IMPEX COLOUR LABORATORIES, NOWSHERA VS SECRETARY REVENUE DIVISION, ISLAMABAD
2011 P T D 1647
[Federal Tax Ombudsman]
BeforeDr. Muhammad Shoaib Suddle, Federal Tax Ombudsman
Messrs IMPEX COLOUR LABORATORIES, NOWSHERA
Versus
SECRETARY REVENUE DIVISION, ISLAMABAD
Complaint No.186/ISD/ST(17)/1249/2010, decided on 13/03/2011.
Sales Tax Act (VII of 1990)---
----Ss. 11, 13, 14, 21 & 36---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9, 10 & 11---Exemption, claim for---De-registration---Maladministration---Complainant obtained voluntary registration in 1994 under Sales Tax Act, 1990---Subsequently when Government changed the threshold by increasing the limit of turnover, complainant felt that it qualified for exemption as its turnover was below the threshold of increased taxable limit---Complainant applied for deregistration, but no action was taken by the department on the application despite issuance of reminders---Complainant closed its business---Alleging maladministration for delay and inattention to de-registration application, complainant had moved complaint---Neglect in dealing with de-registration application filed by the complainant from 1999 to 2004 and issuing adjudication order after the expiry of the prescribed period of 120 days, clearly involved maladministration---Failure to de-register in accordance with the provisions of S.21 of Sales Tax Act, 1990, struck at the very root of the matter---Allegation of maladministration having stood proved against the department, recommendation was made to Federal Board of Revenue to ensure that action on de-registration application should be taken without delay and de-registration issued as per law from the date it was due, within 21 days.
PLD2001SC340; 2003SCMR318andPLD2002SC491 ref.
Yasin Tahir, Senior Advisor, Dealing Officer.
Zafar Ali Khan, Complainant, Authorized Representative.
Dost Muhammad, AC IR and Sharifullah, Law Officer, RTO, Peshawar, Departmental Representatives.
FINDINGS/RECOMMENDATIONS
DR. MUHAMMAD SHOAIB SUDDLE, FEDERAL TAX OMBUDSMAN.---Messrs Impex Colour Laboratories, Nowshera, obtained voluntary registration in 1994 under the Sales Tax Act, 1990. Subsequently, the Government changed the threshold by increasing the limit of taxable turnover. Under the circumstances, the company felt that it qualified for exemption as its turnover was below the threshold of increased taxable limit. The company, therefore, applied for deregistration on 5-10-1999 but no action was taken by the Sales Tax Department despite reminders issued in the years 2000 and 2001. The company statedly closed in 2003. Alleging maladministration for delay and inattention to the deregistrationapplication, the complainant filed this complaint, seeking redress of their grievance.
2.The complaint was referred under section 10(4) of the FTO Ordinance for comments to Secretary Revenue Division. In response, the F.B.R. submitted para wise comments. The complainant also filed a rejoinder to the parawise comments vide his letter dated 8-12-2010.
3.During the hearing, the DR did not dispute voluntary registration of the Company in 1994; regular filing of tax returns by the Complainant and hisfiling ofapplication for deregistration in 1999. He, however, stated that on cross checking, it was observed that Income Tax paid by the taxpayer showed higher turnover than what was declared for Sales Tax. A short payment of Rs.207,085wasthusdeterminedand a Show-Cause Notice No.ST/DC(Adj)Contra/287/2004/1073 dated 5-4-2004 issued. The complainant was provided opportunity of hearing on 19-4-2004, 14-5-2005, 30-5-2005 and 13-6-2005, but he didnot attend. The case was thus adjudicated ex parte vide Order-in-Original No.58 of 2005 dated 14-6-2005. The complainant appealed this decision beforeCollector (Appeals). After its rejection, he filed second appeal before the Appellate Tribunal which upheld the Order-in-Original vide Order No.ST/45/PB/2008/700 dated 20-4-2010. But the complainant did not deposit the adjudicated amount of tax due from him. As deregistration was contingent upon payment of the adjudged amount of tax outstanding against him, the responsibility of delay in deregistration according to the DR, devolved on the complainant rather than the Department.
4.The DR further contended that the complaint relating to the year 1999 was badly time-barred under section 10(3) of FTO Ordinance, 2000. The appropriate remedy lay with the High Court but that too through a reference on point of law within the prescribed time limit. The DR also contended that the jurisdiction of FTO did not extend to cases involving issue of tax assessment decided by the AppellateTribunal.
5.The complainant, however, submitted that the FTO could take notice of the complaint under section 10(3) of FTO Ordinance, 2000. He contended that his complaint should not be rejected merely on technical grounds. He cited judgments of superior courts reported as PLD 2001 SC 340, 2003 SCMR 318 and PLD 2002 SC 491, upholding that technicalities should not create hurdles in the way of substantial justice. He further submitted that as the case remained under adjudication before different fora of the Sales Tax Department which failed to do justice in the matter, he filed the complaint under the FTO Ordinance, 2000.
6.The complaint has been examined in the light of written and oral submissionsof the parties. The complaint basically involves the following issues:--
(i)whetherthejurisdictionofthiscomplaintisbarredunder section 9(2)(b) of the FTO Ordinance, 2000;
(ii)Whether any maladministration was involved in the handling of deregistration application filed by the complainant in 1999.
7.The Department is of the view that the jurisdiction is barred under FTO Ordinance by virtue of the following:--
(i)The complaint is time-barred under section 10(3) of the FTO Ordinance, 2000 (the Ordinance) as it has not been filed within the prescribed period of six months;
(ii)The complaint involves tax assessment which has already been decided at the level of Appellate Tribunal;
(iii)Three legal remedies were available under the Sales Tax Act, 1990. The complainant had already availed two legal remedies the level of Collector (Appeals) and the Appellate Tribunal. He could avail the third legal remedy by filing a reference in the High Court under section 47 of the Act which he did not avail. It was now a closed transaction.
8.The complaint under reference has been registered by condoningthe time bar under section 10(3) of the Ordinance in the interest of justice as the allegationof maladministration involved excessive delay in deciding the complainant's application for deregistration-from 1999 to 2004. Besides, the order-in-original issued in 2005 was also time-barred. These aspects should have been kept in view and addressed by the Sales Tax authorities in the interest of justice and fairness besides there being an inviolable requirement of law to decide an adjudication case within theprescribed time limit. It has been repeatedly held including by the Hon'ble President of Pakistan that Hon'ble FTO's jurisdiction is competent in matters involving misadministration. The preliminary objection of the Department is, therefore, not maintainable as the investigation in this case relates to the allegation of maladministration involved in inordinate delay by the Department in deciding the complainant's application for deregistration and violation of the time limit prescribed for making the decision in this case.
9.As regards the alleged maladministration, the complainant has stated that he filed the application for deregistration on 5-10-1999 under section 14 of the Sales Tax Act, 1990, but no action was taken by the Department till 2001. During this period, he claims to have twice remindedtheDepartmentvidehislettersdated18-7-2000and17-11-2001 (copies of receipts are attached with the complaint). The complainant closed his business in 2003, duly informing the Department,vide letter dated 26-9-2003. Still, no action was taken to deregister the complainant's firm. In 2004, however, the show cause notice determiningaSalesTaxliabilityofRs.287,085wasissuedbythe DepartmentfollowedbyOrder-in-OriginalNo.358/2005dated 14-6-2005. The neglect in dealing with deregistration application from 1999 to 2004, and issuing adjudication order after the expiry of the prescribed period of 120 days (sections 11 and 36 of the Sales Tax Act, 1990) clearlyinvolves maladministration. The DR could not produce any evidence to show any communication having been made by the Department with the complainant during 1999-2004. The plea taken by the DR is that the relevant file of the case was not traceable in the Department. Such an excuse aggravates the maladministrationrather than extenuating it, as it is an abiding obligation of the Department to maintain live record safely and securely. Besides, no evidence of extension in time limit was produced by the DR. Under the circumstances, the complainant's contention that the department neglected his application for deregistration despite two remainders sent during the years, 2000 and 2001 seems maintainable. The higher turnover shown in the Income Tax Returns was also below the threshold for Sales Tax Registration. The failure to deregister in accordance with the provisions of section 21 of the Act within time (four months) and even within a possibly extended time (by two months) strikes at the very root of the matter, and thus, issue of show cause was ab initio void. This in conjunction with the delay in passing the Order-in-Original after the time limit of 120 days destroys the entire super structure of the decisions of the Department.
Findings:
10.Theallegationofmaladminisrationasdefinedunder section 2(3)(i)(a) and (ii) of the FTO Ordinance, 2000 stands proved against the Department.
Recommendations:--
11.F.B.R. to ensure that action on de-registration application is taken without delay and de-registration issued, as per law, from the date it was due, within 21 days.
H.B.T./127/FTOOrder accordingly.