AIMAN RAMSHA EMBROIDERS (PVT.) LTD., SHEIKHUPURA VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2013 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 301 (2012)

Sales Tax Act (VII of 1990)---

----Ss.14, 33 & 34---Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)(ii)---Registration---Complainant/company was successor concern to "Association of Persons" by the same name---Registration of sales tax was refused on the ground that it was already registered for sales tax purposes and it had status of non-filer; and directed that missing sales tax returns be filed along with penalty @ Rs.5000 for each month of default as well as default surcharge---Complainant clarified that cited Sales Tax Registration Number was that of the predecessor "Association of Persons" and not that of the successor company and that the predecessor "Association of Persons" not having done any business since 30-6-2008 was not required to file sales tax returns for the subsequent period; and as a matter of caution, 'Nil' returns were filed but sales tax registration number was not issued---Revenue contended that Directors in the company were also partners in the "Association of Persons" by the same name;that "Association of Persons", an existing registered sales tax person, did not file sales tax returns after 30-6-2008 and was directed to file missing returns and also pay penalty assessed at Rs.5000 for each month the default lasted; that returns were filed but penalty or default surcharge were not paid; and that being pending full compliance of its directions by the "Association of Persons" the Department did not issueSales Tax Registration Number to the company/complainant---Validity---Department did not issue Sales Tax Registration Number to the company only because the defunct "Association of Persons" by the same name as the company did not pay penalty and default surcharge for sales tax periods for which returns were filed belatedly---Under the law, complainant was a distinct corporate entity quite apart from the defunct predecessor "Association of Persons" and could not be denied as Sales Tax Registration Number as it needed the same in order to be able to import machinery for its own use---Denial of the same had prevented the company from importing machinery and conducting its business effectively---Department must deal with the defunct "Association of Persons" separately---Saddling it with sales tax liability by way of penalties and default surcharge when it was evident that it did not transact any business after 30-6-2008 and made no taxable sales and also filed "Nil" Sales Tax Returns during the period 2008 to 2012 was arbitrary and oppressive---Delay in issuance of Sales Tax Registration Number to the complainant company was tantamount to maladministration---Federal Tax Ombudsman recommended Federal Board of Revenue to allow Sales Tax/Federal Excise Duty registration to the complainant company in accordance with law.

Muhammad Munir Qureshi, Advisor Dealing Officer.

Syed Ali Imran Rizvi, Advocate Authorized Representative.

Ashfaq Ahmad, DCIR Departmental Representative.

FINDINGS/RECOMMENDATIONS

DR. MUHAMMAD SHOAIB SUDDLE (FEDERAL TAX OMBUDSMAN).---This complaint is against non-issuanceof SalesTax Registration Number (STRN).

2.The complainant, a (Pvt.) Ltd. Co. with NTN 2819205-2 incorporated in 2008 and a successor concern to AOP by the same name, renders embroidery services and is not liable to pay sales tax. However, in order to be able to import machinery for its own use, it filed an application online for ST/FED registration on 30-9-2011. All information sought by the Deptt. in the context of the application was furnished between October, 2011 and May, 2012. Spot visit by the concerned ACIR and his staff was also made in May, 2012. Thereafter, the complainant received a notice from the ACIR intimating that its application for sales tax registration was misconceived as it was already registered for sales tax purposes at STRN 0307581000828 and it had the status of a non-filer. The Deptt. directed that missing sales tax returns be filed along with penalty @ Rs.5,000 for each month of default as well as default surcharge. The Company clarified that the cited STRN was that of the predecessor AOP and not that of the successor Company and that the predecessor AOP not having done any business since 30-6-2008 was not required to file sales tax returns for the subsequent periods. However, as a matter of abundant caution, nil returns were filed for the sales tax periods 07 of 2008 to 08 of 2012. As STRN was not issued, the complainant filed a complaint before the Hon'ble FTO.

3.When confronted, the Deptt filed a reply contending that Messrs Rahila Imtiaz NTN 0400824-3 and Mr. Sadaqat Ali NTN 1008587-4, Directors in Aiman Ramsha Embroiders (Pvt.) Ltd., were also partners in the AOP by the same name. The AOP, an existing registered sales tax person, did not file sales tax returns after 30-6-2008 and was directed to file the missing returns and also pay penalty assessed at Rs.5,000 for each month the default lasted. The complainant filed the returns but did not pay penalty or default surcharge. Pending full compliance of its directions by the AOP, the Deptt. did not issue STRN to the Company by the same name as the AOP.

4.Both sides have been heard and the relevant record examined.

5.After examining the record and going through the reply filed by the Deptt. it was evident that the Deptt did not issue STRN to the complainant only because the defunct AOP by the same name as the complainant's Company did not pay penalty and defaultsurcharge for the sales tax periods for which returns were filed belatedly. Under the law, the complainant is a distinct corporate entity quite apart from the defunct predecessor AOP and cannot be denied a STRN as it needed the same in order to be able to import machinery for its own use. Denial of the same has prevented the Company from importing machinery and conducting its business effectively. So far as the defunct AOP by the same name as the Company is concerned, the Deptt must deal with it separately. Saddling it with sales tax liability by way of penalties and default surcharge when it was evident that it did not transact any business after 30-6-2008andmadenotaxablesalesandalsofiled"Nil" Sales Tax Returns in the period 2008 to 2012 is arbitrary and oppressive.

Findings:

6.The delay in issuance of STRN to the Complainant Company is tantamount to maladministration under section 2(3)(ii) of the FTO Ordinance.

Recommendations:

7.FBR to-

(i)allow ST/FED registration to the Complainant Company, in accordance with law; and

(ii)report compliance within 21 days.

CMA/200/FTOOrder accordingly.