2020 PLP 1111 (PTD)

2. In the case of Messrs Saif Enterprises STRN 1700402015712, Registered Person (RP) got registered with business activity as other personal service activities N.E.C the investigation conducted by I&I-IR, Karachi revealed that the RP had filed refund claim for the tax period March 2013 of Rs.0.899 million and claimed input from Messrs Al-Mezan Iron and Steel having STRN 1700085745914 which in turn claimed input from Messrs Shaikh Traders and Messrs Madina Traders who were importing Nankang brand tyres and stainless steel sheets/ceramic tiles respectively, which were irrelevant to undertake any manufacturing activity from such diverse input.

3. Thus, Red Alert was accordingly issued by the Directorate General of I&I-IR Karachi vide letter dated 13.06.2013, to verify the genuineness of input tax before processing the refund claim filed by the RP.

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 12.12.2019. It was contended that at the time of issuance of Red Alert the jurisdiction over the case was with RTO-II Karachi and upon its receipt, the STRN of the RP was blacklisted vide order dated 28.10.2013 and no refund was sanctioned since its registration.

5. Averments of the Deptt considered and case record perused.

6. Evidently, the Deptt blacklisted the STRN but no investigation was carried out to verify the genuineness of input tax claimed by the RP, despite the fact that in the blacklisting order, it was mentioned that sales tax registration was obtained with the mala fide intention to cause loss to the national exchequer by getting unlawful input tax adjustment/refund. It is also observed that the Deptt did not grasp gravity of the state of affairs, and except blacklisting no serious effort was made to unearth and apprehend the culprits from within and without who were involved in sales tax registration of the RP. This is evidently a case of gross maladministration where, except blacklisting the RP, the Deptt has failed to initiate any proceedings to verify the genuineness of the input tax or locate the RP. Sadly, even during the instant 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. FINDINGS:

7. Failure of the Deptt to initiate action against the person (s)/officials involved in registration of RP and conduct investigation in the light of observations of the Directorate of I&I-IR, Karachi is tantamount to maladministration in terms of Section 2(3)(i)(d) and (ii) of the FTO Ordinance. RECOMMENDATIONS:

8. FBR to- (i) direct the Chief Commissioner-IR, Corporate RTO, Karachi to investigate and identify the officers/officials involved in the registration of the RP and failure to conduct timely investigative audit and take appropriate criminal/disciplinary action against them; (ii) initiate criminal proceedings leading to prosecution of RP and recovery of unlawful input tax adjustment, swindled from public exchequer; (iii) report compliance within 45 days. KMZ/27/FTO Order accordingly.