2008 PLP 283 (PTD)

(f) Nowhere, either in the O.I.O. or in the Order-in-Appeal, it was determined that the purchases of the complainant were manipulated or fake. The quality and quantity and value of supplies were accepted without any comments to the contrary. The claim of input tax was denied for alleged lack of form. (g) It was prayed that the O.I.O. and Order-in-Appeal be declared illegal as they were based on mala fides intentions and mal administration.

2. The Assistant Collector, Collectorate of Sales Tax and Federal Excise, Faisalabad in his written reply raised the preliminary objection regarding the jurisdiction of the honourable Federal Tax Ombudsman. It was contended that as the legal remedies of appeal, review or revision were available under the relevant legislation, his jurisdiction was ousted within the meaning of section 9(2)(b) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 (the F.T.O. Ordinance).

3. On the merits of the case, following submissions were made:-- (a) The objection of the Audit Officer, DRRA, Lahore was defended as the sales tax invoices submitted by the complainant did not fulfil the requirement of section 23 of the Act. (b) The complainant could not produce original sales tax invoices even at the stage of hearing of appeal before the Collector (Appeals). (c) Section 7 of the Act provided that a registered person shall not be entitled to deduct input tax unless he held a tax invoice in his name bearing his registration number. The invoices submitted did not fulfil this condition. (d) The treatment given to the complainant was rightly upheld by the Collector (Appeals). (e) Section 23 of the Act clearly stated that a registered person making a taxable supply shall issue a .serially numbered tax invoice at the time of supply of goods. The invoices submitted by the Complainant were issued at the end of the tax period and were in conflict with the provision of law. (f) Statement of the complainant on solemn affirmation that he was not informed of the last date of hearing before the Collector (Appeals) was challenged. In support of this statement the observations of the Collector (Appeals) were quoted.

4. On the first date of hearing i.e. 29-9-2006 only the A.R. attended but not the D.R. He stated on solemn affirmation that original invoices were submitted to the Assistant Collector. The mistake which the complainant made was that he did not obtain the acknowledgement of the receipt. Secondly, it was submitted that the complainant had produced copies of invoices which were attested by, no less an authority than the seller itself i.e. P.O.L. These invoices should be treated as good as the original. Third submission made was that the provisions of sections 23(1) and 7(2)(i) did not insist on providing original invoices. Provisions of second proviso to section 23(1)(g) of the Act were also discussed. It was stated that it required that only one invoice shall be issued for one transaction. However, there was no bar in combining various transactions in one invoice. 4.1. As the D.R. had not attended, the arguments of the A.R. were sent to the respondent in writing so that they could come prepared in the next hearing.

5. In the next hearing both A.R. and D.R. attended and the case was discussed with them. In addition to the arguments already submitted, the A.R. pointed out two more aspects of the case:-- (i) In response a letter bearing No.ST-ENT. Audit/20/2005/2463, dated 20-6-2006 written by the Deputy Collector, Collectorate of Sales Tax and Federal Excise, Faisalabad, the supplier of the goods i.e. P.O.L. in their letter bearing No.POL/ST/06, dated 21-6-2006 furnished the invoices in respect of the purchases made by the complainant. These invoices confirmed the exact amount of input tax claimed by the complainant. (ii) The Auditor of the department in his undated report made the following observations:-- "It is pertinent to mention here that issuing of invoices on monthly basis be a procedural error at the end of the supplier (Messrs Pakistan Oilfields Ltd.) of the RIP. The said supplier has the practice of issuing only one sales tax invoice to the distributor in each month against all the supplies made at 'different dates of that month."

6. The D.R. reiterated the arguments given in the written reply. He pointed out that the invoices did not contain any serial number. They only indicated the Customer Registration No., the month of supply and the year. Therefore, the invoice number was missing and hence they failed to fulfil the requirements of section 23 of the Act. 6.1. In support of the Respondent's claim that A.R. of the complainant attended on the last date of hearing before the Collector (Appeals), a letter of Collector (Appeals) bearing C. No.74-Collector-Appeals/2006/825, dated 23-8-2006, was presented which clearly stated that Mr. Faheem Pervez, the A.R. of the complainant was present on that date. In this very letter he went on to observe:-- "It is also submitted for the consideration of the C.B.R that no where in the world a judicial authority is required to explain its judicial orders as mostly these orders pertain to legal interpretations and not maladministration. In Pakistan the law provides adequate remedy against such orders by way of appeal in the Honourable Tribunal and reopening of case by the C.B.R. and both these provisions are available in the Sales Tax Act, 1990 vide sections 46 and 45-A of the Act ibid. The complainant, if aggrieved has a right to file the appeal before the Appellate Tribunal."

7. The case was considered in the light of the written and oral arguments of the two parties and the documents submitted. One aspect which clearly emerges is that the respondents dad not question the, fact of the payment of sales tax by the complainant. 7.1. Two objections with regard to the invoices were made by the respondent: (a) The originals were not submitted and (b) that they did not bear the serial number. They have chosen to ignore the confirmation by the supplier and also the observation of their own auditor as quoted in sub-para. 5(ii) above. Secondly, the provisions of sections 7 and 23 confirm that the submission of the original invoices is not a necessary condition. Thirdly, a point which should be taken note of is that the provisions of section 7(2)(i) require that "a tax invoice in his name and bearing his registration number in respect of such supply is required to be furnished". The invoice submitted by the complainant contained his registration number. Fourthly, the presumed procedural lapse should not be pressed into service for disallowing a credit of tax paid, the payment of which is not doubted by the respondent. It is pertinent to note here that the alleged procedural lapse was committed by the supplier and not by the complainant. The former is also a registered person and is a reputed company and has confirmed the payment of tax. The complainant should not be punished for the alleged lapse of the supplier. No justification is found for the disallowance of the input tax claimed by the complainant.

8. The preliminary objection raised by the respondent was also considered. The provisions of section 9(2)(b) have to be read with section 2(3) of the F.T.O. Ordinance which deals with mal administration. Whenever maladministration is committed the honourable F.T.O acquires jurisdiction, which extends to all acts of mal administration. The definition of maladministration is wide and inclusive in nature and includes decisions, processes, recommendations, acts of omission or commission, which are contrary to law, rules and regulations and or perverse, arbitrary, unreasonable, unjust, biased, oppressed or discriminatory. Disallowance of input tax without any justification squarely falls in the definition of maladministration.

9. Before parting with this order, it is considered necessary to comment on the observation of the Collector (Appeals) as reproduced in para. 6.1 above. The Collector has arrogated the status of a judicial authority for himself. Black's Law Dictionary, 6th Edition, defines a judicial authority in the following words:- "The power and authority appertaining to the office of a Judge". Clearly, the Collector (Appeals) is not a judicial c authority. 9.1 He has also shown his reluctance to explain "its judicial orders". Obviously, he does not known the difference between the filing of a report and explaining his action. Another point of ignorance on his part is with regard to the powers of honourable F.T.O. under section 14 of the Ordinance. Under the provisions of the said section, he can summon and enforce attendance and examine him on oath, compel production of documents, receive evidence on affidavits, issue commission for examination of witnesses etc. He also appears to be unaware of his powers to punish of contempt under section 16 of the said Ordinance. He also does not know that the honourable F.T.O. is empowered to investigate any allegation of maladministration against any officer of the Revenue Division within the meaning of section 9(1) of the F.T.O Ordinance. Perhaps he knows that he is part of the Division. His remarks are held to be impertinent. However, as they obviously are based on his ignorance, the provisions of section 16 of the Ordinance are not being invoked.

10. In the light of above discussion, following recommendations are made: (i) The competent authority to cancel the impugned Order-in-Appeal bearing No. 67 of 2006, dated 30-6-2006 in exercise of the powers under section 45A of Sales Tax Act, 1990. This would result in annulment of O.I.O. bearing No.140 of 2006, dated 30-3-2006. The input tax claimed by the complainant be allowed. (ii) The Collector (Appeals), the author of the order-in-appeal referred to above, be issued a warning letter by the C.B.R. to refrain from making impertinent comments. (iii) Compliance of above-mentioned recommendations be reported within 30 days of their receipt of the Secretary, Revenue Division. C.M.A./179/FTO Order accordingly.