Blocking, de-blocking of ST registration: officials not following proper procedures: FTO

Federal Tax Ombudsman (FTO) Dr Muhammad Shoaib Suddle has observed that the blocking and de-blocking of the sales tax registration of taxpayers is being done without following proper procedure under the relevant law. In a case of Hamdam Paper Products (Pvt) Limited, the FTO has issued an order in favour of the unit with a directive to the Chief Commissioner Regional Tax Office to write a letter of apology to the complainant, which was illegally declared as blacklisted.
The findings of the FTO judgement clearly reflects that the FBR is still declaring units as 'blacklisted' without proper verification of data within the supply chain. Details of the case revealed that the complainant, a registered sales tax payer, is aggrieved by the 'unlawful harsh action' of blocking his company's name in May 2010. This was due on the AC, RTO's letter of January 2010. It is further complained that jurisdiction of the case stood transferred in February 2010 to the LTU but due to bias and arbitrariness by the officers at the RTO, the case papers were not transferred to the LTU.
In addition, in the communication dated 1-6-2010 issued by the Assistant Commissioner, Audit Unit II of Audit Division III of RTO Karachi to M/S Jammali Enterprises, Karachi, the complainant was a company. There was no show cause notice, no order of the FBR and procedure was adopted in the light of Rule 12 of Sales Tax Rule 2001. According to the AC, the complainant was an active taxpayer and the communication to Jammali Enterprises was highly damaging for company's reputation.
The complainant is further aggrieved as the blocking was made by the CRO, Islamabad, in May 2010 based, prima facie, on RTO's letter, when in the meantime jurisdiction over this case had been transferred from RTO to LTU on February 17, 2010. The CRO, before initiating proceedings in the month of May 2010, should have checked the facts and jurisdiction. This showed ineptitude and lack of co-ordination.
The AC further stated that the recommendations made in the earlier complaint No 194-K/2009 had also not been implemented to the extent that audit in the matter of utilisation of "provisional exemption" was not carried out owing to creation of Inland Revenue Service which transferred jurisdiction from Sales Tax Office to the IRS Office. On the contrary, action of 'blocking' on the same issue had been taken without appreciating that recommendations of the Federal Tax Ombudsman were already in the field and implementation was pending.
The DR undertaking that the case papers would be transferred before 23rd of June stated that Audit Division III would be asked to issue correction in the letter addressed to "Jammali Enterprises" in the matter of blacklisting to correct the mistake and a copy of letter would be endorsed to the complainant. The Member Sales Tax had also instructed the AC to approach the Commissioner concerned at the LTU to write to Joint Director CRO to de-block the entity's name.
The FTO observed that although the Chief Commissioner Office has taken steps to correct the maladministration involved but such patently wrong actions should not have been due in the first place. It appears that blocking and de-blocking at times is being done without adopting proper procedures.
The FTO has recommended the FBR to write a letter of apology to the complainant. The FTO has further directed the Chief Commissioner RTO to conduct a fact-finding inquiry into the matter and propose counter measures to avoid such systemic issues in future. The department should also ensure de-blocking of the entity within seven days. The FBR should also complete implementation of recommendations in C No 194-K/2009 within 15 days, failing which contempt proceedings would be initiated against the concerned officials in whose jurisdiction the issues fall presently.