2020 PLP 1300 (PTD)

(iv) the RP was found engaged in imports and supply of yarn amounting to Rs.651.078 million and suspicious purchases of Rs.412.957 million to get illegal refund; (v) the RP made supplies of Rs.1.755 billion to blacklisted / suspected units; (vi) the RP misused SRO 1125(I)/2011 dated 31.12.2011 and availed benefit of manufacturing status without having such facility and caused loss to national exchequer of Rs.13.021 million.

3. Thus, Red Alert was accordingly issued by the Directorate General of I&I-IR Karachi vide letter dated 12.09.2014 for conducting physical verification to verify manufacturing facility of the unit, investigative audit to verify suspicious purchases and supplies and determination of exact tax liability, immediate suspension of STRN of RP to block imports and STRN of Messrs Margalla Industries, recovery of evaded tax and initiation of criminal proceedings against the persons / officials involved in this nefarious and unlawful activity.

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, Islamabad forwarded para-wise comments of the Commissioner-IR, Zone-I, Corporate RTO, Karachi vide letter dated 27.12.2019. It was contended that the Director, I&I-IR, Karachi vide order dated 16.09.2014 blocked input tax/pending refund cases till the completion of proceedings by the Commissioner-IR concerned. Before the issuance of Red Alert, the jurisdiction was with defunct Regional Tax Office, Karachi and the CIR Zone-II, RTO Karachi had blacklisted STRN vide order dated 14.07.2014 as the RP was found non-existent at the declared address and statutory notices were returned back with courier remarks address still closed.

5. Being aggrieved, the RP filed Constitution Petition No.D-3480 of 2014 dated 22.07.2014 before the Hon'ble High Court of Sindh, in compliance to which, STRN was restored vide order dated 04.08.2014. After receipt of Red Alert investigative audit by the CIR, Zone-II of defunct RTO, Karachi was conducted and Order-in-Original No. 30/7 of 2015 dated 25.02.2015 for recovery of inadmissible input tax of Rs.410.495 million along with penalty was adjudged against the RP. In the meanwhile, physical verification was conducted and the unit was found closed at the declared address. After giving ample opportunity of being heard, STRN of the RP was suspended vide order dated 14.11.2019 and blacklisting proceedings are underway. It was further informed that the RP had filed five refund claims for the tax period February, March, May, July and August 2010. Four refund claims except for the period August 2010, were processed and three claims were deferred. Only one refund claim for the tax period May 2010 of Rs.0.453 million was sanctioned but cheque was not issued.

6. The averments of the Deptt considered and case record perused.

7. It has been noted that the CIR, Zone-VI, Corporate RTO Karachi suspended STRN of the RP on 14.11.2019 after more than four years of physical verification when the RP was traceable and the Order-in-Original against the RP was issued on 25.02.2015, for recovery of Rs.410.495 million. The Deptt failed to apprehend the culprit and initiate action to recover the tax evaded as a result of misuse of SRO 1125(I)/2011. This is indeed a criminal negligence and a case of gross maladministration. Although after the receipt of Red Alert no refund claims were processed but the Deptt failed to initiate any proceedings for retrieval of short levied sales tax/ value added tax on imports amounting to Rs.651.078 million, through misuse of concessionary SRO. The outlaws, who were involved in registering the fake RP as no operational manufacturing facilities was found at the declared premises were also not taken to task. Sadly, even after starting own motion investigation, the Deptt seems disinclined to take any action in this regard. It also sounds strange that the Directorate General of I&I-IR Karachi, 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:

8. Failure of the Deptt to initiate action against the person (s)/officials(s) involved in registration of fake RP and retrieval of refund already issued 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:

9. FBR to- (i) direct the Chief Commissioner-IR, Corporate RTO, Karachi to investigate and identify the officials involved in registration of fake RP and initiate disciplinary/criminal action against those found involved (ii) direct the Chief Commissioner-IR, Corporate RTO, Karachi to investigate and identify the officers/officials who failed to take timely action to recover tax evaded through misuse of SRO 1125(I)/2011 and take appropriate criminal/disciplinary action against them; (iii) initiate criminal proceedings leading to prosecution of RP and recovery of evaded amount, swindled from public exchequer; (iv) report compliance within 45 days. KMZ/24/FTO Order accordingly.