2004 PLP 1659 (PTD)

11. The Deputy Collector stated that the post‑refund audit of the Complainant was started in 2002 and audit observation was issued on 4‑3‑2003. Its reply was not found satisfactory and a contravention case for recovery of Rs.78.8 million in sales tax and Rs.15 million additional tax was formulated on 30‑6‑2003 and sent for issue of show‑cause notice. He stated that besides transaction with G.I. Traders, C.B.R had some additional information on the basis of which they decided to place the name on the list of suspected units and comprehensive audit had already been carried out.

12. Mr. Lakhany stated in his counter‑arguments that. the issue of audit observation did not establish any offence without issue of show -cause notice and adjudication of the contravention case, about which they have not knowledge. The Complainants cannot be treated guilty of any offence. The Department does not have the powers to decide the guilt of a unit without due process of law. The Complainants are in the export business and have been exporting goods regularly but the sales tax officials were treating them as untouchables merely because their names have been placed on the suspected list without any justification, without any cogent reason, without disclosing the reasons, and without any adverse decision. It has been held by the Sindh High Court, PTCL 2003 CL 2003, in the case of United Exports that intimation of audit' observation did not constitute a show‑cause notice.

13. Mr. Shoaib Majid, proprietor of Messrs KAM International described at considerable length the harassment that he and his firm has been subjected to for the last one year when post‑refund audit was started. He stated that his unit was one of the major exporters of bed 4inen, mostly to France, and its outstanding, record of performance was acknowledged by the Ministry of Commerce and Export Promotion Bureau. But the Sales Tax Department has meted out a very shabby treatment to his business concern. He and his officials have been visiting the office almost on the lower functionaries, and a deliberate policy was set in motion not to solve their genuine problems, not to sanction genuine refunds and not to treat him and his staff with courtesy.

14. From the submissions made in the complaint, the arguments put of hearing and the response of the Department, the position emerges as follows:‑‑ (1) The Complainants made four purchases from G.I. Traders in 2002, which was placed on the suspected list in June, 2003. (2) Payment was made by crossed cheques through banking channels. (3) C.B.R. placed it on the suspected list and directed the Collector to withhold pending refund claims as a result of which refund of Rs.88,755,969 for July, 2002 to June, 2003 was blocked. (4) According to the Department a contravention case for recovery of Rs. 78 million sales tax and Rs.15 million additional tax was formulated un 30‑6‑2003 and sent for issue of show‑cause notice, which has not yet been issued. (5) The proprietor of the Complainant's firm bitterly complained about the alleged maltreatment meted out to him and his officials despite the outstanding record of export performance.

15. It has been admitted by the Department that the name of the Complainant's firm has been included in the list of suspected units because one supplier was involved in some malpractice. There is considerable force in the argument that if one of the suppliers was fake the buyer should not have been placed on the suspected list unless collusion was established and there was evidence to prove that the transactions were fake. The respondents should have carried outs investigation to verify; (i) the physical transfer of goods from the supplier to the purchaser on the basis of dispatch note, receipt note, the transport' documents, entry in the purchaser's books of account; (ii) payment through banking channels to ascertain the genuineness of the transactions and validity of invoices inclusive of sales tax; (iii) physical receipt of goods and export thereof from the Complainants' records etc. If the purchases by the Complainants were found genuine, their claim for de‑listing from the suspected list would be justified.

16. The Complainants have not been confronted with the evidence established against them as a result of comprehensive audit issued on 4‑3‑2003. Their reply has not been taken into account and reconciliation of the facts, and figures not carried out. C.B.R. has blocked the refund claims but no show‑cause notice in their regard has been issued. If there is tangible evidence against the Complainants, the same should have been disclosed to them, the charges framed in the form of show‑cause notice, and opportunity provided to them to rebut the same and represent their case.

17. The situation as brought out from the foregoing paragraphs shows a one‑sided action on the part of the Department to condemn the Complainants to the "suspected" category, deny the refund without due process, and harass them as alleged by the proprietor. It may be recalled that in one of its directives, C.B.R. had issued instructions that refund claims should not be rejected for a few suspected invoices, refund be disallowed only to the extent of fake invoice, and the remaining amount sanctioned. Clearly this directive has been violated by the sales tax authorities. The entire process, action and proceeding suffer from maladministration as they are arbitrary, based on presumption and irrelevant grounds, unjust and oppressive. The administrative excess is proved which involves improper motive as defined in clause (d) of subsection 3 of section 2 of Establishment of Office of Federal Tax Ombudsman Ordinance 2000.

18. It is recommended that C.B.R. (i) direct the Collector concerned tos (a) carry out investigation and verification on the lines mentioned in paragraph 15, re‑examine the status of this unit and should it be established that it has been included in the list of suspected units merely on the basis of a few purchases from a supplier in 2002 whose premises was found closed in 2003 without adverse tangible evidence, de‑list it from the said list; (b) afford opportunity to the Complainants, if not already done, to rebut the objections raised in the audit observation and necessary issue show‑cause notice only on the basis of concrete evidence; and (c) examine the blocked refund claims with a view to verifying the physical transportation of goods, their entry in their records and actual shipment, as mentioned in paragraph 15, and decide the refund claims expeditiously on the basis of verified facts. (ii) Investigate into the allegation of maltreatment meted out to the Complainants and appropriate disciplinary action be taken against the defaulting officials. (iii) Above action be completed within thirty days and compliance reported within forty‑five days. C.M.A.110/FTO Order accordingly.