The Federal Tax Ombudsman former Justice Munir A. Sheikh has taken serious notice of delay of more than 900 days in deciding a sales tax refund claim and directed the Taxation officials that they must decide the refund claims through speaking orders in accordance with law.
The FTO gave this direction on a complaint of M/s AGN International Manufacturers & Exporters, Custom House Road, Hyderabad who had alleged that the sales tax officials rejected their refund claim of input tax on goods exported in 2003 without any lawful reason and without providing them an opportunity to clarify the objections if any.
The complainants alleged that they shipped their first consignment comprising 36,000 pieces of Quilt Covers, 20,000 pillow covers and 6000 bed sheets destined to Baku Azerbaijan on an export order booked by a trading company of Dubai.
They said that on receipt of sale proceeds of $308,280/, through bank on 11-09-2003, an amount of Rs 17,591,732 was credited to their account and on submission of copies of export documents, Collector of Customs (Export) allowed rebate vide cheque dated 01.10.2003.
The complainant further stated that the claim for refund of sales tax under section 10 of the Act, along with relevant documents/CD prescribed in the scheme of STARR was submitted on 06-10-2003 to the Sales Tax Refund Department at Hyderabad.
Under sub-section (2) of section 10 of the Act, the input tax incurred in connection with zero-rated supplies should be refunded not later than 30 days of filing of the return in the prescribed manner.
Deputy Collector of Customs, Sales Tax and Federal Excise in his reply stated that a number of discrepancies were observed in the claim for refund of input sales tax in the monthly return of August 2003 and on the basis of these discrepancies, Alternate Dispute Resolution Committee recommended that the refund of input tax claim be rejected being devoid of merit and unsubstantiated which was accepted by the CBR.
After careful consideration and detailed examination of the complaint and the stand taken by the Department, the FTO said that it transpires that (i) The complainants have approached FTO secretariat with the complaint that their claim for refund of sales tax on goods exported in 2003 was not decided for more than 900 days. (ii) Show Cause Notice was not issued and adjudication order not passed within the prescribed time limit. (iii) They were blacklisted without opportunity of clarifying their position several months after the export. (iv) It took nine months for the Department to delete their name from the blacklisted units.
(v) Suppliers unit too was blacklisted without any justification and registration was restored on the recommendation of Federal Tax Ombudsman. (vi) Even after several hearings (from 15-07-2004 to 02-05-2006) the adjudication order was not passed. (vii) Complainants opted to approach Alternate Dispute Resolution Committee (ADRC) whose (one-sided and arbitrary) recommendations were allegedly formulated by the sales tax officer, which were not based on facts and without examining their arguments.
(viii) ADRC stated that the sale of goods to the complainants was not genuine in view of the manner in which the payment was made to the bank, there was no actual transportation of goods and transfer of money, and it was a fake paper transaction. The explanations of the complainants to the objections were not taken into consideration by ADRC.
(ix) CBR approved the adverse recommendations of ADRC and the adjudicating officer rejected the refund application (x) Consultant claimed that he had obtained verified copy of the bill of landing and the bill of export from the Manifest Clearance Department of the Custom House which proved actual export of goods. This aspect was not considered by the adjudicating officer.
(xi) Purchases were made against 12 invoices issued by M/s JAS Industries in August 2003 inclusive of sales tax. It should have been verified whether the sales tax invoices were issued by the supplier and payment was made by the purchaser through banking channel.
(xii) A significant point whether the supplier deposited the sales tax in the government account or paid to its registered supplier(s) was not examined at any level.
The FTO said that it is clear from the circumstances of this case that the refund application of goods exported in 2003 was not decided for a long time without any justification as evident from inordinate delay in the issue of Show Cause Notice and the adjudication order.
He said that during the pendency of adjudication process, the complainants and their suppliers were blacklisted without any apparent reason and subsequently their registration was restored.
FTO said that in desperation the complainants requested for reference of their case to ADRC but it seems that the ADRC also did not take into consideration their clarifications and explanations and formulated its recommendations on certain assumptions and conjectures which, surprisingly, was approved by the CBR and the Deputy Collector adjudicated the case without taking into consideration the exporters arguments.
He said since mal-administration has been established against the Department, therefore the CBR should reopen the case under section 45A of the Sales Tax Act and remand the same to the Collector for consideration of all the aspects of the case after affording opportunity of explaining their position and of hearing to the complainants.
He further instructed that the taxation officials should decide the claim through a speaking order within 45 days.