RAINBOW INDUSTRIES, MULTAN VS SECRETARY REVENUE DIVISION, ISLAMABAD, 2014 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1688 (2013)

Export Oriented Units and Small and Medium Enterprises Rules, 2008---

----R. 3---Establishment of the Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 2(3) & 9---Federal Board of Revenue, S.R.O. 327(I)/2008 dated 29-3-2008---License for an Export Orientated Unit---Issuance of---License number allotted to company but formal license not issued due to lapse by Customs Collectorate---Effect---Harassment tantamount to maladministration---Complainant-company in question, which exported all its products, applied for issuance of an export orientated unit under S.R.O. 327(I)/2008 dated 29-3-2008 (Rules)---Company was granted formal approval by the Customs authorities on the relevant file and licence number was also allotted to the company, however formal licence could not be issued as Additional Collector concerned directed his office to obtain format of the licence from authority concerned and prepare the same accordingly---Formal licence was not issued to the company and when company sought clearance of one of its consignments, customs authorities raised the plea that company did not possess the requisite licence, thus it should pay the requisite duties---Validity---Failure of Customs Department to issue formal certificate (licence) was a lapse by the Collectorate of Customs for which no blame could be apportioned to the company---Two consignments belonging to the company were cleared despite formal license having not been issued---Departmental proceedings against the company were of the genus of harassment tantamount to maladministration---Federal Tax Ombudsman recommended that Federal Board of Revenue should direct the Collector Customs to grant approval for grant of licence to the company in terms of S.R.O. 327(I)/2008 dated 29-3-2008 (Rules) after the company had submitted all necessary requisitioned documents, and that the case instituted by the Collectorate Customs against the company should be withdrawn.

Umar Farooq, Advisor Dealing Officer.

Mian Abdul Ghaffar for Authorized Representative.

Mrs. Kanwal Ali, Deputy Collector, MMC Multan for Departmental Representative.

FINDINGS/RECOMMENDATIONS

ABDUL RAUF CHAUDHRY, (FEDERAL TAX OMBUDSMAN)---Messrs Rainbow Industries Multan, which exports all its products, submitted an application in the prescribed proforma along with supportive documents on 6-6-2011 to the Collector of Customs, Multan for issuance of licence of an export oriented unit, under S.R.O. 327(I)/2008. On further requisition by the Collector, the remaining missing documents were also provided by the unit. The case was processed and formal approval was granted by the Collector of Customs on the note sheet of the relevant file on 29-6-2011 and licence number was also allotted. However, formal licence could not be issued as the Additional Collector concerned directed his office to obtain format of the licence from MCC Lahore and prepare the same accordingly.

2.After the approval on file, two consignments of raw material of Messrs Rainbow Industries arrived at Dry Port Multan and the same were released after extending benefit of S.R.O.327(I)/2008 dated 29-3-2008. The concerned staff of the Customs also endorsed the licence number on the GDs and cleared the goods after making assessment in terms of the relevant S.R.O. Licence in the prescribed format was not available with the unit, because of the fact that the MCC Multan was trying to procure format of the licence from MCC Lahore. Later, instead of issuing the licence based on the approval on file, the Collector, MCC, Multan, refused to issue the licence and raised various queries asking the complainant to provide certain information. This correspondence between the Collectorate and complainant went on. According to the complainant, he supplied all the relevant documents/information to the Collectorate but still the Collectorate did not issue the licence on the pretext that the complainant had failed to fulfil the legal formalities. In the meanwhile, the Additional Collector also called the explanation of the examination and appraisement staff regarding release of two consignments of the complainant by extending benefit of S.R.O.327(I)/2008 dated 29-3-2008. Both the officials informed the Additional Collector that as proper approval of licence was available on the file since 29-6-2011 and a licence number had also been allotted coupled with the fact that the unit was totally Export Oriented, as per report of the Assistant Collector Bonds Customs Dry Port at Multan, who had visited and inspected the said Unit, combined with its clean past record the unit qualified for the facility under the said S.R.O. So the consignments were released. In the meanwhile Deputy Collector, Dry Port, Multan, under instructions from the Collector and Additional Collector, presented the post-dated cheques furnished by the complainant at the time of release of the two consignments to the bank for encashment on the plea that the party did not possess the required licence. However encashment was stopped by the complainant. As a result the Deputy Collector, on 30-7-2013, raised a demand of Rs.4,73,145 and threatened to register a criminal case against the complainant if the said amount was not deposited. The complainant tried in vain to convince the officers of the Collectorate of his bona fide stance by which he was entitled to the benefit of S.R.O.327(I)/2008. At this stage, the complainant approached this forum for redressal of his grievance.

3.In response to the complaint, the Collectorate furnished its reply on 27-9-2013 denying the charges of maladministration on the following grounds:--

(a)The right of an importer does not accrue unless a licence has been issued. In this case, no licence was issued. Approval on note sheet does not tantamount to issuance of a license. The authority has the right to satisfy itself about the admissibility of licence before its issuance. In this case the licence was not issued as the importer failed to fulfil the prescribed conditions and the findings of rejection were duly conveyed to the importer.

(b)The charge of threatening has vehemently been denied. Notice for the recovery of duty/taxes was issued on the inadmissible clearance of goods under S.R.O. 327(I)/2008 dated 29-3-2008 as the complainant was not in possession of the licence.

(c)No loss of foreign exchange has taken place as the complainant himself has stated in para 7(b) of preface to his complaint that he is engaged in 100% export of its production. The complainant has failed to fulfil the prescribed conditionalities for getting a licence of "Export Oriented Unit" under rule 3 of S.R.O.327(I)/2008 dated 29-3-2008.

(d)The insurance policy provided by the unit was faulty and certain other requirements as envisaged in S.R.O.327(I)/2008 were also not fulfilled by the Unit.

(e)Map of the manufacturing Unit showed certain discrepancies.

(f)General bond equal to sum of Rs. one million has been submitted which does not cover the amount of duty and taxes involved on the imported and locally procured goods.

(g)Messrs Rainbow industry did not apply to the Collector of Customs for issuance of analysis certificate showing the input and output ratio of the goods to be manufactured along with wastages because of the fact that they were not in possession of E.O.U. license.

4.On the basis of the above the licence, according to the Collectorate, was refused and thus not issued.

5.Mrs. Kanwal Ali, Deputy Collector Multan appeared along with Ch. Zafar Iqbal, Advocate to present this case on behalf of MCC Multan. Mian Abdul Ghaffar, Advocate represented the complainant.

6.Parties heard and documents perused.

7.The licence of an export oriented unit, as required under S.R.O.327(I)/2008 was approved on file. Even a licence number was allotted. The licence was acted upon in the clearance of two consignments. Formal document could not be issued to the complainant as the Department did not have the requisite form on which the entries were required to be made. It sought these from MCC Lahore. Thus failure to issue the formal certificate was a lapse of the Collectorate for which no blame could be apportioned to the complainant.

Findings:

8.Subsequent Departmental proceedings are of the genus of harassment tantamount to maladministration

Recommendations:

9.FBR to direct?

(i)the Collector to grant approval for grant of licence to the unit Messrs Rainbow in terms of S.R.O. 327(I)/2008 dated 29-3-2008 after Messrs Rainbows has submitted all necessary requisitioned documents;

(ii)the case instituted by the Collectorate against the Unit on this account be withdrawn; and

(iii)compliance be reported within thirty days.

MWA/72/FTOOrder accordingly.