2020 PLP 1352 (PTD)

3. Thus, Red Alert was accordingly issued by the Directorate of I&I-IR Karachi vide letter dated 25.03.2013 for retrieval of bogus refund based on chain of fake/flying invoices and concomitant necessary action against the persons/officials involved in this nefarious and unlawful activity.

4. Comments of the Secretary, Revenue Division, Islamabad were sought in terms of Section 10(4) of the FTO Ordinance read with Section 9(1) of the Federal Ombudsmen Institutional Reforms Act, 2013. In response thereto, the FBR forwarded para-wise comments of the Commissioner-IR. Zone-I, Corporate RTO, Karachi vide letter dated 19.12.2019. It was contended that at the time of issuance of Red Alert, the jurisdiction of the case was with Regional Tax Office-II, Karachi and action was taken and cheque No.A149622 of Rs.6.038 million, relating to refund claim for tax period November 2012 was stopped by the CSTRO. It was responded that Rs.19.183 million, were claimed by the RP on account of input tax/refund for various tax periods, from September, 2012 to January, 2013.

5. Being aggrieved, the RP filed Constitution Petition No.D-2465 of 2013 before the Hon'ble High Court of Sindh at Karachi, which was decided on 24.11.2014, with the following directions: i. the respondent to issue the Show Cause Notice under section 21(2) of the Sales Tax Act, 1990 to the registered person within one week. ii. RP shall properly respond to it and order will be passed within 07 days. iii. If there is no case of incorrect or inadmissible input tax adjustment of sales tax, the refund may be released in favour of petitioner within fifteen days thereafter.

6. It was averred that the Commissioner-IR, Zone-IV, RTO-II, Karachi completed proceedings as per directions of the Hon'ble High Court of Sindh and blacklisted the RP vide order No. CIR/Zone-IV / RTO-II/KHI/2014/3916 dated 20.02.2015. It was also informed that no refund was claimed by the RP after the receipt of Red Alert.

7. The averments of the Deptt considered and case record perused. It has been noted that the then CIR, Zone-IV, RTO-II, Karachi issued blacklisting order dated 20.02.2015 and failed to apprehend the culprit despite the fact the RP failed to join proceedings under section 21(2) of the Act, initiated under the orders of the Hon'ble High Court. This is indeed a criminal negligence and a case of gross maladministration. Although after the receipt of Red Alert no refunds were claimed/issued, and refund sanctioned for tax period November 2012 was not disbursed but the Deptt failed to initiate any proceedings for retrieval of bogus refunds pertaining to tax period September 2012, October 2012 and December 2012. The outlaws, who were involved in registering the fake RP as it was a paper entity as per blacklisting order and issuance of refund were also not taken to task. Sadly, even after starting own motion investigation, the Deptt seems disinclined to take any action in this regard. It also sounds strange that the Directorate of I&I-IR Karachi, after conducting such laudable effort of detecting fraudulent activities and issued letters of Red Alerts to the field formation but did not pursue the matter to its fruition.

8. It is observed that a country wide investigation against issuance of bogus refunds was carried out by the Directorate General I&I-IR FBR. After painstaking exercise, the I&I-IR unsearched copious cases, where fake RPs registered with the connivance of the staff, claimed on the basis of fake and flying vouchers, refund and in many cases get away with fraudulent refund, causing colossal loss to already cash starved exchequer. FINDINGS:

9. Failure of the Deptt to initiate action against the person(s)/officials(s) involved in registration of fake RP and retrieval of refund already issued prior to issuance of Red Alert, is tantamount to maladministration in terms of Section 2(3)(i)(d) and (ii) of the FTO Ordinance. RECOMMENDATIONS:

10. FBR to- (i) direct the concerned Chief Commissioner-IR, to investigate and identify the officials involved in registration of fake RP and initiate disciplinary/criminal action against those found involved (ii) identify the officers/officials involved in processing on the basis of fake and flying vouchers and issuing refund of sales tax pertaining to tax period September 2012 to January 2013, amounting to Rs.19.183 million and take appropriate criminal/disciplinary action against them; (iii) initiate appropriate action including criminal proceedings leading to prosecution of RP and recovery of refund amount , swindled from public exchequer; (iv) report compliance within 45 days. KMZ/25/FTO Order accordingly.