2015 P T D 858

[Federal Tax Ombudsman]

Before Abdur Rauf Chaudhry, Federal Tax Ombudsman

UMAR HAYAT

versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Review Petition No. 38 of 2014 in Complainant No.929/LHR/ST(303)/1693 of 2013, decided on 27/11/2014.

Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---

----Ss. 2(3), 9 & 14(8)---Sales Tax Act (VII of 1990), Ss.3-B & 66---Rejection of complaint on ground of laches---Review petition---Jurisdiction of Federal Tax Ombudsman---Scope---Federal Tax Ombudsman vide his findings/recommendations having rejected complaint filed by the petitioner, without embarking upon the merits of the matter, petitioner had filed review petition against rejection order---Matter in the case related to auction lots of trees, mainly comprising timber-wood in the form of dead/dry standing and fallen trees and firewood---Only a small component of those lots comprised green trees---Green trees could qualify for sales tax exemption, and timber wood and firewood was chargeable to Sales Tax---Description given by the complainant in his complaint as 'standing trees' was misleading---Appropriate description, should have been "dead/dry trees" "timber and firewood", and "green trees"---Complainant/petitioner's attempt to mislead the Federal Tax Ombudsman, could not be supported---Matter involving interpretation of law and determination of facts for tax assessment, same fell outside the purview of the Federal Tax Ombudsman; as its jurisdiction was barred in terms of S.9(2)(b) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Findings of the Federal Tax Ombudsman, were upheld, in circumstances.

PLD 1998 SC 64; Govt. of KPK v. Khalid Mehmood 2012 SCMR 619 and Shahtaj Sugar Mills Ltd. v. Government of Pakistan 2009 PTD 1544 ref.

Umar Farooq, Advisor Dealing Officer.

M. Bashir Malik, Authorized Representative.

Shaukat Mehmood, Chief Commissioner Departmental Representative.

ORDER

ABDUR RAUF CHAUDHRY, FEDERAL TAX OMBUDSMAN.---The Review Petition was filed in terms of section 14(8) of the Federal Tax Ombudsman Ordinance, 2000 (the Ordinance) for review of the following Findings/Recommendations of the FTO in the subject complaint:--

"The first question to be resolved is that of limitation for claiming a refund. Section 6 of the Sales Tax Act, 1990 (the Act) provides a limitation of one year. The deduction was made in 2001-2002 to 2005-06 and claim of refund filed on 11-11-2013 i.e. after more than a minimum of seven years. No application for condonation of delay has been filed and no justification given for such an inordinate delay.

The complaint is accordingly rejected on the ground of laches, without embarking upon the merits of the matter. Case file be consigned to record."

2.The review petition was sent for comments to the Secretary Revenue Division. In response, the Deptt filed para wise comments vide Chief Commissioner RIO, Lahore, letter No.CC/RIO/1sd/1185 dated 9-9-2014 explaining the legal position and endorsing the FTO's Findings/Recommendations.

3.During hearing, the parties reiterated the averments of their written pleadings. The AR argued his case with reference to the following points raised in the review petition:--

(i)Many identical complaints in the past had been decided by the Hon'ble FTO in favour of the complainants;

(ii)The same issue in another complaint was decided in favour of the complainant by the Hon'ble President vide C. No. 179/08, in the case titled Falak Sher v. FBR;

(iii)The complainant was not registered with the Sales Tax Department. Hence, Section 66 of the Sales Tax Act, 1990, (the Act) was not applicable in his case;

(iv)The Hon'ble Supreme Court vide judgment reported as PLD 1998 SC 64 had held that:--

"if one party under a mistake, whether of fact of law paid some money to another party (which includes a Govt. Department) which was not due by law or contract or otherwise that must be repaid in view of Section 72 of Contract Act, 1872."

"where some money is received by the Govt. not lawfully due, the plea of limitation by its department was violative of the principles of morality and justice "

(v)Closing the complaint by FTO, without considering arguments of the complainant, was illegal and without any justification;

(vi)The complaint was rejected without going into the merits of the case.

4The AR presented copies of various decisions of the FTO in the past which were upheld by the Hon'ble President and refunds were sanctioned. Regarding late submission of request for refund, the AR referred to Supreme Court's decision in 2012 SCMR 619 titled as Govt. of KPK v. Khalid Mehmood, in which the issue of condonation of late submission was settled by directing that legal technicalities should not hinder the payment of refund. The Supreme Court further directed that:--

"the money paid by a citizen to a public authority in the form of taxes or other levies paid pursuant to an ultra vires demand by the authority was prima facie recoverable by a citizen as of right. The retention of moneys known to have been paid under a mistake at law, although it was a course permitted to an ordinary litigant was not regarded as a 'high-minded thing' to do, but rather as a 'shabby thing' or a 'dirty trick'."

5.The AR specifically relied on Hon'ble President's decision, in representation No.179/08 dated 2-12-2009 where the FTO's decision rejecting the complaint on the issue of laches was not set aside and the refund claims were allowed to be considered on merit.

6Responding to the AR's averments, the Chief Commissioner IR, Lahore who represented the Deptt, stated that the complainant filed application for refund in Zone-III of RTO-I, Lahore, vide letter dated 17-9-2013 which was transferred to Zone-II of RTO-I, Lahore, on point of jurisdiction. A certificate issued by the authorities of Forest Deptt in respect of the claimed refund amount showed that last deduction was made in 2006. Therefore, the complainant filed the claim after a period of more than six years. The complainant was also not registered with the Sales Tax Deptt. Besides, there was a question of Section 3B of the Act regarding passing of tax to the end consumer. Further, according to section 66 of the Act, refund claim other than under section 10 of the Act, could be made within one year of the relevant period under Section 66 of the Act which provides as under:--

"66. Refund to be claimed within one year-

No refund of tax claimed to have been paid or over paid through inadvertence, error or misconstruction [or refund on account of input adjustment not claimed within the relevant tax period, shall be allowed, unless the claim is made within one year of the date of payment."

7.The Chief Commissioner added that sales tax was an indirect tax and the incidence of this tax was always passed on to the consumers. It seems quite illogical/implausible that purchaser of dead/standing/fallen trees paid sales tax to Forest Deptt. but did not pass on this burden of tax to the users of wood. Even if the plea of the complainant was accepted, then, onus was upon him under the law to substantiate that the incidence of tax had not been passed on to the consumers. In view of Section 3B of the Act, no refund was admissible where incidence of tax had been passed on to the consumers.

8.As regards delay of years in filing the claim of refund, the Chief Commissioner, cited the judgment of Hon'ble Supreme Court of Pakistan reported as 2009 PTD 1544 (Shahtaj Sugar Mills Ltd., v. Govt. of Pakistan). The Hon'ble Supreme Court of Pakistan has held that:--

"By... Not claiming the refund within one year the petitioner was stopped to agitate the claim after six years, and the principle of laches and waiver would also come into play against the petitioner"

9.The Chief Commissioner further stated that the petitioner kept completely silent for over six years and then suddenly brought out the refund claim for the first time. The petitioners' negligence was prominent in this case. The ratio laid down in the above cited Hon'ble Supreme Court's judgment applies to the facts and circumstances of complainant's case. Under the given circumstances of the case and in view of the Hon'ble Supreme Court judgment, cited in Para 08 supra, the Dept'l refusal to condone delay, for which no plausible explanation was offered by complainant, did not amount to maladministration.

10.The Chief Commissioner also argued the facts of the case on its merit. He cited Hon'ble President's decision dated 10-7-2013 in Complaint No.682/09. While deciding FBR's representation against FTO Findings in Complaint No.682/2009, Hon'ble President had decided the issues as under:--

"The earlier decisions relied upon by FTO reveal that it was a case of purchase of standing trees which do fall within the definition of agricultural produce as claimed in Circular dated 10-9-2003. However, the same Circular states that wood including fire woods, timber, log and all other kinds of woods are chargeable to sales tax. The lots comprised of standing dead/dried trees and wind fallen trees. In order dated 2-9-2004 passed by FTO in review No.34/2004 (in Complaint No.1674/2003) there is a reference to judgment of Lahore High Court dated 16-3-2004 holding that purchase of wood from Forest Deptt is liable to sales tax. It is but obvious that a question of law arose for decision involving interpretation of the law and rules on the subject as also determination of factual aspects regarding the composition of the lots purchased by complainant. The matter related to determination of liability of tax involving interpretation of law and rules on the subject and as such FTO was not a proper forum. Matter of passing on of incidence of taxation to consumer also required determination in accordance with law. Findings and recommendations of FTO, therefore, are not sustainable.

Accordingly, the President is pleased to accept representation of Agency and to set aside findings and recommendations of FTO with observation that any of the parties may approach a court/forum of competent jurisdiction for determination of questions arising in the case."

11.Regarding Hon'ble President's earlier decisions in favour of the complainant as cited by the AR, the Chief Commissioner stated that live trees being agricultural produce were exempt from sales tax under Sr. No.10 of Table 02 of the Sixth Schedule of the Act. However, dead/dry trees were categorized as wood. As such, these were taxable as clarified by the FBR in its letter No.1/105-STT 1998 dated 10-9-2003. However, the aspect involves interpretation of law which falls outside the jurisdiction of FTO. While deciding FBR's representation in Complaint No.280/LHR/ST(45)/682/09, the Hon'ble President had accepted the representation and set aside the FTO Findings/ Recommendations, vide his order reproduced under Para 10 supra.

12.The Chief Commissioner stated that auction of dead trees by the Forest Deptt was taxable if examined in the light of the auction advertisement and standard agreement deed of the Forest Deptt. normally executed with the purchasers. He contended that facts of refund claims could be different and distinguishable from each other. Their merits need to be examined and decided in the light of facts, laws, rules, advertisement and agreement deeds of the Forest Deptt., the stuff being auctioned, FBR's clarification on the subject and the President's latest decision dated 10-7-2013 in Complaint No.280/LHR/ST(45)/682/09.

13.The review petition has been examined in the light of written and oral pleadings of the parties and documents on record. In order to cross-check the facts of the case, auction record of the Forest Deptt. including press advertisement of lots put up for auction and copies of agreement deeds were obtained. Perusal of these documents revealed that auction lots mainly comprised of timber wood in the form of dead/dry standing and fallen trees and firewood. Only a small component of these lots comprised green trees. While green trees may qualify for sales tax exemption, it is an established position that timber wood and firewood is chargeable to sales tax as clarified by FBR vide its letter No.1/105-STT/98 dated 10-9-2000, reconfirmed vide Circular No.5(53)/STB/2006 dated 2-8-2006. In such view of the facts, the description of goods given by the complainant in his complaint as 'standing trees' is misleading. The appropriate description should have been dead/dry trees, timber and firewood and green trees as per the aforesaid auction documents. The complainant's attempt to mislead the FTO Office cannot be supported.

14.Misleading description distinguishes the facts of this case from the cases cited by the AR in favour of the complainant. Therefore, the ratio laid down by FTO or Hon'ble President or judgments of the Supreme Court cited by the complainant are not applicable in the case. In addition to time limit, the question of passing of tax in terms of section 3B has also to be addressed. Issue of the complainant being non-registered is also involved. As such the matter involves interpretation of law and determination of facts for tax assessment. It, thus, falls outside the purview of the FTO as its jurisdiction is barred in terms of section 9(2)(b) of the Ordinance and Hon'ble President of Pakistan's decision referred to in Para-10 supra.

15.In such view of the facts, the FTO Findings in Complaint No.929/LHR/ST(30)/1693/2013 are upheld. The Review Petition is dismissed and case filed consigned to record.

HBT/160/FTOPetition dismissed.