FTO endorses complainant's de-registration

Federal Tax Ombudsman Justice Saleem Akhtar has endorsed the suspension of registration of an exporter for being involved in sale/purchase of fake invoices.
The complainant, R M Textile, Shadman, Lahore, had complained that following audit of its accounts for June 2000 to June 2002, the firm had paid Rs 61,200 due as default which was paid but the Collector of Sales Tax, instead of issuing NOC, had suspended its registration.
It was further submitted that the collector's order was arbitrary and illegal.
However the department's view was that the deposited amount of Rs 61,200 was an inadmissible input and that the complainant was involved in other violations of law which were mentioned in the audit report.
The complainant was involved in sale and purchase of flying/fake invoices and its name was put on the list of suspected units.
The department stated that the firm claimed input tax of Rs 823,783 (40 percent of total input claim) on invoices issued by six registered persons included among suspected units.
It was further alleged that the firm was involved in tax fraud by way of issuing fake/flying invoices.
The bank accounts confirmed involvement in sale and purchase of fake invoices as the deposits and withdrawals were made in quick time.
To counter the allegations, the representative of the complainant said that the suspension order was issued without calling the complainant and that the order for suspension of registration was issued on 20.8.03.
Though 90 days have passed, inquiry has not been completed.
The Departmental Representative (DR) contended that there had been no physical transfer of goods.
The firm was involved in tax fraud with some other suspect units. The transactions made by the firm were mere paper transactions. Further, the units from which the complainant purchased goods are absconding.
Since the inquiry is not complete, a case for contravention would be made out later.
After hearing both sides, the FTO agreed that under law a person indulging in fake invoices could be de-registered pending inquiry, which should be completed in three months. Since the inquiry is continuing, the show-cause notice will be issued.
The FTO in his order noted that the authority had acted in accordance with the provisions of law. He added that the inquiry should have been completed in reasonable time.
There was an element of maladministration. Thus the FTO directed that the inquiry should be completed promptly and action should be taken after providing the complainant an opportunity for defence or being heard. Compliance should be reported within 30 days.