Federal Tax Ombudsman former Justice Munir A. Sheikh has ruled that adjudicating officers of the Revenue Division/Central Board of Revenue must pass speaking orders to dispose of cases of the tax payers after applying their mind to the facts and explanations according to law.
The FTO gave this ruling on a complaint of Island Textile Mills Ltd M A Jinnah Road, Karachi. This was against an order-in-original dated 03.08.2006 passed by the Assistant Collector of Sales Tax on a report of Senior Auditor of the Sales Tax Department, a copy of which was made available to Business Recorder on Sunday.
The complainant alleged that the Senior Auditor with a view to delay the determination of sales tax refund claims of Rs934,708 and Rs920.644 submitted a false report to the AC alleging that the refund was not admissible due to : (a) invoice summary was not submitted by the supplier (b) supplier was a non-filer, and (c) refund claims exceeded declared sales tax in the summary of the supplier.
The complainant contended that the AC, Sales Tax (Refund) was not empowered under SRO 575(1) /2002 to reject the refund claim on the basis of STARR verification, and the order-in-original was passed without issuing show cause notice.
It was further stated that the complainants were exempt from furnishing a summary of their purchases and sales vide CBR SRO 525(1)/2005 dated 06.06.2005 under which manufacturers or suppliers of textile and some other articles were exempt.
The complainant also provided documentary proof that the suppliers were regular filers and summary of suppliers that the refund amount did not exceed the sales tax amount but adjudicating officer ignored them without assigning any reason.
In his reply Deputy Collector reiterated that the department acted according to the provisions of the Sales Tax Act, the admissible amount of refund was sanctioned and the inadmissible amount was rejected after providing full opportunity of hearing to the complainants, through an adjudication order.
After examining record of the case, the FTO observed that "the adjudication order is a unique decision which is arbitrary, unreasonable, a total departure from the established practice of formulating an order and betrays neglect, incompetence, inefficiency and ineptitude as evidenced by the following:
(1) Show cause notice dated 20-06-2006 issued by the Deputy Collector in respect of refund claim of Rs1,180,655 for August 2005 stated that the amount of Rs246,947 was sanctioned and required the complainants to show cause why claim of Rs934,708 should not be rejected.
(2) Another show cause notice dated 20.06.2006 was also issued by the Deputy Collector in respect of the refund claim of Rs11,18,677 for September 2005 stated that the amount of Rs198,032 was sanctioned and required the claimant to state why the claim of Rs920.644 should not be rejected.
(3) In both the show cause notices non-sanctioned claims were found objectionable due to "Exceeds declared output. Invoice summary not submitted. No sales to claimant shown"
(4) Assistant Collector passed a short order dated 03-08-2006 of less than one page about the claim of September 2005. The objection said that the claim exceeded declared sales tax, that AR appeared for hearing and submitted reply to the show cause notice and without any analysis of facts or evidence, the claim for Rs871,419 was rejected.
(5) In para 4 of the order the claim of August 2005 for Rs91,403 was allowed and the amount of Rs843,305 was rejected without even a brief discussion of facts.
(6) Interestingly the claim for July for which no show cause notice seemed to have been issued was also decided by the same order allowing Rs127,048 and rejecting Rs1,800
Concluding his findings, the FTO observed that the Assistant Collector has passed a non-speaking summary order only repeating which has been stated in the show cause notice, making no mention of the reply of the complainants and evidential documents produced by them which makes a very poor demonstration of the administrative capability of the officer to examine the facts, apply his mind and take a meaningful decision.
He asked CBR to set aside the order-in-original under section 45A of he Sales Tax and re-examine the validity of the pending refund claims in the lights of the documents/evidence produced by the complainants and afford them the opportunity of hearing.
He further directed the department to decide the claims and also pass an order regarding additional payment claimed under section 67 of the Sales Tax Act within thirty days.