MUHAMMAD TUFAIL VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2012 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 392 (2011)

Sales Tax Act (VII of 1990)---

----S.45-A(4)---Complaint against order passed beyond jurisdiction---Show-cause notice was issued to the complainant to the effect that input tax claimed by him was not admissible as it was based on invoices issued by black-listed persons andthat refund issued for the period February 2004 to July 2005 was recoverable---Order-in-original was accordingly passed---Collector (Appeals) allowed appeal of the complainant and input tax for the period February 2004 to June 2005 was allowed, while the claim for July 2005 was rejected---Appellate Tribunal decided appeal of the complainant and remanded the case to the department to the extent of the month of July 2005---Appellate Tribunal in its judgment had unequivocally held that retrospective black-listing of the suppliers units was not tenable in law---In the complainant's case the period involved was from February 2004 to July, 2005, whereas the supplier's units were black-listed in 2007 after more than two or three years' span---Order could not be made applicable retrospectively---Appellate Tribunal in its judgment did not approve the treatment accorded by the department and only the period July 2005 was remanded for de novo appraisal---Judgment of Appellate Tribunal disposing of the complainant's appeal against decision of the Collector (Appeals) had been deliberately distorted/perversed, which tantamount to maladministration under S.2(3) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Federal Board of Revenue was recommended to direct the Commissioner to set aside the order-in-original by invoking provisions of S.45-A(4) of the Sales Tax Act, 1990; to implement the order of Appellate Tribunal, in letter and spirit; to ask C.I.R. to explain why appropriate corrective/disciplinary action as provided under S.13 of Establishment of office of Federal Tax Ombudsman Ordinance, 2000, may not be taken against him and to report compliance within 15 days.

PLD 1997 SC 582ref.

Muhammad Munir Qureshi, Advisor Dealing Officer.

Mian Abdul Basit Authorized Representative.

Qasswar Hussain, ACIR Departmental Representative.

FINDINGS/RECOMMENDATIONS

DR. MUHAMMAD SHOAIB SUDDLE, FEDERAL TAX OMBUDSMAN.---This complaint is against order passed beyond jurisdiction available under the law.

2.The Additional Collector Customs Sales Tax and Federal Excise issued a show cause notice on 16-6-2007 to the effect that input tax amounting to Rs.10,804,144 claimed by the complainant was not admissible as it was based on invoices issued by black-listed persons, and so the refund issued for the period February, 2004 to July, 2005 was recoverable. Order-in-Original (O-I-O) was accordingly passed bearing Nos.465-467 of 2007 dated 13-9-2007.

3.The complainant contested the Order-in-Original. The Collector (Appeals) vide Order No.617 of 2008 dated 12-5-2008 allowed the appeal, and, resultantly, input tax for the period February, 2004 to June, 2005 was allowed, while the claim for July, 2005 was rejected.

4.The Department as well as the complainant filed appeals before the Appellate Tribunal Inland Revenue (ATIR), Lahore.

5.The ATIR, vide Order No.479/LB/2009 dated 19-1-2011, dismissed the appeal of the Department. The complainant's appeal was decided vide Order No.370/LB/2009 dated 20-6-2011, and case remanded back to the Department to the extent of the month of July, 2005 involving amount of Rs.205,800.

6.TheCIRhoweverissuedanothershow-causenotice dated25-8-2011 for the entire period, February, 2004 to July, 2005, on the pretext that the Appellate Tribunal had remanded the case back to the Department in its entirety for de novo decision.

7.Paragraph 6 of the Tribunal's judgment is reproduced below for facility of reference:

"We are therefore inclined to set aside the order passed by the learned Collector (Appeals) to the extent for the period July 2005 and the case is remanded back to the adjudicating authority having jurisdiction with the direction to properly scrutinize the documentary evidence which will be furnished before him at the time of de novo proceedings on the issue under consideration after providing ample opportunity of being heard."

8.The CIR passed order dated 13-9-2011, re-instating the demand of tax adjudicated on 13-9-2007 (Rs.10,804,144). As noted that this demand was contested before the ATIR, and the Departmental appeal was dismissed. The complainant pointed out that the CIR deliberately distorted the ATIR verdict by omitting mention of the month of July, 2005 clearly cited in the verdict.

9.When confronted, the Department filed a reply in which a preliminary submission was made that the matter in dispute pertained to assessment and the complainant had the option to file an appeal against the order passed by the CIR. Instead of availing that option the complainant chose to file a complaint before the Hon'ble Federal Tax Ombudsman who could not act as a parallel appellate authority in a matter pertaining to sales tax assessment. On merits, the Department averred that the complainant was involved in tax fraud and had received an amount of Rs.10,804,144 as illegal refund of input tax. As the complainant failed to respond to Departmental notices when the matter was taken up for de novo adjudication, an order-in-original was passed on 13-9-2011.

10.The preliminary objection of the Department has been examined and after due consideration is found to be misconceived for the reason that the core issue in the complaint is not assessment per se. Rather, the complainant is aggrieved by the CIR's deliberate mis-reading/distortion of the ATIR judgment, which had clearly and unambiguously referred to July, 2005 as the period for which remand had been ordered. This deliberate mis-reading was evident from the extract from the ATIR judgment reproduced by the Department in their reply in which the following words had been omitted:

"We are therefore inclined to set aside the order passed by the learned Collector (Appeals) to the extent for the period July 2005 and the case is..."

11.The selective illustration of the ATIR order by deliberately omitting the above cited words is indicative of perverse Departmental intention and the same was tantamount to tampering with the judgment so as to give it a false connotation to the detriment of the complainant. In order to appreciate the proper context of the ATIR judgment one needs only to go through paragraph-5 wherein it has been unequivocally held that retrospective black listing of suppliers units was not tenable in law. A reference has also been made to Supreme Court of Pakistan judgment reported as PLD 1997 SC 582 in which it has been held that Executive Order/Notification which is detrimental or prejudicial to the interest of a person cannot be made operative retrospectively and only beneficial Order/Notification issued by an executive functionary can be given retrospective effect. In the complainant's case, the period involved is from February, 2004 to July, 2005 whereas the supplier's units were blacklisted in 2007 'after more than two or three years span' and hence the order could not be made applicable retrospectively. It is evident that the ATIR judgment did not approve of the treatment accorded by the Department and only the period July, 2005 was remanded back for de-novo appraisal.

Findings:

12.The ATIR judgment disposing of the complainant's appeal against decision of the Collector (Appeals) has been deliberately distorted/perverted by the CIR Zone-II, RTO, Multan, Mr Ghulam Sarwar Qaisrani, which is tantamount to maladministration undersection 2(3) of the FTO Ordinance.

Recommendations:

13.F.B.R. to -

(i)direct the Commissioner to set-aside the order-in-original dated 13-9-2011 by invoking provisions of section 45A(4) of the Sales Tax Act, 1990, and implement the order of the ATIR bearing S.T.A. No.370/LB/09 dated 20-6-2011, in letter and spirit;

(ii)ask CIR Ghulam Sarwar Qaisrani to explain why appropriate corrective/disciplinary action, as provided under section 13 of the FTO Ordinance, may not be taken against him; and

(iii)report compliance within 15 days.

H.B.T./8/FTOOrder accordingly.