The Federal Tax Ombudsman Munir A Sheikh has ruled that sole reliance on the indications given by a computer programme would not be sufficient ground for rejection of a refund claim.
He said that there was no provision in the Sales Tax Act 1990 to support the action that in case the STARR system indicated a routine observation of "abnormal profile", the refund claim perforce be rejected. "The term 'abnormal profile' has nowhere been defined in the law," he added.
The FTO gave this ruling on a complaint of Chiniot Enterprises Ltd, Haripur, against rejection of its refund claim on the ground that the computer system STARR had indicated that the supplier had an 'abnormal profile'
THE FACTS OF THE COMPLAINT WERE: Chiniot Enterprises(Pvt) Ltd was engaged in the manufacture of vegetable ghee, oil and allied products. It filed the sales tax refund claim for the tax period May-2005 for the receipt of the supply of tinplate sheets issued by Owais Trading Company on which it paid sales tax amounting to Rs 127,112 through the banking channels.
During the verification of invoice the STARR system indicated that the registered supplier showed the 'abnormal profile'. An ex parte order in original was issued by Assistant Collector Sales Tax Refund, Peshawar, in which the refund claim of the complainant was rejected.
The Collector, Appeals, disposed of the appeal in which it was decided that since the STARR system had raised objection on the relevant invoice, as such the claim was not admissible.
The plea taken by the department from the very first hearing of the case was that the STARR System showed 'Abnormal Profile' of the complainant and the same remained unchanged throughout the entire litigation period.
In his findings, the FTO said; "It is evident on the face of the record that the refund claim of the complainant was rejected because STARR System of processing, pointed out that the supplier had an 'abnormal profile'."
He said that there was, however, no provision in the Sales Tax Act, 1990 that supported the action that in case the STARR system indicated a routine observation of 'abnormal profile', the claim had, perforce, to be rejected.
He said it was understandable that necessary conditions had to exist before the refunds were allowed, but the sole reliance on the indications given by a computer programme would not be sufficient ground for rejection, more so because the terms 'abnormal profile' has nowhere been defined.
He said that supply in the instant case was made by a commercial importer which was duly registered with the Sales Tax Department and was, admittedly, submitting tax returns under the prescribed procedure on regular basis. He said that the department had committed maladministration by rejecting the claim without taking into consideration the merit of the case. He directed the department to decide the case on merit in the light of his findings.
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