datedMarch16, 2010. As this letter was issued by them on the date of hearing when all other parties were already present for hearing in the FTO Secretariat, therefore, the request for adjournment could not be acceded to because it would have further delayed the already excessively delayed payment of refund.
6.The complaint has been examined in the light of the written and oral submissions of the parties. It has been observed that the refund claim is pending since 2007 for want of confirmation of non-payment of input adjustment by the Sales Tax authorities of RTO Karachi. Although this confirmation was required under the rules to be issued by the Sales Tax authorities within a month, yet it has taken months upon months and still the requisite confirmation is not forthcoming.
7.The Customs authorities at Airfreight Unit Karachi have also not appropriately pursued the matter with the Sales Tax authorities. The inefficiency and ineptness is clearly discernible from the fact that the first Letter No.52/138/2008-AFU seeking confirmation of input adjustment/refundfromtheSalesTaxauthoritieswaswrittenon19-2-2009 i.e. over one year after the Appellate Tribunal's decision [dated 11-12-2007] in favour of the complainants and about eight months from the complainants' letter No.Gold/2k08 dated 7-6-2008. Not only was the time limit of thirty days for confirmation under the aforesaid STGO not heeded to, this matter was also not efficiently followed up by the Customs. Even the reply of Sales Tax received four months later on 11-6-2009 vide Sales Tax Letter No.01/08/Regd/Custom/NOC/05 only confirmed that refund had not been claimed from the Sales Tax authorities, but regarding input adjustment, it advised the Customs to refer the matter to the Assessment and Processing Division of Sales Tax of the RTO Karachi. As a result of this inefficient handling, the refund claim has been inordinately delayed for over two years, which tantamounts to deliberate non-payment of refund already determined by the competent authority i.e. the Appellate Tribunal, and thus constitutes maladministration as defined under clause (v) of the section 2(3) of the FTO Ordinance, 2000.
8.The height of inefficiency of both the Customs and the Sales Tax authorities can also be gauged from the fact that having received a copy of the complaint for comments in December, 2009, neither the Deputy Collector Customs of AFU Karachi responsible for payment of refund in this case showed any anxiety to expedite the settlement of this inordinately delayed refund claim nor the Sales Tax authorities expedited their confirmation in spite of the fact that sufficient time was available to them from the date of the complaint and the last date of hearing in FTO Secretariat. Instead of taking effective action, they have handled the matter in an inefficient and irresponsible manner and also in violation of the time limitation prescribed under the aforesaid SGTO which also constitutes maladministration as defined under section 2(3) of the FTO Ordinance, 2000.
9.In addition to the above, the AR stated that the DR had issued him three unlawful and unnecessary notices of hearing in his office in Karachi as under:
(i)S2/138/2008-AFT dated 09-11-2009.
(ii)S2/138/2008-AFU dated 16-11-2009.
(iii)S2/1398/2008-AFU dated 19-11-2009.
The Advocate could attend only once because it was too expensive to travel from Islamabad to Karachi. When asked why the Advocate was called by the DR to appear before him in Karachi, he had no plausible explanation or justification to offer.
Findings
10.From the foregoing discussion, it is evident that the refund claim has been inordinately delayed just for want of confirmation of refund and input adjustment by Sales Tax authorities under RTO Karachi. This inordinate delay has also been caused by inefficient handling of the matter by the Customs. This case presents a glaring example of gross inefficiency on the part of the Customs and the Sales Tax authorities of RTOKarachiwhichconstitutesmaladministrationasdefinedin section 2(3)(i),(ii) and (v) of the FTO Ordinance, 2000.
Recommendations:
11.In view of the above, the following recommendations are made:--
(i)F.B.R. to direct RTO Karachi to verify within 7 days, whether or not the complainants have made any input adjustment in this case.
(ii)The Customs at Airfreight Unit, Karachi to decide the case in the light of the of Appellate Tribunal's decision within 7 days from the date of receipt of Sales Tax response about the input adjustment.
(iii)Responsibility of non-implementation of Appellate Tribunal's decision dated 11-12-2007 in respect of Sales Tax and violation of time limitation of 30 days prescribed under section STGO No.3 of 2004 dated 12-6-2004 causing inordinate delay in this case be fixed and the Customs and Sales Tax functionaries responsible for maladministration proceeded against under the relevant disciplinary rules;
(iv)The Deputy Collector Customs, AFU, Karachi [Mr. Saqif Saeed] responsible for issuing unjustifiable call notices resulting in AR's uncalled for visit to Karachi is hereby called upon to show-cause within 15 days why the expenditure incurred by the AR on travelling, boarding and lodging may not be recovered from him under section 22 of the FTO Ordinance, 2000. He may also indicate if he wishes to be heard in person.
(v)A list of similarly delayed cases be prepared and necessary steps put in place to dispose of all such cases within next three months.
(vi)Regular and meaningful monitoring of delayed cases be done by Member (Legal) with monthly progress reports submitted to FTO Secretariat;
(viii) This complaint be included as a case study in the training module of the Training Directorates under the Revenue Division/F.B.R.
12.Compliance of recommendations at (i) and (ii) above be reported within 21 days and compliance of recommendations at (iii), (v), (vi) and (viii) above be reported within 90 days.
H.B.T./136/FTOOrder accordingly.