The Federal Board of Revenue (FBR) has refused to delegate "embargo" powers to the collectors of sales tax pertaining to recovery of arrears and unpaid defaulted amounts under the Sales Tax Act, 1990. The FBR has decided that the embargo powers may not be delegated to the collectors, and status quo would be maintained, for the time being.
However, other enforcement measures could be adopted for recovery of arrears from the tax defaulters. Sources told Business Recorder on Saturday that the board has rejected a proposal of collectors of sales tax to empower field formations for directly imposing "embargo", without consulting the board, on the defaulters for recovery of arrears. Under the "embargo" powers, the collectors may block imports and freeze bank accounts of short-filers of sales tax and Federal Excise Duty after obtaining permission from the board. On the pattern of sales tax law, officials are empowered to block imports and freeze bank accounts of short-filers of Federal Excise Duty (FED) using enforcement provisions available under section 14A of the Federal Excise Act, 2005.
Details showed that each collector would be required to individually approach the board for obtaining permission for imposing embargo on non-filers; short-filers and defaulters etc. Under section 11A of the Sales Tax Act, 1990, where a registered person pays the amount of tax less than the tax due as indicated in his return, the short paid amount of tax along with default surcharge shall be recovered from him.
The collectors have to approach the board seeking permission for placing embargo on the registered units. In this connection, collectors have to submit the names of the units to the board for permission purposes. Following approval of the board, collectors would invoke provisions of section 11A of the Sales Tax Act, 1990 against the short-filers and defaulting units. Under the embargo, tax officials could seize the business activity of the defaulters, block imports and freeze bank accounts of short-filers.
Through Finance Act (2007-08), the powers of excise officials had been considerably enhanced in budget through introduction of section 14A in the Federal Excise Act. Under the new law, the tax officials can recover short-paid amount from the manufacturers of excisable commodities without issuance of show-cause notice.
According to (14A) in the Federal Excise Law: "Where a registered person pays the amount of duty less than the duty due as indicated in his return, the short paid amount of duty along with default surcharge shall be recovered from such person by stopping removal of any goods from his business premises and through attachment of his business bank accounts without prejudice to any other action under this Act or the rules made thereunder: Provided that no penalty shall be imposed unless a show cause notice is given to such person."