2011 PLP 1429 (PTD)

(ii) Legal remedy in the form of Appeal under section 45-B of the Sales Tax Act, 1990 was available to the complainant against Department's failure to sanction refund of amount collected as Sales Tax on the supply of trees; (iii) The complainants never filed claim of refund amounting to Rs.330,553. (iv) The complainants have filed complaints on the plea that Sales Tax was collected on trees which fall in the definition of agricultural produce which is exempt from levy of Sales Tax. The complainants' plea for exemption is contrary to the law as the respective heading of Pakistan Customs Tariff PCT 0602.2000 cover only fruit bearing trees whereas the complainants have purchased forest trees which were not exempt from Sales Tax under the category of agricultural produce covered under item No.10 of Table 2 of the 6th Schedule to the Sales Tax Act, 1990.

4. At the time of hearing, the DR stated that refund claims of the complainants were not traceable and so the complainants should provide duplicate copies to enable RTO Multan to ascertain the legal position regarding admissibility of refund after proper verification. He stated that refund was to be claimed within specified time frame as laid down in section 66 of the Sales Tax Act, 1990. The AR, however, contended that honourable Federal Tax Ombudsman in different cases i.e. complaint No.440-L/2008 to 443-L/2008, No.120/2003 and 1674/2003 had held trees to be exempt from payment of Sales Tax, and refund could not be denied on mere technical grounds, even if the claims of refund were filed late. AR pointed out that honourable Sindh High Court in case reported as 2003 PTD 593 titled as Messrs Saleem Haji Rehmat Ullah Dada Karachi v. CIT Karachi ruled that relief available in law to a person should not be denied on account of technicality. He produced copies of two letters dated 3-12-2009 and 7-12-2009 bearing signatures of the Sales Tax officials who had duly received the refund claims. He also provided copies of reminders sent to the Commissioner IRS to expedite the matter. Copies of all the letters and the reminders were provided to the DR.

5. The complaint has been examined in the light of written and oral submissions of the parties. The contention in the parawise comments that the complainants had not filed any refund claim is not maintainable on account of the fact that copies of two letters of the Complainants bearing signature of the Sales Tax Officials in token of receipt of refund claim as well as two reminders [as at para 4 supra] show that the refund claims were not only filed by the complainants but also duly received by the concerned Sales Tax Officers. Moreover, the contention of the Commissioner that the exemption was restricted to fruit trees is incorrect on the following grounds:-- (i) The F.B.R's. clarification No. 1/105-STJ/98 dated 10th September, 2003 says that the trees being agricultural produce are exempt from payment of Sales Tax without qualifying trees into fruit trees and non- fruit trees; (ii) The exemption under serial No. 12 of the Sixth Schedule is also without qualification of fruit or non-fruit trees as it not only covers heading 0602.2000, but also 0602.9090 which is most relevant to the live trees; (iii) The FTO Secretariat has already directed in a number of cases including complaint No.120/2003, complaint No.1674/2003 and complaint Nos. 440-L/2008 to 443-L/2008 that the Sales Tax illegally collected by the Forest Officers on the auction of standing trees was unlawful ab initio; (iv) Upholding the FTO's Findings in complaint No. 440-L/2008 to 443-L/2008, the honourable President had directed, that there was no lawful authority under which the 'State can retain the citizen's money collected from him without the authority of the law' [Honourable President's decision vide F.No.73/08-Law (FTC)) dated April 25, 2009 refers]. Not even section 3B of the Sales Tax Act, 1990 applies in such cases in the light of the honourable President's decision No. 142/2003/FTO Law dated 20-11-2003 in Complaint No.120/2003; and (v) The F.B.R. had accepted these decisions after rejection of their Representations and allowed the refund of unlawfully charged Sales Tax.

6. As the complainants have lodged complaints against delay in the sanction of Sales Tax refund, there is no question of determination of tax. The provisions of section 9(2)(b) of FTO Ordinance, 2000, therefore, are not attracted. The provisions of Section 45B are also not attracted as no order regarding refund claims under reference had been passed to enable the complainants to file appeal in case of adverse decision.

7. In view of this established position, an appropriate course for the Revenue Division and F.B.R. is to effectively circulate the information among all the Forest Officers that sale and purchase of standing trees/live trees is not chargeable to Sales Tax in order to forestall the chances of repetition of this malpractice of collecting Sales Tax on auction of trees by the Forest Officers. Recommendations:

8. F.B.R. to- (i) direct the concerned officials to sanction due refund as per law within 30 days by condoning any delay involved in filing the claims; (ii) effectively circulate the non-taxability of live/standing trees and plants and take other appropriate measures to forestall the chances of the malpractice of collecting Sales Tax on trees by the Forest Officers; (iii) ensure that in other similar cases where Sales Tax has been charged on standing trees/live trees despite F.B.R's clarification No. 1/105-STT/98 dated 10-9-2003, the same be refunded to the persons who paid it, within 60 days; and (iv) report compliance of (i) above within 45 days and (ii) and (iii) within 75 days. H.B.T./106/FTO Order accordingly.