2020 PLP 1394 (PTD)

iv) immediate suspension/blacklisting of the RP to avoid further loss of revenue.

3. Thus, Red Alert was accordingly issued by the Directorate of I&I-IR, Karachi vide letter dated 31.05.2012, for immediate suspension / blacklisting STRN of the RP to avoid further loss of revenue, with holding refund of Rs. 24.677 million and any other refund and for granting immediate approval for investigative audit under section 38 of the Sales Tax Act, 1990 to the Directorate I&I-IR.

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 Chief Commissioner-IR, RTO-III, Karachi submitted para-wise comments vide letter dated 15.11.2019. It was contended that when the Red Alert was issued, the case fell under the jurisdiction of RTO-II, Karachi from where it was transferred to its present jurisdiction in the light of FBR's Jurisdiction Order F.No.57(2)Jurisdiction/95923-R dated 21.07.2016. It was pointed out that Messrs Hanata Trading was registered as a manufacturer of textile goods on 15.01.2009. Accordingly, the RP was suspended and later on blacklisted vide orders dated 19.11.2012 and 17.12.2012, respectively. The RP in response filed a Constitution Petition (CP) No.D/292 of 2013 dated 28.03.2013, before the Hon'ble High Court of Sindh. The Hon'ble Court issued following directions: "By way of interim arrangement and without prejudice to the case of the parties, the NTN number of the petitioner is de-blocked only to the extent and for the purposes of export of goods, which shall be processed and dealt with strictly in accordance with law. Insofar as to refund, if any, this order shall not affect the same."

5. The status of the RP was restored/de-blocked in line with the directions of the Hon'ble Court. However, the Commissioner IR, Zone-II, RTO-III, Karachi vide order No.CIR/zone-I/RTO-II/KHI/2016/1042 dated 16.02.2017 suspended the registration of the RP due to non filing of the monthly sales tax returns from January 2016 to December-2016. The RPO is still suspended. It was further informed that only three Refund Payment Orders (RPOs) for the tax period August 2011 dated 07.03.2012, of Rs.2.778 million, October 2011 dated 07.03.2012 of Rs.4.922 million and May 2012 dated 08.01.2012 of Rs.0.297 were issued but no cheques or refund were issued to the RP after the receipt of the Red Alert.

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

7. 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 unearthed 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 got away with fraudulent refund, causing colossal loss to already cash starved exchequer. In the case of instant RP also, on the basis of was investigation Red Alert was issued by the Director I&I-IR Karachi vide letter dated 31.05.2012 with specific recommendations. Unfortunately, the Deptt did not realize the gravity of the situation and suspended STRN of the RP after six months although immediate suspension/blacklisting was recommended. The blacklisting order was issued on 17.12.2012 but status of the RP was active as it was not updated in the FBR database as is evident from the Chief Commissioner-IR's, RTO, Karachi letter dated 05.04.2013 and provided opportunity to the RPO to approach the Hon'ble High Court for restoration of STRN. Besides, no effort appears to had been made for scrutinizing the dubious refund and various abnormalities/discrepancies on account of thirteen refund claims of Rs.38.377 million, filed by the RP. The Deptt also did not make any effort to unearth the culprits from within and without, who were involved in processing and sanctioning of refund claims for tax period August 2011 and October 2011, prior to the issuance of Red Alert. Obviously, the registration and issuance of refund was not a simple task but a team work, involving not only the main beneficiaries but also having connivers in the Deptt.

8. The Chief Commissioner-IR, RTO-III Karachi has tried to absolve himself from the responsibility by simply stating that Red Alert letter was not in the record received from the defunct RTO. His studied silence of the part of CCIR RTO-III Karachi regarding failure to retrieve huge loss of revenue due to bogus input and not initiating action against the culprits is also very strange. This is, evidently a case of gross maladministration where, except suspending the STRN of the RP in February 2017 on the allegation of non-filing of monthly sales tax return from January 2016 no other action was initiated. The culprits who were involved in processing the refund claims and issuance of RPOs were also not taken to task. Sadly, even after initiating own motion investigation, the Deptt seems disinclined to take any action in this regard. It also sounds strange that the Directorate General I&I-R FBR and its filed offices, after conducting such laudable effort of detecting fraudulent activities and issued letters of Red Alerts to the filed formation but did not pursue the matter to its fruition. FINDINGS:

9. Failure of the Deptt to initiate timely action for suspending STRN and scrutinizing bogus refund claims filed by the RP against the person(s)/officials(s) involved in sanctioning of refund 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 Chief Commissioner-IR,RTO-III, Karachi to investigate and identify the culprits involved in delaying the suspension of STRN of the RP and despite delayed blacklisting the STRN was active in the FBR web portal and initiate disciplinary/criminal action against those found involved; (ii) identify the officers/officials who were involved in processing and sanctioning of refund claims prior to the issuance of Red Alert including failure to conduct investigative audit and take appropriate disciplinary / criminal action against them; (iii) initiate appropriate action including criminal proceedings leading to prosecution of RP and recovery of bogus input tax, swindled from public exchequer; (iv) report compliance within 45 days. KMZ/36/FTO Order accordingly.