2008 PLP 1782 (PTD)

Ashfaq Ahmad Sheikh, ITP for the Complainant. M. Abid Raza Bodla, D.C. Sales Tax for Respondents. DECISION/FINDINGS JUSTICE (RETD.) MUNIR A. SHEIKH, (FEDERAL TAX OMBUDSMAN).

Facts of the complaint are that the complainant

an exporter of textile goods

exported made-ups in the month of October 2003 and claimed refund of Rs.352800 under section 10(1) and (2) of the Sales Tax Act, 1990. In support of his refund claim, he had, in compliance of rule 4 of the Sales Tax Refund Rules, 2002, submitted all the supportive documents as far back as in November 2002. The department scrutinized the refund claim as required under rule 5 of the aforesaid rules, which included verification of input invoice from the concerned Collectorate, including deposit of sales tax on input invoices. Although the verification so made had disclosed the claim to be genuine and despite the fact that as per rule, of the aforesaid rules refund to the commercial exporter had to be sanctioned/paid within one month of the submission of supportive documents to the extent of input tax shown in sales tax invoices, the respondents did not issue the refund pay order. Respondents' failure to issue refund payment order and withholding the same without any valid reason amounted to `maladministration' within the meaning of section 2(3) of the F.T.O. Ordinance, 2000. They may be directed to issue refund cheque immediately and redress complainant's grievance.

2. In reply, the Collector of Sales Tax, Multan has submitted that while processing the complainant's refund claim it was observed from the STARR (Sales Tax automated Refund Repository) analysis sheet that the `registration status' of the complainant's supplier was invalid. Therefore, the claim could not be processed. Only verification of invoices and transactions of payment did not make refund claims genuine as the STARR objection created a doubt about the complainant's supplier and the genuineness of complainant's refund claim. The Collectorate of Multan had requested the Collectorate of Faisalabad vide its letter dated 19-10-2005 to intimate the registration status of Messrs Chishti Weaving Faisalabad (complainant's supplier) so that subject refund claim could be processed accordingly. The Collectorate would have no objection to sanction the admissible refund to the complainant if the Faisalabad Collectorate declared the supplier's registration status as valid. Complainant's refund claim would be processed on receipt of report from the Collectorate of Sales Tax, Faisalabad, already addressed in the matter. The complaint may not be entertained.

3. During the hearing, the AR reiterated the arguments advanced in the written complaint. He pointed out that all the relevant documents were submitted by the complainant and received by the respondents. The respondents verified the documents and did not raise any objection on his claim. It is only in respondents' comments/reply filed in response to the present complaint that they had come up with the objection that the supplier's registration was invalid. The Faisalabad Collectorate had verified the tax invoices. The complainant had furnished proof of payment of sale price in adherence to the provisions of section 73 of the Sales Tax Act, 1990. Bank statements and shipping bills were also verified. The respondents should have issued the refund voucher within one month as required under law. Their failure to do so amounted to 'Maladministration'. The supplier had paid sales tax on invoices issued on by it. On 25-2-2004 even STARR had confirmed tax payments supplier's invoices and its registration status. The law did not provide for withholding refund on account of supplier's registration status. Even if the supplier did not deposit the tax, it was his responsibility to pay the tax. The complainant had made the payments of sale price to the supplier. The FTO had already decided in Complaint No.275 of 2002 that refund could not be blocked even if the supplier was not traceable because it was for the department to trace it out and recover tax from it.

4. The DR submitted that the complainant's profile showed that there were no transactions except in the months of May and October 2004. He promised that the complainant's case would he processed and finalized soon upon receipt of report from the Faisalabad Collectorate, which report was required for determining the question of admissibility of refund or otherwise. If the invoices were finally found to be genuine and payments were made in adherence to the provisions of section 73 of the Sales Tax Act, 1990 and the registration of the supplier was also found genuine, refund would be allowed.

5. The arguments of the two sides and record of the case have been considered and examined. The complainant claims that he had submitted the supporting documents of his refund claim as for back as in the month of November 2002 yet the respondents have failed to settle the refund claim. However, there is on record a receipt dated 12-2-2004 issued by the receiving officer giving the impression as if the documents were received on 12-2-2004. It appears that the complainant had submitted the supporting documents earlier than 12-2-2004. Even if 12-2-2004 is considered to be the date of receipt of supporting documents, the respondents have delayed, beyond doubt, decision on complainant's refund claim. It is also observed that even during the period from .12-2-2004 onwards the respondents did not even intimate the complainant as to why his claim was being withheld. Complainant's claim, therefore, suffered from `inattention' and inordinate delay on the part of the respondents, which amounts to `maladministration'. The Collector, Sales Tax, Multan has addressed a letter dated 19-10-2005 to the Collector, Sales Tax, Faisalabad asking it to intimate the current `registration status' of the supplier located at Faisalabad so that the pending refund claim could be finalized accordingly. The D.R. submitted that verification report would be obtained from the Collectorate of Faisalabad shortly. The A.R., on the other hand, emphasized that the complainant had paid the sale price inclusive of tax to the supplier in accordance with the provisions of section 73 of the Sales Tax Act, 1990, and it was for the supplier to deposit sales tax into the government treasury and if he had not, the department should recover the same from the supplier. He cited in this connection F.T.O's findings in Complaint No.275 of 2002.

6. The case records show that the Collectorate of Multan had asked the Collectorate of Faisalabad vide its letter dated 2-1-2004 to verify invoices issued by the complainant's supplier so that the refund case could be processed accordingly. The Collectorate of Faisalabad vide its letter dated 30-1-2004 verified the invoices. The D.R. emphasized that the STARR analysis sheet was showing the registration status of the supplier as invalid and, therefore, a reference to and report from the Collectorate in whose jurisdiction the unit was located was essential for deciding the case. Clearly; the case has been pending since long. The department should have finalized its inquiries expeditiously. They are still awaiting a report from the Collectorate of Faisalabad. In the cited complaint i.e. No.275 of 2002 it was recommended by the F.T.O. that the verification process be finalized within 90 days in which the complainant should also be associated and if as a result of investigation, invoices were not found to be fake and fraudulent then refund be paid to the complainant. In this case, the Multan Collectorate got supplier's invoices verified from the Faisalabad Collectorate yet it failed to finalize the refund claim. Instead, they wanted to verify from the Collectorate of Faisalabad the `registration status' of the supplier and also to check whether the supplier had deposited the tax into the treasury vis-a-vis the purchases made by the complainant. The reference dated 19-10-2005 made to the Collectorate of Faisalabad should have been made much earlier. The complainant contends that (i) the invoices and other documents had been verified, including deposit of sales tax on input invoices, (ii) he had made payments to the supplier in accordance with the provisions of section. 73 of the Sales Tax Act, 1990 and (iii) if the supplier had not deposited sales tax into the government treasury, it was not the responsibility' of the complainant.

7. As the respondents have committed `maladministration' by delaying their decision on the complainant's refund claim and by withholding refund for which the complainant had filed the documents long ago, without any valid reason, it is recommended that the CBR direct the Collectorate of Sales Tax, Multan to: (i) Obtain from the Faisalabad Collectorate of Sales Tax report regarding `registration status' of complainant's supplier, asked for vide its communication dated 19-10-2005, promptly to' examine and decide complainant's refund claim on merit, in accordance with the provisions of law but by taking into consideration the contentions of the complainant mentioned in para. 6 supra and after hearing him. (ii) Compliance report be submitted within 30 days of the receipt of this order. C.M.A./8/FTO Order accordingly.