MUSLIM TRADERS VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2017 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1144 (2017)

Sales Tax Act (VII of 1990)---

----Ss. 14, 11 & 19---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 9 & 10---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Scope---Complaint against proceedings initiated against complainant for sales tax registration and realization of sales tax---Contention of complainant, inter alia, was that he was not required to register for sales tax under S. 14 of the Sales Tax Act, 1990---Validity---Department had issued notice to the complainant to inquire about his position with regard to sales tax registration and realization of sales tax, and complainant, instead of filing a reply to the said notice, preferred to file complaint before the Federal Tax Ombudsman---Federal Tax Ombudsman observed that issuance of notice does not cause any grievance or prejudice for filing of complaint---Complaint was rejected, in circumstances.

2016 PTD (Trib.) 2348 ref.

Haji Ahmad, Advisor and Abdur Rehman Dogar, Advisor, Dealing Officer.

Riaz Ahmad Raja, ITP Authorized Representative.

Muhammad Masood, DCIR Departmental Representative.

FINDINGS

ABDUR RAUF CHAUDHRY, FEDERAL TAX OMBUDSMAN.--The complaint has been filed under section 10(1) of the Federal Tax Ombudsman Ordinance, 2000 (FTO Ordinance) against the proceedings initiated for sales tax registration and realization of tax amounting to Rs185.958 million for tax years 2013, 2014 and 2015 vide notice No.340 dated 04.10.2016 and No.361 dated 19.10.2016.

2.Briefly stated, the Inland Revenue Officer, Layyah issued a notice for realization of sales tax on the basis of audit observation raised by the Directorate of Revenue Receipts Audit (DRRA). In response, the AR vide letter dated 07.10.2016 contended that the Complainant was engaged in supplies of life saving medicines which were exempt from sales tax under S.R.O. 555(I)/2002 dated 23.08.2002, therefore, was not liable for registration under section 14 of the Sales Tax Act, 1990. Further contended that data retrieved from income tax return cannot be considered for calculating sales tax liability as held in a case cited as 2016 PTD (Trib.) 2348. Moreover, DRRA can only audit receipts of the Federal Government and not the record of a registered person as per S.R.O. 1195(I)/90 dated 17.12.1990.

3.The complaint was sent for comments to the Secretary, Revenue Division, Islamabad in terms of section 10(4) of the FTO Ordinance. In response, the FBR vide letter C.No.1(79)TO-II/2016 dated 07.12.2016 forwarded comments of Commissioner IR, Multan Zone bearing No.5353 dated 25.11.2016. According to the Deptt, the Complainant was engaged in the business of distribution of pharmaceutical products as well as vegetable and fruit juices which were taxable under the Act. The Complainant being a distributor of taxable supplies was liable to be registered under clause (e) of subsection (1) of section 14 of the Act. Accordingly, notices dated 04.10.2016 and 19.10.2016 were issued wherein the Complainant was provided opportunity to explain his position. However, no legal proceedings have been initiated in this case.

4The DR reiterated the stance taken in the written comments but assured to consider Complainant's reply to the notice on merits without being influenced by the audit observations.

5.Both the parties heard and case record perused. The Deptt has issued notice to the Complainant to know his position with regard to the registration and realization of tax. Instead of filing a reply, he has preferred to file this complaint. The issuance of notice does not cause any grievance or prejudice for filing of complaint as held by this office in various similar complaints.

6.In view thereof, the complaint is rejected and case file consigned to record.

KMZ/10/FTO Complaint rejected.