MUHAMMAD EHSAN MEHBOOB VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2012 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 469 (2011)

Sales Tax---

----Complaint against arbitrary curtailment of quantitative entitlement certificate and delay in its issuance---Complainant i.e. manufacturer of Welded Pipes was issued quantitative certificate for 10,000 Metric Tons of 'input goods'/Hot Rolled Steel Coils---Certificate was issued after intervention by Federal Tax Ombudsman---Subsequently, on fresh application, after eleven reminders, a provisional quantitative entitlement certificate for import of only 5,800 tons of input goods in next year was issued---Department had not come up with any cogent reason as to why the complainant's 10 reminders in rapid succession failed to get a response; and why in the eleventh reminder, the entitlement certificate was issued for 5,800 Metric Tons as against 10,000 Metric Tons for the previous year---Manufacturers, could not plan their production cycle properly when they were not assured a guaranteedsupplyofinputgoods;iftheyhadtofacebottlenecksinthe supply of essential inputs, it was bound to have adverse effect on their efficiency and profitability---Delay in issuance of entitlement certificate and curtailment of sanctioned limit, was tantamount to maladministration under S.2(3) of Establishment of Office of Federal TaxOmbudsmanOrdinance,2000---FederalBoardofRevenue,was recommended to direct the Chief Commissioner to give the complainant, personal hearing with a view to arriving at a just and fair resolution of the issues involved; to streamline the procedure for the issuance of entitlement certificates and to notify parameters for objective appraisal of a registered person's requirements for input goods; and report compliance with 30 days.

Muhammad Munir Qureshi, Advisor Dealing Officer.

Imran Iqbal, Authorized Representative.

Ashfaq Ahmad, DCIR Departmental Representative.

FINDINGS/RECOMMENDATIONS

DR. MUHAMMAD SHOAIB SUDDLE, FEDERAL TAX OMBUDSMAN.---This complaint is against arbitrary curtailment of quantitative entitlement certificate and delay in its issuance.

2.The complainant, a leading manufacturer of welded pipes, was issued quantitative certificate No.41-Ind/Sur/2008/08 dated 1-4-2011 for 10,000 metric tons of 'input goods,' that is, 'Hot Rolled Steel Coils/ Strips' valid till 30-6-2011. The certificate was issued after intervention by the Hon'ble Federal Tax Ombudsman. A fresh application for entitlement certificate was filed on 7-7-2011. After eleven reminders between 22-7-2011 and 26-8-2011, a provisional, quantitative entitlementcertificateforimport of 5,800tonsofinputgoodsin2011-2012 was issued on 12-9-2011, valid till 30-6-2012.

3.According to the complainant, the belated issuance of entitlement certificate for only 5,800 tons of hot rolled coils/strips is arbitrary, oppressive and bereft of any objective basis. After the entitlement certificate in 2010-2011 for 10,000 metric tons, there was no justification to curtail the entitlement to 5,800 tons in 2011-2012, particularly when the installed plant capacity was 10,000 tons. The complainant also takes issue with the cut-off date specified in the certificate after which the certificate would be rendered useless even if the specified quantity had not been imported. The complainant sees the action as deliberate harassment on the part of F.B.R. functionaries.

4.When confronted, the Department filed a reply in which it was contended that the Departmental action was justified as a number of fact as like installed plant capacity, the level of imports, production per-formance, quantum of local purchases and the condition of the economy were considered, as also the requirements of S.R.O. 565(I)/2006 dated 5-6-2006, before the certificate was issued. It was also necessary that the input goods were fully consumed within the specified period and hence the need to specify a cut-off date.

5.Submissions made by both sides have been considered. The Departmenthas not come up with any cogent reason why the complainant's 10 reminders in rapid succession failed to get a response and why on the eleventh reminder the entitlement certificate was issued for 5,800 metric tons as against 10,000 metric tons for the previous year. It is understandable that registered persons cannot be given a carte blanche to import whatever quantity that they may wish regardless of their actual need. Imports entail utilization of scarce foreign exchange. But at the same time, the manufacturers cannot plan their production cycle properly when they are not assured a guaranteed supply of input goods. If they have to face bottlenecks in the supply of essential inputs, it is bound to have an adverse effect on their efficiency and profitability. The Departmental reference to the requirements of S.R.O. 565(I)/2006 as an explanation for arbitrary determination of entitlement is also not correct as the S.R.O. makes no such stipulation. Nor is specification of a cut-off date backed by any statutory stipulation. However where an industrial unit is seen to be importing input goods well in excess of actual need in a given time frame, on a recurring basis, placement of a restriction would appear to be justified, provided parameters are spelled out clearly and are made known to the registered person.

Findings:

6.The delay in issuance of entitlement certificate and curtailment of sanctioned limit is tantamount to maladministration under section 2(3) of the FTO Ordinance

Recommendations:

7.F.B.R. to--

(i)direct the Chief Commissioner to give the complainant a personal hearing with a view to arriving at a just and fair resolution of the issues involved;

(ii)streamline the procedure for the issuance of entitlement certificates and to notify parameters for objective appraisal of a registered person's requirements for input goods; and

(iii)report compliance within 30 days.

H.B.T/12/FTOOrder accordingly.