The Federal Board of Revenue (FBR) has admitted before the Federal Tax Ombudsman (FTO) that the STARR refund automation system has no procedure for handling sales tax refund claims made on court orders, where verification of bills and invoices is not involved.
The departmental representative of the FBR has made these remarks while hearing the case of a manufacturer of fruit juices of Karachi, which has filed complaint against the department to the FTO for excessive delay in sanctioning due refund. The DR, despite admitting the complainant's claim, showed inability to process the subject refund through the Refund Claim Counter (RCC) as no procedure for handling refund claims arising out of court orders, where verification of bills and invoices was not involved, was provided in the STARR software.
He stated that under the circumstance the DG Strategic Planning and Statistics (SP&R), FBR, had been again requested, vide letter dated 23.11.2011, to allow processing of claims of the complainant through generation of electronic Refund Processing Order (RPOs).
The department informed the FTO that claims arising out of appellate orders had to be refunded. However, as per procedure laid down by the FBR, the claims could not be processed unless submitted through Refund Claim Processing System (RCPS) of STARR system. It was contended that manual processing of the refund claims was no more permissible under the Sales Tax Act.
It was further contended that when the Officer concerned approached the Director General (SP&R), FBR, for permission to generate electronic Refund Processing Order (RPO), he was informed vide letter dated August 27, 2011 that claims u/s 66 of the Act could be lodged at Refund Claim Counter (RCC) functioning in the Regional Tax Offices (RTOs)
The authorised representative argued that the subject claims were not accepted at the RCC, as it required Refund Claim Processing System (RCPS) data ie invoices and bills etc which for the cases where refund arose out of appellate orders was not available. In the instant case also the sales tax demand was created and the same was recovered by the Department through pay orders. The refund claims remained unattended despite instructions of the DG (SP&R) conveyed to the officer concerned vide letter dated 27.8.2011 to generate electronic RPO. He stressed that only method available in such cases was to process the same manually.
According to the FTO's findings, the delay in allowing appeal and settling refund claims tantamount to maladministration in terms of Section 2(3((ii) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000. The FTO has recommended the FBR to revisit the instructions regarding refund processing through STARR so that payment of refund and maintenance of record are both clearly provided for. The FBR should direct the concerned officials to allow appeal effect to appellate orders and issue refund due, as per law and report compliance within 30 days.