COLLECTOR OF CUSTOMS, KARACHI VS
2015 P T D 531
[Federal Tax Ombudsman]
Before Abdur Rauf Chaudhry, Federal Tax Ombudsman
COLLECTOR OF CUSTOMS, KARACHI
Review Petition No.8 of 2014 in Complaint No.126/ISD/CUS(15)/1748 of 2013, decided on 27/10/2014.
Customs Act (IV of 1969)---
----Ss.32-A & 195---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 2(3), 9, 10(4), 14(8) & 16---Maladministration---Review petition---Collector of Customs, had filed petition under S.14(8) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000, for review of Federal Tax Ombudsman's findings and recommendations on certain grounds contending that impugned findings were harsh---Most critical issues involved in the case, were; firstly, whether, delay had occurred in payment of duty drawback to the complainant for export of socks, etc., and whether impugned findings and recommendations issued by Federal Tax Ombudsman, were harsh; secondly, whether it was desirable on the part of the Customs Authorities to ask the complainant to withdraw the complaint to Federal Tax Ombudsman, thirdly, whether complainant had attempted to defraud the Government Exchequer of the huge amount of duty drawback and fourthly, whether issuing show-cause notice to the complainant was justified and lawful, while complaint to the Federal Tax Ombudsman was under investigation---Validity---Regarding firstly, there could be no doubt that payment of duty drawback, was excessively delayed in 20 claims pertained to the years 2010 and 2011, and 4 claims pertaining to the period after 2012; three other claims of the complainant were also pending due to the failure of the Customs Authorities to inform the complainant about the change in the refund system under the "Pakistan Customs Computerized System (PaCCS)" and its replacement---Such acts of omission and commission by the Customs Authorities, constituted "maladministration" in terms of S.2(3) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Said inordinate delay by Tax functionaries in the settlement of duty drawback claims of exporter without any fault, was much more serious "maladministration" to be condoned, merely on the ground of being a legacy issue of transition from one Computerized System to another---Impugned findings of Federal Tax Ombudsman, were not harsh---Regarding, secondly, Assistant Collector asked the complainant to withdraw his complaint, as department was co-operating with him to settle his outstanding claims; and that it would cause a lot of expenditure to the Government due to travel of Gazetted Officer from Karachi to Islamabad for attending hearing proceedings---Request to withdraw the complaint would similarly cause a lot of cost to the exporter (complainant) to travel from Haripur (Khyber Pakhtunkhwa) to Karachi to attend the hearing proceedings for defending himself against allegations of "fiscal fraud", which would also cause, lot of emotional and reputation loss to valuable exporter, who had an unblemished track record as exporter and taxpayer---Request of department, was not reasonable, in circumstances---Regarding, thirdly, the complainant had not filed duplicate claims, but he just wanted information, whether his claims, had been paid, which was his right---Exercise of such right, could not be treated as an attempt to defraud the Government Exchequer, as neither duplicate claims had been filed, nor the complainant had even insisted on payment of those 19 claims, which were stated by the Departmental representative to have been paid already---No room was available, in circumstances, for charging the complainant with "fiscal fraud" under S.32-A(1)(a) of Customs Act, 1969---Regarding fourthly---Fact was that Assistant Collector, asked the complainant to withdraw his complaint, and only after two days of declining of the Assistant Collector's request to withdraw the complaint, show-cause notice was issued against the complainant, without any factor charge; issuing show-cause notice, in circumstances, was an act of reprisal by the Customs Authorities for refusal by the complainant to accept the Assistant Collector's request for withdrawal of the complainant---Acts of department, having constituted a very serious "maladministration" in terms of S.2(3) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000, FBR was recommended; to call for the record of the case in exercise of the powers under S.195 of the Customs Act, 1969, and withdraw the show-cause notice issued by Assistant Collector; to initiate disciplinary proceedings for issuing an unjustified and unlawful show-cause notice, as a measure of reprisal for taxpayer's refusal to comply with unlawful requirement to withdraw the complaint; convert the matter into a case study for training the Customs Officers; and report compliance within specified period.
Yasin Tahir, Senior Advisor Dealing Officer.
Malik Muhammad Fareed, CEO and Malik Haroon Fareed, Authorized Representatives.
Dr. Aftab Ahmed Bhatti, Addl. Collector and Ms. Mona Iffat Baloch, Deputy Collector Departmental Representatives.
ORDER
ABDUR RAUF CHAUDHRY, FEDERAL TAX OMBUDSMAN---The Collector of Customs, MCC (Exports), Custom House Karachi filed a petition under Section 14(8) of the FTO Ordinance, 2000 (the Ordinance) for review of the FTO Findings and Recommendations dated 12-2-2014 in Complaint No 126/ISD/CUS(15)/ 174/2013 on the following grounds:--
(i)that the Findings are harsh as the defunct MCC PaCCS had already sanctioned and paid 19 duty drawback claims to the complainant;
(ii)the complainant admitted during the course of hearing in response to Show-Cause Notice (SCN) by the Collectorate that they had received 07 out of 19 cheques issued by MCC PaCCS. Karachi;
(iii)the aspect of claiming of rebate claims, already paid, under the garb of maladministration by the complainant has been ignored by the FTO and was not even mentioned in the Findings;
(iv)MCC PaCCS did not act illegally nor displayed any reluctance in payments. However, due verification of transactions was required to be carried out to avoid duplicate payments;
(v)it is a settled principle of law that he who seeks equity must come with clean hands whereas in this case till the issuance of SCN dated 11-1-2014, the complainant was oblivious of the number and outstanding amount of his own duty drawback claims. Hence, the allegation of maladministration cannot be established on the basis of false acquisitions;
(vi)the SCN already issued on account of attempted fiscal fraud cannot be withdrawn without completing the proceedings in the case. The SCN has to be decided keeping in view merits of the case through due process of law and proceedings. In the past, duplicate claims had been properly adjudicated and fine/penalties were imposed on the complainants in a number of cases to discourage such malpractices. In certain serious cases, even prosecution was initiated against the exporters, by the MCC PaCCS. However, this Collectorate took a lenient action in this case by issuing SCN in which ample opportunity of hearing was given to such exporters;
(vii)the complainant should have been served with SCN also by the FTO under the Ordinance for concealing actual position and providing wrong/incorrect information and claiming duty drawback in already encashed claims and misusing the august forum for ulterior motives; and
(viii) the extent of non-seriousness of the complainant can be gauged form the fact that, in final hearing before the FTO, the complainant presented another list of 18 claims, on scrutiny of which 14 claims were found already encashed. Thus, it also warrants issuance of SCN by the Deptt or by the FTO
2.On the basis of the grounds mentioned above, the Collector of Customs (Exports) prayed that Para-07 of the impugned FTO Findings dated 12-2-2014 in the subject complaint may be expunged as there was no element of maladministration on the part of MCC PaCCS. It was also prayed that the complaint may be disposed of with appropriate action against the complainant for his attempt of concealing the facts at the FTO forum and attempting to misguide and defraud the national exchequer with illegitimate claims of duty drawback. Therefore, the complainant be directed to face adjudication, order of which (when issued) would be appealable to appellate fora i.e. Collector of Customs (Appeals) and the Customs Appellate Tribunal.
3.A copy of the review petition was provided to the complainant and hearing opportunities were provided to the parties on 9-6-2014 and 30-9-2014 On the first date, Malik Haroon Fareed, Son of the complainant, and Dr. Aftab Ahmed Bhatti, Additional Collector of Customs attended hearing proceedings.
4.During hearing, the DR contended that no maladministration was involved on the part of the MCC Exports as it was mainly on the part of the MCC PaCCS, which was closed in 2012 and the legacy of its pending issues including settlement of duty drawback claims was shifted to MCC Exports vide S.R.O. 518(I)/2013 dated 18-6-2013. On receipt of a copy of the complaint to the FTO, a pendency of 20 duty drawback claims was identified from database of MCC PaCCS as inherited by MCC Exports. Duty drawback in these claims pertaining to 2010-2011 could not be previously paid to the exporter owing to the operational difficulties faced by MCC Exports as software was changed from Agility Micro Clear to WeBOC and non-availability of previous data of MCC PaCCS in the desired format. Nevertheless, these 20 claims were sanctioned and payment of duty drawback was acknowledged by the complainant during hearing of his complaint in the FTO Office, Islamabad There were three other export consignments against which duty drawback claims had not been filed by the complainant as also admitted by the complainant during hearing of the complaint However, the data of defunct MCC PaCCS indicated that 19 claims pertaining to exports during the period from 2006 to 2009 had already been sanctioned by MCC PaCCS and paid to the exporter. 'Therefore, no maladministration could be attributed to MCC Exports', the DR said.
5.The AR however, pointed out that the 20 pending claims pertained to the period from 2010 to 2011 when the PaCCS Collectorate was fully operational Therefore, delay in clearing these claims was tantamount to maladministration in terms of section 2(3)(ii) of the Ordinance. Besides 4 out of 18 fresh claims pointed out during hearrng of complaint were also admittedly pending settlement.
6.As regards the DR's contention of some transitional difficulties due to change from Agility Micro Clear to WeBOC system of computerization, it was not found acceptable because (i) the 20 claims pertained to 2010 and 2011 but the system change took place in 2012; (ii) the legacy of issues of MCC PaCCS was shifted to MCC Exports on 18-6-2013 vide S.R.O. 518(I)/2013 and the exporter filed complaint of delay before the FTO in November, 2013, five months after the change over. Therefore, the DR's contention to justify delay by the change over obviously suffered from rationality deficit. Besides, Messrs Agility provided the software; while the system operation database management and administration of the Servers was entirety with the team of Customs Officers at the helm of the paperless PaCCS Collectorate. Besides, data of import/export was being maintained on duplicate disk drives which were kept in the lockers of the National Bank. Therefore, such an inordinate delay by MCC PaCCS and MCC Exports could not be plausibly explained by winding up of the PaCCS Collectorate in 2012 or the change in computerized system from Messrs Agility's software to the PRAL's WeBOC.
7.As regards the misdeclaration attributed to the exporter, it was observed that he had already explained during hearing of the complaint, the unusual circumstances which made him desperate as none of the institutions had supplied him the requisite information. However, he could not be blamed for attempting duplicate claims as he had not filed any duplicate claims. He was only desperately trying to collect necessary information about his claims. Had it been timely provided to him by the Customs, the hassle could have been avoided. During that hearing of the complaint, the complainant requested only confirmation of payment through the State Bank of Pakistan which the DR had amicably agreed to provide The hearing was adjourned on the request of the AR (Malik Haroon Fareed son of the CEO Malik Muhammad Fareed) who was then out of the country.
8.On the second hearing, the complainant Malik Muhammad Fareed appeared in person. The DR explained the Dept'l practice of issuing SCNs in such cases. The complainant contended that he could not be charged with wilful attempt to commit fraud as he had not filed duplicate claims. Instead, the exporter had merely asked the Collectorate, through the FBR and the State Bank of Pakistan, to know the fate of his duty drawback claims as he did not appear to have received the payments. Seeking such an information was his right and it was a common practice to check up position from the Customs in cases where there is some doubt about settlement of duty drawback claims.
9.The complainant further contended that issues had been comprehensively and amicably sorted out during hearing of the complaint. The DR had accepted explanation of the circumstances in which the complainant had stated that he did not received payment in any of the duty drawback claims for exports made since 2006 onwards. The DR had agreed to provide the State Bank confirmation for 12 out of 19 claims. The complainant had agreed to end the matter on receiving the promised confirmation and the DR agreed to withdraw the SCN. Once these issues were amicably settled during hearing of the complaint, these should not have been reopened through an unnecessary review petition.
10.It was due to an amicable settlement that the complainant had neither claimed compensation for inordinately delayed payment of 20 duty drawback claims nor insisted on recommending disciplinary proceedings against the Customs staff for their inefficiency and reprisal based SCN. In the backdrop of the amicable settlement, the FTO issued the following recommendation resolve the problem of confirmation of payment in 12 out of 19 claims.
"FBR to-
(i)direct Collector, MCC Exports, Custom House, Karachi, to provide hard copies of State Bank of Pakistan's confirmation of encashment of cheques in 12 disputed claims; and
(ii)report compliance within 21 days."
11.In pursuance of this Recommendation, the Deptt., obtained the requisite confirmation from the State Bank of Pakistan vide the Bank's letter No. PAD(P)21006/Misc-2014 dated 26-9-2014, the matter should have ended at that as it would have met the requirement of the complainant and also complied with the FTO's Recommendations. The SCN should have been withdrawn and the pending 4 out of 18 claims (not part of the complaint) should have only been disposed as per law of for a comprehensive settlement of the issues involved in this case and redressed the grievances of a valuable exporter. Thus the Collector would have also spared the Government exchequer the cost of further travelling to Islamabad in connection with hearing proceedings of his review petition Instead the Collector unnecessarily complicated and prolonged the matter by filing the review petition making a factually incorrect statement that no maladministration was involved on the part of the Collectorate and refusing to withdraw.
12.As the Collector had charged the complainant in the SCN with fiscal fraud under section 32A(1)(a) of the Customs Act, 1969 (the Act), the second hearing of the review petition was focused on the legality and sustainability of the SCN. In the second hearing held on 30-9-2014, the DR handed over a letter No.PAD(P)/21006/Misc-2014 dated 26-9-2014 issued by the State Bank of Pakistan confirming date-wise payment of duty drawback by 19 cheques. Although, it was not indicated as to which Account number of the exporter these cheques had been credited, the complainant accepted the confirmation and treated the matter of the impugned 19 duty drawback claims pertaining to the export period 2006-2009 as settled as per the mutual agreement previously reached during hearing of the complaint.
13.The complainant, however, questioned the justification and legality of the SCN charging him with fiscal fraud which was a heinous crime. He stated that (i) he was a reputable manufacturer and exporter of socks from Haripur (KP); (ii) he had been the Chairman of Hattar industrial Association, (iii) President of Hanpur Chamber of Commerce and Industry, (iv) Member of Federation of Pakistan Chambers of Commerce and Industry (FPCCI), Karachi, and (v) Senior Vice Chairman of FPCCI's Standing Committee on Sales Tax. Besides he had an unblemished profile as an exporter and taxpayer.
14Reiterating the unfortunate circumstances the complainant stated that it was due to the sudden death of his representative (Mr. Mehboob Ali) in Karachi in 2011 that the account of paid duty drawback claims was not available with him, So, he sought confirmation vide his letter No.HACCI(P)25/2011 dated 20-7-2011 the State Bank of Pakistan of payments against his duty drawback claims since 2006-2007. The State Bank of Pakistan, responded vide its letter No. PAD(P)/22476/Misc-2011 dated 22-7-2011 stating that confirmation of such payment/non-payment could only be issued on the request of the Deptt. in terms of Rule 165 of the Federal Treasury Rules. The complainant was advised by the State Bank to contact the Customs authorities in this mailer. As he had already addressed a letter dated 20-7-2011 to the Collector of Customs (Exports) at Karachi and endorsed a copy to the Member, Customs (FBR), which had been relayed by the FBR to the said Collector vide letter No. 3(2)DRD/2011-113833 dated 4-8-2011 directing him to settle the pending duty drawback claims on merit as per law under intimation to the FBR, he was expecting confirmation of already paid claims and settlement of pending claims. Had the Customs authorities provided the State Bank confirmation of already paid claims to the exporter and settled the pending claims, it would have settled the matter at that. As the needful was not done, the exporter filed complaint to the FTO. When the facts were explained by the DR to the complainant during hearing of the complaint an amicable settlement was reached. After that the SCN should have been withdrawn as the exporter had neither filed any duplicate claims nor committed any fiscal fraud within the meaning of section 32A(1)(a) of the Act
15.The DR, however, contended that by stating that no claims had been paid pertaining to 2006-2011, the exporter had attempted to obtain duplicate claims which was tantamount to actionable fiscal fraud in terms of section 32A(1)(a) of the Act. The DR further explained that the Deptt. was issuing SCNs in all such cases, without discrimination. When asked. whether the order-in-original issued in such cases were being sustained by the Deptt's appellate authorities, the answer was in the negative.
16.The complainant contended that Mr. Jamali the Assistant Collector of Customs (PaCCS Legacy) was annoyed by his filing of the complaint to the FTO. He accordingly emailed him a message as under:--
"You are hereby directed to file rebate claims from your WeBOC ID to enable the Deptt for further processing of your claims. It is further intimated to you if you are satisfied with the progress on your case you may withdraw the complaint. This office undertakes to process the claims as soon as possible when you will submit/file rebate in system through your WeBOC User ID in KCSE 03 GDs of amount PKR55,955. Your action will prevent the Government money that will be spent on travelling of a Gazetted Officer from Karachi to Islamabad for any proceedings in FTO Office, Islamabad. Feel free to contact if you face any problem regarding your case."
17.The complainant also alleged that the Assistant Collector (Mr.Jamali) telephonically compelled him to withdraw the complaint before the FTO. 'On my refusal to do so, the Assistant Collector hastened to issue the SCN as a measure of reprisal in order to teach me a lesson', the complainant said. He contended that there was no justification for charging a valuable exporter having a clean record as taxpayer, with such a heinous crime as fiscal fraud that too during the pendency of his complaint to the FTO.
18.The review petition has been examined in the light of written and oral pleadings of the parties. The most critical issues in this case are:---
(i)whether delay had occurred in payment of duty drawback to the complainant for export of socks etc. and whether the impugned Findings and Recommendations, issued by the FTO in the party's complaint No 126/ISD/CUS(15)/1748/2013 were harsh?
(ii)whether it was desirable on the part of the Customs authorities to ask the complainant to withdraw the complaint to the FTO?
(iii)whether the complainant had attempted to defraud the Government Exchequer of a huge amount of duty drawback by stating before the Deptt. and the FTO Secretariat that he had not received any duty drawback for the claims pertaining to the years 2006 to 2012? and
(iv)whether issuing SCN to the complainants was justified and lawful while the complaint to the FTO was under investigation?
Issue No.1.Delay in settlement of duty drawback claims
19.There could be no doubt that payment of duty drawback was excessively delayed in 20 claims pertained to the years 2010 and 2011 and 04 claims pertaining to the period after 2012. Whether it was the defunct PaCCS Callectorate or MCC Exports or both, was immaterial for the complainant 3 other claims were also pending due to the failure of the Customs authorities to inform the complainant about the change in the refund system under the defunct PaCCS and its replacement by WeBOC. There can be no doubt that these acts of omission and commission by the Customs authorities constituted maladministration in terms of section 2(3) of the Ordinance.
20.As the matter had been amicably mutually agreed during investigation of the complaint that the complainant would accept confirmation of payment as and when it was provided to him by the Customs authorities and the DR agreed to withdraw the SCN and also confirm payment position of 18 other claims which were not a part of the complaint. As delay of 3 to 4 years was patent in 20 claims pertaining to the years 2010 and 2011 settled in January, 2014, that too after filing of the complaint to the FTO, it was rightly treated in the FTO Findings as maladministration on the part of the Customs authorities because delay by tax functionaries is defined as maladministration under section 2(3)(ii) of the Ordinance. But, compensation or disciplinary proceedings were not recommended because the complainant had foregone his right to demand these consequences of maladministration.
21.Inordinate delay of years by tax functionaries in settlement of duty drawback claims of exporter without any fault of the exporter is a much more serious maladministration to be condoned merely on the ground of being a legacy issue of transition from one computerized system to another. Therefore the Collector's contention that the Findings were harsh is not maintainable. Was the delay of 3-4 years in settlement of 20 pending claims not harsh on the hapless exporter whose cash flow was blocked by the Customs authorities for 3-4 years instead of 3-4 days without any justification whatsoever and it was released only after the FTO's intervention?
Issue No.II:Whether it was desirable on the part of the Customs authorities to ask the complainant to withdraw the complaint to the FTO?
22.The complainant felt that hasty issuance of SCN alleging fiscal fraud under section 32A(1) of the Act was a reactionary act of reprisal by the Customs authorities. He produced a copy of electronic message dated 9-1-2014 by Assistant Collector Mr. Jamali asking the complainant to withdraw his complaint as the Deptt. was cooperating with him to settle his outstanding claims and as it would cause a lot of expenditure to the Govt. for arranging travel of a gazetted officer from Karachi to Islamabad for attending the FTO's hearing proceedings. This electronic message was allegedly followed up by a telephone call by the same Assistant Collector insisting on withdrawal of the complaint before the FTO in exchange for cooperation of the Customs authorities. Had the complainant withdrawn his complaint, he would not have been treated guilty of any fiscal fraud, misdeclaration or wrongful claim of duty drawback and he could also 'feel free to contact if you face any problem regarding your case' as the aforesaid electronic message offered.
23.Only two days after his declining the Assistant Collector's request to withdraw the complaint a SCN was hastily issued against the complainant by the same Assistant Collector of Customs (Mr. Jamali) on 11-1-2014 without any factor change as the facts of the matter were the same before and after issuance of the said SCN. This clearly confirms that on the one hand, issuing this SCN was an act of reprisal by the Customs authorities for refusal by the complainant to accept the Assistant Collector's request for withdrawal of the complaint before the FTO and, on the other hand, it was aimed at impeding and obstructing the investigation by the FTO Office by manipulative invoking of bar on FTO's jurisdiction under section 9(2)(a) or (b) of the Ordinance by issuing the SCN. This aspect of the intent and purpose of issuing SCN in violation of the provisions of section 18 read with section 24 of the FOIRA, 2013 is all-too-obvious even in the prayer of the Collector that the complainant be directed to face adjudication as the order (not yet issued) was appealable before Collector Appeals and the Appellate Tribunal.
24.It is being increasingly observed that some of the tax functionaries resort to issuing SCN's after the FTO Office has registered a compliant against them and process of investigation is initiated by the FTO under section 10(4) of the Ordinance by referring the complaint to the Deptt. for comments. This is an abuse of the legal process and, more often than not, it is aimed at obstructing, impeding and impenliing the process of the FTO within the meaning of section 16 of the Ordinance.
25.Apart from the morality and legality of issuing a SCN in such circumstances, a rationality issue is also involved. The Assistant Collector of Customs requested withdrawal of the complaint before the FTO inter alia on the ground that it would cause a lot of cost to the Govt. for a gazetted officer's journey from Karachi to Islamabad to attend the hearing proceedings in the FTO Office. The question however is, would it not similarly cause a lot of cost to the exporter (complainant in this case) to travel from Haripur (KP) to Karachi to attend the hearing proceedings for defending himself against allegations of 'fiscal fraud', which would also cause a lot of emotional and reputation loss to valuable exporter of the country who has an unblemished track record as exporter and taxpayer? Thus, issuing such a frivolous SCN as a measure of reprisal for an exporter's refusal to comply the Assistant Collector of Customs' request for withdrawal of the complaint before the FTO suffers from rationality deficit.
26.It appears, that some of the Customs officers even of the rank of Collector are not feeling the pulse of the fast changing trends in the governance paradigm of Pakistan in this day and age despite the fact that the Facilitation and Taxpayers Education (FATE) Wing of the FBR has issued a 'Taxpayers Charter' as a facilitation guide explaining the rights of taxpayers with the following introduction of its intent and purpose:--
"The 'Taxpayers Charter' defines rights and obligations of taxpayers, which will help eliminate the traditional perception and create a new tax culture of mutual trust, confidence and friendly working relationship between the taxpayers and tax functionaries."
27.The 'Taxpayers Charter' inter alia provides the following rights to the taxpayers:---
Have access to information or documents of the taxpayers (own) tax affairs:
Acknowledgement of receipt of taxpayers communications;
Swift and accurate response to taxpayers queries and requests for assistance;
Competent redress of the taxpayers problems;
Payment of due refunds to the taxpayers within the prescribed time limit; and
Payment of compensation for delayed refunds.
28The question is, did not the Customs authorities violate their own Charter by delaying payment of refund, non-responding to his correspondence seeking information on his refund claims and charging a respectable exporter with fiscal fraud in reprisal to his refusal to with his complaint to the FTO against those Customs authorities? The FTO Office does not subscribe to the Collector's contention that it too should have issued a SCN to the complainant just for stating that he had not received payment in any of duty drawback claims and asked the Customs to let him know the payment position of each claim. When the DR promised to provide State Bank confirmation of payment position of 12 claims out of 42 claims, the Complainant readily agreed to accept such confirmation and end the matter at that. The Customs authorities should have been rather grateful to the complainant as he did not press the matter any further for claiming compensation for delay and disciplinary proceedings against the Customs officials responsible for delay, not of days, weeks or months but of years in settlement of undisputed claims, which were complete in all respects.
Issue No. IIIWhether the complainant attempted Payment of Duplicate Claims?
29.Uncertainties facing MCC PaCCS during 2011, lack of response from the Customs authorities to the complainant despite FBR direction to the Collector of Customs MCC PaCCS vide FBR letter No. 3(2)/DRD/ 2011-113833 dated 4-8-2011 to dispose of the pending duty drawback claims and the State Bank's refusal vide its letter No PAD(P)/22476/ Misce/2011 dated 22-7-2011 to confirm payment to the exporter instead of tax functionaries of the concerned Collectorate, the sudden death in 2011 of his representative in Karachi who used to handle the complainant's duty drawback claims at Custom House, Karachi and inability of the Soneri Bank, Rawalpindi to confirm receipt of payments during 2006-2009 due to system changes, drove the exporter desperate to know the fate of his duty drawback claims pending unattended for years. This desperation was compounded by struggle for fending off some acute problems of power outages, inflation deteriorating law and order situation, and above all, lack of direct personal access of the Haripur based complainant to the tax functionaries located at Custom House, Karachi. The FTO Office did not find any justification to charge a respectable exporter, having unblemished record and, who had not filed any duplicate claims with such a heinous crime as fiscal fraud by merely asking the Deptt. to provide requisite information. As the FTO Office is meant for justly and fairly resolving rather than creating problems for the genuine taxpayers, there was not an iota of doubt that the complainant was a genuine exporter who had been driven to desperation by the overall circumstances of this case as explained above. Therefore an amicable settlement was promoted by the FTO Office during hearing of the complaint as duly reflected in the Findings and Recommendations in the complaint.
Issue No. IV.Whether issuing SCN was justified and lawful?
30.It is evident that the complainant had not filed duplicate claims. He just wanted information whether his claims had been paid which was his right even under the Freedom of Information Ordinance, 2002 and the Taxpayers Charter issued by the FBR. Exercise of this right cannot be treated as an attempt to defraud the Govt. exchequer as neither duplicate claims had been filed, nor the complainant had even insisted on payment of those 19 claims which were stated by the DR to have been paid already. He acknowledged receipt of payment in seven claims during hearing of the complaint and only wanted confirmation by the State Bank of Pakistan of payment in the remaining 12 claims. An amicable solution had thus been found by the parties by mutual agreement that the Customs would provide confirmation of payment of 12 remaining claims from the State Bank of Pakistan and the complainant would accept those 12 remaining claims as paid and settled. The DR had promised to withdraw the SCN after receipt of State Bank confirmation by the complainant. On this note the hearing was closed noting only the maladministration aspect involved in huge delay of years in payment of 20 duty drawback claims which should have been paid in the normal course within a week's time in the export years 2010 and 2011 to which these claims pertained as per the computerized payment system of the PaCCS Collectorate or WeBOC without the need for the FTO's intervention. Had the Customs done their job properly and paid the claims in time, there would not have been any need for the exporter to raise alarm of non payment. As the origin of the exporter main problem arose out of inordinate delay in sanction and payment of duty drawback claims, nobody other than the Customs functionaries themselves are responsible for the problems that respectable exporter was made to face.
31.Under the circumstances explained above, there was absolutely no room for charging the complainant with fiscal fraud under section 32A(1)(a) of the Act as the complainant statements do not conform to the defunctive of fiscal fraud under section 32A(1) of the Act as he did not file any duplicate claims. Therefore issuing SCN against the complainant (Exporter) in this case was unjustified. It was also unlawful, as the FTO. had already taken notice of it and the exporter's complaint of delay was under investigation by the FTO Issuing the SCN by the Customs authorities was also patently unlawful as Section 18 of the Federal Ombudsmen Institutional Reforms Act, 2013 dated 20-3-2013 read with section 24 ibid places bar on the courts or authorities to assume jurisdiction in respect of any matter pending with or decided by an Ombudsman. Thus, issuing of SCN was also unlawful besides being unjust.
Findings:
32.In such view of the facts, issuing an unlawful, unjustified and irrational SCN constitutes a very serious maladministration in terms of section 2(3) of the Ordinance. It also constitutes violation of bar of jurisdiction stipulated under section 18 of the FOIRA read with section 24 ibid. The Customs authorities resorting to such an unjust, unlawful and oppressive SCN attracts the mischief of section 16 of the Ordinance as it was aimed at impeding and imperiling the FTO process of investigation of the complaint by the aggrieved exporter against years of delay by the Customs in settlement of his duty drawback claims which should not have taken days to settle. Besides, filing of an unnecessary review petition is also violative of the Hon'ble President of Pakistan's Directive No. 1 of 1990 issued vide letter No. 178/1/President dated 20-9-1990 followed-up by the Prime Minister's Orders vide letter No JS9PUB/Misc/14156/25035 dated 14-11-1995 and observations of the Supreme Court of Pakistan vide its judgment reported as 1999 SCMR 2189, emphasizing that the Ombudsman's recommendations ought to be implemented promptly avoiding any delaying tactics and that reviews/ representations should be field in strong cases only.
Recommendations:
33.FBR to-
(i)call for the record of this case in exercise of the powers under section 195 of the Customs Act, 1969 and withdraw the SCN No Nil dated 11-1-2014 issued by Assistant Collector of Customs Exports (Legacy Issues), MCC Exports, Karachi;
(ii)initiate disciplinary proceedings for issuing an unjustified and unlawful SCN as a measure of reprisal for the taxpayers refusal to comply an unlawful requirement to withdraw the complaint before the FTO;
(iii)convert this matter into a case study for training the Customs officers; and
(iv)report compliance of (i), (ii) above within 21 days and of (iii) in 45 days.
HBT/136/FTOOrder accordingly.