Delay in filing refund applications: Field formations told to issue condonation

On a complaint filed by a Korean joint venture to the Federal Tax Ombudsman, the Federal Board of Revenue has directed the field formations to take immediate action on the applications filed by the taxpayers to issue condonation of time period for delay in filing refund applications.
In this regard, the FBR has issued instructions to the Director Generals of Large Taxpayer Units (LTUs) and Regional Tax Offices (RTOs). In different cases, it has been observed that the registered units have applied for condonation of delay in filing of refund applications, but the department has not issued such condonations due to one reason or the other.
Sources told Business Recorder here on Monday that the FBR has issued the instructions to the field formations on the recommendations of the Ombudsman Dr Muhammad Shoaib Suddle. According to the FBR instructions issued to the DGs LTUs/RTOs, the filed units should address the systemic aspects to avoid taxpayers' agitation arising from the departments' failure to take into account already decided issues.
The board has directed the field formations that the FBR instructions may be implemented to ensure providing maximum relief to the taxpayer, the FBR added. The FTO order revealed that the complainant is a Korean joint venture for manufacture of auto parts registered under the Sales Tax Act, 1990 and regular filer of sales tax returns. The unit reflected carry forward of excess input-tax amount of Rs 424,900 in its sales tax return for June, 2006.
The Sales Tax Office informed the company to resubmit copies of returns, summary of invoices and readjustment advice, which the Company complied with on September 2, 2006. In February 2007, the company was told that since the time limit of 3 months given in SRO 666(1)/2005 had elapsed, it could apply for refund instead of the requested adjustment of the carry forward amount of the unadjusted excess of sales tax paid on inputs. The company accordingly applied for refund on March 26, 2007 and thereafter made requests for sanction of refund followed by a written reminder on May 21, 2008.
However, on November 16, 2008, the company was informed by the Deputy Collector that since there was delay in applying for refund, he was no longer entitled for refund. The Deputy Collector stately did not appreciate that the Company had applied for adjustment of excess input tax by way of carry forward and adjustment in the subsequent months within time as prescribed under the law. On 16-7-2008, the company requested intervention by Member FBR, but no reply was received.
However, as the Collector was also authorised as per sales tax general order (STGO) 08 of 2009 to condone delays, the Company applied to the Collector on April 18, 2009 but no reply was received. A reminder was sent on June 30, 2009 which too was not replied to. Aggrieved by the delay, neglect and inattention, the company filed this complaint before the FTO.
The unit pleaded that his claim could have also been reconsidered in the light of STGO 08 of 2009, which required the collector to exercise his discretion in the matter of condonation in such like situations. The authorised representative (AR) argued that FTO Office had earlier also recommended condonation of delay in similar cases. The AR also relied on the case of Pfizer Laboratory Vs Federation of Pakistan and others [PLD 1998 SC 64] wherein the Supreme Court of Pakistan deprecated withholding of refund due to a taxpayer merely on the basis of technically of time limitation.
As regards condonation of delay, the current trend of superior judiciary is to deprecate withholding of legitimate refund lawfully due to a citizen on the mere technicality of time limitation. The Supreme Court of Pakistan's judgement reported as PLD 1998 SC 64 is relevant. The office of FTO has also recommended condonation of delay in filing of supporting documents in a number of cases. Endorsing the FTO's recommendations in complaint No 1069-K/2007, President also rejected the FBR representation, holding:
"It is trite law and rules are intended to advance remedy and not to take away the substantive rights. The department concedes that the company filed the return within time and the refund is due. The company's failure to furnish the supportive documents could not operate to destroy their substantive right. They could and still can be required to furnish the documents. The time limit for complying with the requirements of rules relating to production of evidence and documents is always considered directory and not mandatory unless the disobedience is contumacious. No contumacy is discernible.
The FTO observed that failing to take action on the application filed by the company for condonation of delay constitutes maladministration under section 2(3) of the FTO Ordinance, 2000.
The FTO has recommended the FBR to condone delay involved under Section 74 of the Act, and allow submission of supporting documents. The FBR should direct the Commissioner to process the refund claim as per law within 30 days.
The FBR should also issue clear directions to filed units to address the systemic aspects to avoid taxpayers' agitation arising from department's failure to take into account already decided issue, the FTO added.