2012 PLP 325 (PTD)

(ii) pay compensation for the withheld amount under section 67 of the Sales Tax Act.

3. The Department preferred representation against the Findings/ Recommendations before Hon'ble President of Pakistan under section 32 of the FTO Ordinance, 2000. The President of Pakistan was pleased to reject the representation of the Department vide order dated 10-12-2005.

4. The review sought by the Revenue Division, against the said decision vide application dated 16-5-2006 under section 38 of the FTO Ordinance, 2000, was also rejected by the Hon'ble President of Pakistan vide order dated 1-7-2007.

5. The complainant thereafter filed contempt application under section 16(a) of the FTO Ordinance, 2000, which the Hon'ble Federal Tax Ombudsman decided vide order dated 26-6-2007 holding a under: "After clarification of the implication of the decision in the complaint and order of the President as well the respondent is given an opportunity to comply with the Recommendations within 20 days and in case they would fail to do so I shall be constrained to make recommendation to the worthy President to take action against the officers and also to issue notice of contempt."

6. In order to implement the Recommendations of the Hon'ble FTO, the Deputy Collector, Refund Group-VIII (DCRG), Sales Tax (Enforcement), Karachi, after making physical verification of the suppliers, served on the complainant a show cause requiring him to explain his position regarding verifiability of his claims. After considering the reply of the complainant, the DCRG passed order-in-original (Order-in-Original) dated 18-9-2007 rejecting his claims on the ground that the suppliers were already on the roll of blacklisted companies as being bogus. The complainant filed appeal before the Collector (Appeals) who, vide Order-in-Appeal (Order-in-Appeal) dated 30-7-2008 confirmed the Departmental treatment. The complainant thereafter preferred appeal before the Appellate Tribunal. The Tribunal vide order dated 18-1-2011, however, held that not only was the show-cause notice issued by the Department after inordinate delay of about five years illegal, but, the Collector (Appeals) had also failed to decide the appeal within the period stipulated under the law. The Tribunal accordingly directed the Department to pay the refund claim, as permissible under the law. It was further held that the Department did not discard the invoices through evidence as per requirements of section 73 and that there existed no provision in the Act to levy tax twice; firstly at the time of purchases and secondly at the time of sales.

7. The Revenue Division, in compliance to notice, filed parawise comments on 9-8-2011 and 15-11-2011, denying vehemently, at the outset, any maladministration on the part of the Department. It was stated that the suppliers of the complainant were registered with the Department as commercial importers/wholesalers and not manufacturers, as was claimed by him. It was further contended that the suppliers were found blacklisted on account of their involvement in the issue of fake and flying invoices. It was for this reason that physical verification of alleged Units of suppliers was conducted. These were found nonexistent on the addresses given on the invoices. Moreover, the alleged owners in whose names these units were shown were either found not traceable or were engaged in petty businesses. It was argued that after affording opportunity of being heard to the complainant to explain his position about fake and flying invoices, his refund claims were rejected through speaking order-in-original dated 18-9-2007 which was upheld by the Collector (Appeals).

8. The AR of the complainant argued that the Appellate Tribunal vide judgment dated 18-1-2011 had already set-aside the order-in-appeal dated 30-7-2008, and directed the department to pay the refund claim as permissible under the law. He contended that there is nothing left for the Department but to allow appeal effect and sanction the refund claims as directed by the Appellate Tribunal. He reiterated that the department, despite passage of considerable time had failed to allow appeal effect to the Appellate Tribunal's order and issue refund due.

9. The DR confirmed that order of the Appellate Tribunal was with the Legal Wing and the Department had not filed reference against the order under section 47 of the Act, and so, as a consequence, it had attained finality. He however contended that in order to allow appeal effect to the Tribunal's Order and issue refund permissible under the law, claims were processed through the STARR system launched by the F.B.R. He submitted copies of Objection Memos (OM) generated through STARR dated 6-8-2011 which were served on the complainant to clarify his position with regard to sales tax invoices, bills of exports and shipping bills in respect of the claims. He contended that as soon as the reply is filed by the complainant, the claims would be settled, as per law.

10. The arguments of both the parties have been given due consideration and record perused. It is noted that in order to allow appeal effect to the Tribunal's decision the Department has already initiated process through STARR and the OMs generated by the system have been served on the complainant. This case speaks volumes about how the Deptt. deals with the taxpayers' affairs, and how stubborn and insular its organizational climate is, at times. Any further dilly-dallying, however, will entail serious consequences. No tax functionary can be allowed to make a mockery of the law. Findings:--

11. The Appellate Tribunal allowed refund on 18-1-2011. The delay in giving appeal effect to this order is tantamount to maladministration. Recommendations:

12. FBR to direct the Chief Commissioner to - (i) allow the refund, as per law, within 15 days; and (ii) report compliance within 07 days thereafter. C.M.A./269/FTO Order accordingly.