BASHIR PRINTING INDUSTRIES (PVT.) LTD., FAISALABAD VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2013 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 534 (2012)

Sales Tax Act (VII of 1990)---

----S. 66---Sales Tax Rules 2006, R.38 (3)---Refund to be claimed within one year---Refund was allowed by the Appellate Tribunal by accepting appeal---After filing refund application under S.66 of the Sales Tax Act, 1990, reminders were sent but refund was not issued within the time prescribed under law---Department contended that claims involving refund were pending due to STARR objections; and supportive documents such as invoice summary, evidence of payment and bank statement required for removing STARR objections were not filed along with refund claim; that claims were not made in accordance with the provisions of S.66 of the Sales Tax Act, 1990, read with Refund Rule 38(3) of the Sales Tax Rules, 2006; that claims under S.66 of the Sales Tax Act, 1990 could not be sanctioned merely on the basis of order-in-original; that documentary evidence was essential for processing the claim; that the taxpayer was required to provide details of pending refunds along with supportive documents; and that Taxpayer provided documents, on receipt of documents, the claims were restored in the system, and the process of verification initiated---Validity---Department could not show that Commissioner was prevented by sufficient cause to decide the refund claim within the prescribed time nor could he give any cogent reason as to why non-submission of evidence/documents was not conveyed by the Department immediately on receipt of refund application; and assured that refund due would be issued as soon as the verification was completed---Department denied the compensation as the refunds were created and claimed under S.66 of the Sales Tax Act, 1990, as a result of orders of Appellate Tribunal---Order passes by the Appellate Tribunal had not been implemented---Denial of compensation for no fault of the taxpayer was both unfair and unreasonable---Delay in disposal of refund claims was tantamount to maladministration---Federal Tax Ombudsman recommended that Federal Board of Revenue direct the Chief Commissioner to sanction refund/compensation due, as per law.

Haji Ahmad, Advisor Dealing Officer.

Khubaib Ahmad Authorized Representative.

Syed Azhar Abas Sherazi, ACIR Departmental Representative.

FINDINGS/RECOMMENDATIONS

DR. MUHAMMAD SHOAIB SUDDLE (FEDERAL TAX OMBUDSMAN).---This complaint is filed against delay in issuance of following sales tax refunds:--

2.According to the complainant, the adjudicating authority deferred/rejected the claims. Feeling aggrieved, he filed an appeal with Collector (Appeals), Faisalabad, which was rejected. Then he filed an appeal before the Appellate Tribunal. The appeal was accepted, allowing the refund claims.

3.Afterfilingtherefundapplications under section 66oftheSales Tax Act, 1990 (the Act) on 5-4-2010, 19-8-2010 and 3-11-2010, theComplainantsentremindersdated2-10-2012, 16-10-2012and30-10-2012, but the refund was not issued within the time prescribed under law.

4.When confronted, the department contended that the claims involving refund were pending due to STARR objections. The supportive documents such as invoice summary, evidence of payment and bank statement required for removing STARR objections were not filed along with the refund claim. Moreover, the claims were not made in accordance with the provisions of Section 66 of the Act, read with Refund Rule 38(3) as notified vide S.R.O.555(I)/2006 dated 5-6-2006. The claims under section 66 of the Act could not be sanctioned merely on the basis of order-in-appeal. Documentary evidence was essential for processing the claim. The complainant was required to provide the details of pending refunds along with the supportive documents. In response, the complainant provided documents on 15-11-2012. On receipt of documents, the claims were restored in the system, and the process of verification initiated.

5.During hearing, the DR reiterated the written comments. According to him, there was no maladministration involved in the case. However,hecouldnotshowthattheCommissionerwaspreventedbysufficientcausetodecidethecomplainant'srefundclaimwithintheprescribedtime. Norcouldhegiveanycogentreasonastowhy non-submission of evidence/documents was not conveyed by the Deptt. immediately on receipt of refund application. However, he assured that refund due would be issued as soon as the verification was complete.

6.As regards the compensation, the Deptt. contended that compensation was not payable as the refunds were created and claimed under section 66 of the Act, as a result of the orders of the Appellate Tribunal.

7.TheTribunal'sorderswerepassedduringtheperiodfrom16-9-2009 to 6-9-2010, but had not been implemented so far. The denial of compensation for no fault of the complainant is both unfair and unreasonable.

Findings:

8.The delay in disposal of refund claims is tantamount to maladministration under section 2(3)(ii) of the FTO Ordinance.

Recommendations:

9.FBR to direct the Chief Commissioner to--

(i)sanction refund/compensation due, as per law; and

(ii)report compliance within 30 days.

CMA/10/FTOOrder accordingly.