SHAHEEN CLOTH PROCESSING MILLS (PVT.) LTD. VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2017 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1556 (2017)

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

----Ss. 9(2)(a), 2(3) & 10---Sales Tax Act (VII of 1990) Ss. 47, 66 & 67---Complaint against non-issuance of sales tax refund---Jurisdiction of the Federal Tax Ombudsman---Maladministration---Scope---Matter sub judice before High Court---Effect---Contention of the Department was that per S.9(2)(a) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000; jurisdiction of the Federal Tax Ombudsman was barred since the matter was subject of a reference before the High Court under S.47 of the Sales Tax Act, 1990 which was filed before the present complaint---Validity---Contention of Department was misconceived as the Federal Tax Ombudsman looks into acts of omission and delay caused due to inefficiency, neglect and inattention of the Department---No justification existed in the present case for unwarranted delay in process of verification of complainant's application and disposal of the refund claim---Contention that refund should be withheld till decision of the reference before the High Court was not convincing as no stay was granted by the relevant court of law---Appeal by itself did not have the effect of staying of the operation of the order appealed against---Federal Tax Ombudsman observed that the neglect and inattention of the Department in the process of verification and disposal of refund claim tantamount to maladministration and recommended the Department to direct the concerned Commissioner to issue due refund/compensation within 45 days---Complaint was disposed of, accordingly.

2002 PTD 2646; 2013 PTD 534; 2013 PTD 2341; 2002 PTD 1805; 2012 PTD 424, 2013 PTD 534; Messrs Mumtaz Ghani Textile (Pvt.) Ltd. v. Secretary Revenue Division, Islamabad 2013 PTD 1770 Complaint No.300/LHR/51(62) ??? 583/2012 ref.

2002 PTD 6446; 2013 PTD 534; 2013 PTD 2341 and Order No.14/2007-Law/FTO rel.

S. Ashraf Ahmad Ali, Advisor Dealing Officer.

Khubaib Ahmad, Authorized Representative.

Bilal Ahmad, DCIR Departmental Representative.

FINDINGS/RECOMMENDATIONS

ABDUR RAUF CHAUDHRY, (FEDERAL TAX OMBUDSMAN).---This complaint has been filed under section 10(1) of the Federal Tax Ombudsman Ordinance, 2000 against non-issuance of sales tax refund with compensation as detailed below-

2.Briefly stated, the Complainant, a Private Limited Company, filed refund claims for the periods May/2009 to November/2012 and December/2008 to February/2013 against zero rated supplies of textile and textile articles which were deferred on account of STARR objections and subsequently rejected vide Order-in-Original (O-i-O) No.186/2015 dated 24.03.2015 and No.254/2015 dated 10.06.2015. Aggrieved, the Complainant filed appeal before the Commissioner IR(Appeals) who vide Order-in-Appeals Nos. 756/2015 and 757/2015 dated 19-11-2015 set aside the impugned orders and directed the Deptt: to process claim in the light of supportive documents provided by the Complainant after its verification. Whereas, for the tax period July/2011 to February/ 2013, the Deptt: instituted a contravention case vide show-cause notice dated 15-01-2014 which was decided against the complainant vide adjudication order dated 10-06-2014. Aggrieved, the Complainant filed appeal before the CIR (Appeal) who vide Order-in-Appeal No.900/2004 dated 17-12-2014 partially accepted the appeal. During pendency of appeal, Deptt coercively recovered an amount of Rs.7.947 million by way of deduction from admissible refund of the Complainant pertaining to tax periods December/2011 to August/2014. Aggrieved against order of CIR (Appeals) dated 17.12.2014, an appeal was filed before the Appellate Tribunal IR, Lahore who vide S.T.A. No.786/LB/2015 dated 06-04-2016 accepted contention of the Complainant by observing as under:--

"In view of what has been discussed hereinabove, particularly in the light of law and record, we hold that the impugned orders passed during the hierarchy of Inland Revenue, being suffering from grave legal infirmities are declared to be illegal and are hereby set-aside.

This would result into acceptance of the registered person's appeal in the manner indicated above"

In pursuance of orders of CIR (Appeals) and ATIR, complete information/documents required under the law were provided to concerned officer followed by application/reminders dated 31.10.2016, 10.11.2016 and 17.11.2016 and personal visits of the office time and again, but the claim was not settled. The Complainant has relied upon the judgment of this fora cited as (2002 PTD 2646), (2013 PTD 534), (2013 PTD 2341) and on representation vide order No.14/2007-Law/FTO dated 31.08.2008 wherein held as under--

"It is trite law that appeal by itself does not have the effect of staying the operation of the order appealed against. The FTO's recommendations are in accordance with law .. After the expiration of limitation for making appeal, they should implement the order or obtain stay. This is rule of law. We must respect it".

Further contended that refund was allowed at appellate stage, but withheld without plausible reason and so the Complainant was entitled to compensation under Section 67 of the Act as held vide judgments cited as (2002 PTD 1805), (2012 PTD 424), (2013 PTD 534) and (2013 PTD 1770 and in case of "Messrs Mumtaz Ghani Textile (Pvt.) Ltd. v. Secretary Revenue Division, Islamabad" in Complaint No.300/LHR/ ST(62)583/2012 dated 06-08-2012.

3.According to the Complainant, Deptt was under obligation to process claim within stipulated period prescribed in law, but it failed to do so, which comes within the ambit of maladministration under section 2(3)(ii) of the FTO Ordinance.

3A.The complaint was referred for comments to the Secretary, Revenue Division, in terms of section 10(4) of the Ordinance. In response, FBR vide letter C.No.4(0611)TO-I/2016 dated 12.01.2017 forwarded comments of the Commissioner IR, Corporate Zone, RTO, Faisalabad bearing No. 377 dated 03-01-2017. The Deptt raised preliminary objection that jurisdiction of this Fora is barred under Section 9(2)(a) of FTO Ordinance, 2000 in the matters which are subjudicious before a court of competent jurisdiction. In this case a reference under Section 47 of the Sales Tax Act, 1990 was filed before the Hon'ble Lahore High Court, Lahore on 02.09.2016 against ATIR's S.T.A. No.786/LB/15 dated 06.04.2016, while complaint was filed thereafter on 14.12.2016 and so the matter was sub-judice on the date of filing this complaint. Further, the Complainant failed to fulfill the conditions prescribed in Section 10(3) of the FTO Ordinance, 2000. The complaint was filed after six months from the day on which the Complainant first had the notice of the matter alleged in the complaint and was thus liable to be dismissed. Whereas, recovery had been made according to legal provisions of Sales Tax Act, 1990 and no coercive measures had been taken against the Complainant. According to the Deptt, the Complainant failed to provide supportive documents, he was, therefore, required to furnish the same vide letter No.299 dated 21.11.2016, but he preferred to lodge this complaint rather than to fulfill legal requirements. Further contended that refund claims under Section 66 of the Sales Tax Act, 1990 are sanctioned after verification that no adjustment or refund of input tax has been claimed earlier and that goods have been duly accounted for in the inventory/record and invoices claimed are valid. Whereas, in the instant case, neither STARR objections were addressed nor supportive documents provided for over-ruling of objections and so admissibility of refund could not be determined. Under the circumstances, the claim for compensation under section 67 of the Sales Tax Act, 1990 is also baseless.

4.The complaint has been examined in the light of the written and oral submissions of the parties and facts available on record. The objection with regard to the jurisdiction of FTO is misconceived as this office is looking into the acts of omission and the delay caused due to inefficiency, neglect and inattention of the Deptts' officers/officials. Objection regarding late filing of complaint is not convincing as evident from record. The Complainant had been consistently approaching the FBR for issuance of refund, but the claims were not settled. The contention of the Complainant regarding filing of documents appears to be convincing as the Commissioner IR (Appeals) has also confirmed that supportive documents were available on record. Despite that process of verification was not initiated. There was thus no justification for unwarranted delay in the process of verification any consequently the disposal of refund claim. It has been held by the President of Pakistan and Superior Courts in number of cases that omission to decide the Complainant's application within the prescribed time without sufficient cause by itself was, on the part of the Commissioner, an act of maladministration. Deptt's contention regarding withholding of refund till the decision by the High Court is not convincing. Under the law, it is not permissible to withhold refund on the ground that an appeal or a reference has been filed, especially when no stay was granted to withhold the refund by the relevant court of law. In the cases decided by this form cited as (2002 PTD 6446), (2013 PTD 534), (2013 PTD 2341) and in Order No.14/2007-Law/FTO dated 31.08.2008 in representation, it was held that appeal by itself does not have the effect of staying the operation of the order appealed against. Moreover, reference in the High Court has been filed against ATIR's orders No.786/LB/2015 and not against Order-in-Appeals Nos. 756/2015 and 757/2015. The claim of compensation also needs to be looked in the light of cases cited by the Complainant.

Findings:

5.The neglect and inattention of the Deptt. in completion of the process of verification and disposal of refund claim is tantamount to maladministration in terms of section 2(3)(ii) of the FTO Ordinance, 2000.

Recommendations:--

6.The FBR-

(i)to direct the CIR to issue refund/compensation due within 45 days; and

(ii)report compliance within 07 days thereafter.

KMZ/57/FTO Order accordingly.