MUHAMMAD YASIN BUTT VS FEDERATION OF PAKISTAN, 2018 PTD-LAHORE-HIGH-COURT-LAHORE 1 (2017)

Sales Tax Act (VII of 1990)---

----Ss. 37A, 33 & 37----Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000) Ss. 32 & 14---Offences and penalties under the Sales Tax Act, 1990---Sales Tax fraud---Power to arrest and prosecute---Payment of tax and penalty/default surcharge---Recommendations of the Federal Tax Ombudsman---Representation to the President---Setting aside of order of the President under S. 32 of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000---Scope---Petitioner, under protest, deposited tax and penalty after order-in-original was passed in proceedings under Sales Tax Act, 1990 for sales tax fraud, which order was subsequently set aside by Commissioner Appeals---Contention of petitioner, inter alia, was that the Department had not returned the said amount to him---Validity---Recommendations of the Federal Tax Ombudsman in support of the petitioner, were made after due regard to the facts and circumstances of the case, which were set aside after representation filed by Department to the President was accepted---Department compelled the petitioner to deposit substantial amount by way of sales tax when there was no evidence or any document on record to show that subsequently petitioner was found involved in tax fraud and was liable for said amount---No reply was given to petitioner from Department when request for return of said amount was made by him---Order passed by the President was set aside and findings of the Federal Tax Ombudsman were revived---Constitutional petition was allowed, accordingly.

Waheed Shehzad Butt for Petitioner.

Nemo for Respondents.

ORDER

SHAHID KARIM, J.--- The petitioner is a registered person under the provisions of Sales Tax Act, 1990 ("the Act, 1990). In the month of May, 2010 a notice was issued by the respondent No.2 by which the petitioner was confronted with certain amounts which were claimed as input tax by the respondents. The said amounts were deposited under protest by the petitioner and this is evident from the documents which are annexed at pages 31 to 35 with this petition. The petitioner clearly took a stance that it was not involved in a tax fraud for which notice under Section 37 of the Act, 1990 was issued to the petitioner on 12.07.2010. During December, 2010, a news was published in the daily Business Recorder which reported that a tax fraud scam had been busted by the Intelligence and Investigation and in which the officials of CREST were involved. Be that as it may, the petitioner requested on 15.12.2010 for the return of the amounts deposited under protest in response to the notice under Section 37 of the Act, 1990. However, the respondents set in motion another proceedings against the petitioner and a show cause notice was issued for the payment of an alleged penalty in respect of the amount of sales tax which had already been deposited by the petitioner. The order in original was passed against the petitioner in July, 2011 by which the petitioner was saddled with a liability for the payment of penalty and additional tax and although it was the case of the petitioner that the amounts were deposited under protest as also that it had been found specifically that the petitioner was not involved in any tax fraud. The petitioner was, therefore, constrained to file a complaint with the Federal Tax Ombudsman for the maladministration on the part of the respondents and after hearing the parties the final recommendations were made by the Federal Tax Ombudsman, which are as under:--

"Recommendations:

11. FBR to -

i.direct the Chief Commissioner to refund the amount deposited by Complainant, under protest, as there was no legal order in the field at the relevant time;

ii.direct the Commissioner to cancel the Order-in-Original No.July-2011/03 dated 29.07.2011 ;

iii.conduct an enquiry to identify if any PRAL officials were involved in the scheme and to proceed against the defaulters, as per law;

iv.to launch an investigation into the circumstances why the officials of the Directorate of Investigation and Intelligence did not file an appeal against the apparently light sentences awarded to those who seemingly masterminded the scam; and

v.report compliance within 30 days."

2.The respondents filed a representation to the President of Pakistan which was accepted vide order dated 24.09.2014 and the recommendations rendered by the Federal Tax Ombudsman were set aside and it was held that no case for maladministration was made out.

3.I have heard the learned counsel for the petitioner. Despite notices and opportunities to arrange representation on the part of the respondents, no one appeared on behalf of the respondents and therefore the respondents are proceeded against ex-parte.

4.Firstly, the order in original which was passed against the petitioner by which penalty and additional tax was imposed on the petitioner, has been set aside vide order dated 21.12.2011 passed by the Commissioner Inland Revenue (Appeals) Gujranwala.

5.From a perusal of the order passed by the Federal Tax Ombudsman as well as the findings rendered by the President on representation filed by the respondents, it is clear that the recommendations made by the Federal Tax Ombudsman was done after due regard for the entire facts and circumstances as well as by taking into account the legal proposition that no recovery of tax could be made otherwise by due process of law and by following procedural formalities. It was under these circumstances that the Federal Tax Ombudsman returned the findings that the act of the department to recover sale tax from the petitioner without proving that he was involved in a tax fraud was tantamount to maladministration in terms of section 2(3) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000. Having returned the said findings, it was as a consequence that further direction was issued for refund of the amounts deposited by the petitioner. It is indeed highhandedness on the part of the respondents to have transgressed the petitioner into submissions and to have compelled him to imburse a substantial amount purportedly by way of sales tax due from the petitioner. There is no evidence or any other document on record which would show that subsequently the petitioner was found involved in a tax fraud and was thus liable for the payment of such amount. Although the petitioner wrote a letter to the respondents on 15.12.2010, no reply was made to the said letter controverting the contents of that letter. The least the department ought to have done was to have replied to the request of the petitioner and offered an explanation as to why the amount recovered from the petitioner was still retained by the department without reasonable cause.

6.In view of the above, this petition is allowed and the order dated 24.09.2014 passed by the President is set aside with the result of the findings rendered by the Federal Tax Ombudsman, shall stand revived.

KMZ/M-189/L Petition allowe