A registered manufacturer of footwear has desperately approached forum of Federal Tax Ombudsman (FTO) for implementation of FTO's recommendations by a Regional Tax Office of the Federal Board of Revenue (FBR) seeking balance sales tax refund of Rs 24.895 million.
In a representation to the FTO, tax consultants of M/s Chawla Footwear said that as per FTO's order sheet dated June 16, 2015 against complaint, taxpayer has submitted the complete requisite evidence for the balance refund claims as per Sales Tax Refund Rule, 38. On the other hand, department has once again violated FTO orders by demanding complete record u/s 22 which can only be demanded u/s 25 for detail audit, from July, 2011 to February, 2013. Moreover, the department has served a Show Cause notice C.No.80 dated 26.05.2015 aiming to reject unit's balance refund claims on the pretext of non provision of "brand wise detail of manufactured goods". While, department has already sanctioned previous refund claims without such irrelevant information which is not mentioned in any Rule of Sales Tax Rules, 2006.
The unit has provided all the above mentioned documents and consumption statements to the department, as per "given format and department has processed 8 refund claims on the basis of the same and precedent for consumption statements under Rule 33 has already been set for balance refund. Now the demand for provision of "brand wise detail of manufactured goods" and show cause notice for the inadmissibility and rejection of refund claims, on the basis of the same vividly shows bad intentions of the department towards unit, it said.
The tax consultant said that the show cause notice is a clear violation of Section 24 of FOIRA, 2013 which says that if a taxpayer files a complaint with FTO for non-payment of undisputed refund, the Commissioner of Inland Revenue will not be in a position to take any adverse proceedings, like amendment of assessment to eliminate the refund as it will be violative of Section 18 of the FOIRA, 2013.
It is also the violation of Stay Order dated 12-11-2014 passed by FTO, barring the department from any action/order during the proceedings of implementation of FTO's recommendations. It says that the initiation of audit proceedings in the case is a serious act of maladministration and culpable under FTO Ordinance with regard to the non implementation. Any action/order that emanate there from would jeopardize the proceedings for implementation pending in FTO. Section 29 of the FTO Ordinance as well as section 9(2) of the FOIRA debar such action/order. Therefore, the tax department is hereby advised to refrain from such order and proceedings till the matter is under consideration of FTO under the FTO Ordinance, representation said.
The concerned DCIR has passed an Assessment Order against unit for Rs 6,646,367 in respect of CREST Discrepancies again ignoring the Stay Order from FTO.
The unit has requested the FTO to declare the assessment order & show cause notice, unlawful, unjust & invalid and bind the department to process our refund claims as per law and initiate the contempt of court proceedings against the concerned department officials under the law to meet the ends of justice. An application has already been under process before FTO office, tax consultant of unit added.
FTO Regional Office Lahore order dated March 17 2014 (142/LHR/ST(48)/319/2014 said that the complaint has been filed in terms of Section 10(1) of the FTO Ordinance 2000 (the Ordinance) for delay in issuing sales tax refund. Briefly the case is that refunds of the complainant unit amounting to Rs 120 million, pertaining to July 2011 to June 2013, are pending with RTO-I, Lahore.
The complaint was referred to the Department for comments in terms of Section 10(4) of the Ordinance, which, vide its letter C. No. Enfor. & Coll. Unit-04/1149 dated 16.04.2014, has intimated that an amount of Rs 31.84 million has been sanctioned to the complainant, and the remaining refund claims of the complainant could not be processed due to CREST discrepancies.
The authorized representative (AR) intimated that the amount of Rs 31.84 million was sanctioned by the RTO on the interference of the Finance Minister. This was also not a part of the present complaint. The DR referred to the monetary restrictions imposed by the FBR in sanction of refunds, The AR, however, stated that these restrictions were imposed a month back, whereas, his refunds were more than two years old. The departmental representative (DR) also referred to CREST discrepancies, which according to him, had withheld the sanction of refunds of the unit. The AR informed that all required/deficient documents for removing CREST discrepancies had already been furnished to the Department few months back. The AR met the Chief Commissioner many times, but he refused to hear his complaint. According to the AR, the Chief Commissioner, in his presence, had directed the DCIR concerned, who is incidentally the DR in this case also, not to process claims of the Complainant unit, perhaps, because of the intervention of the Finance Minister, which might have annoyed him. The AR was critical of the attitude of senior officers of RTO-I, Lahore, FTO order said.
The DR confirmed that all 'the required deficient documents provided by the unit for clearing of CREST discrepancies were available with the RTO-l. He further intimated that processing of refund claims beyond Rs one million could not be undertaken till the FBR gives permission to do so. At present, such claims are not being reflected in the system, so these cannot be processed. The DR has been directed to inform the Chief Commissioner to provide a definate schedule for clearance of refunds to the Complainant unit. Secondly, the DR has also been instructed to intimate the complainant, of any further discrepancy/deficiency in documents, which might hamper the sanction of refunds.
FTO order said that the DR has informed that due to monetary restrictions imposed by the FBR on sanction of refunds, the refund claims of the complainant are not being reflected in the system. In this regard, the Chief Commissioner, RTO-l, Lahore, has taken up the issue with the FBR. However, no further instructions have been received uptill now. According to the DR, once the claims exceeding Rs 1 million, start reflecting in the FBR system, those admissible under law, will be sanctioned. Until, the system exhibits these claims, deficiency in documents, if any, cannot be ascertained.
The executive order of the FBR, restricting the sanction of refunds to a certain amount, within a certain period of time, does not override the provisions of the statute, which envisages sanction of all admissible refunds within 45 days, FTO order said.
As per FTO findings, FBR's executive order restricting sanction of refunds, has no legal sanctity behind it. This has resulted in undue hardships to the taxpayers. It amounts to maladministration.
According to the recommendations of the FTO Regional Office, FBR has been directed that the Chief Commissioner RTO-I, Lahore, to decide the cases of refunds of the Complainant, as per law, within 30 days and report compliance in one week thereafter.
Later, FTO Secretariat Regional Office Lahore issued another order dated June 4, 2015 to the Commissioner IR Zone-VI RTO Lahore for implementation of its recommendations. It said that the complaint was decided by the FTO vide order dated 10.07.2014 with the recommendations "FBR to direct the chief Commissioner IR, RTO-I, Lahore to decide the cases of refund of the complainant as per law, within 30 days and report compliance Within one week thereafter. The said recommendations were neither contested by filling review nor by representation and as such attained finality. Secretary, Revenue Division directed to implement the recommendation within the given time. It is over 11 months that said officer and the concerned CIR have failed to implement the recommendations, despite issuance of four specific letters/notices and instructions conveyed to the Department for compliance during hearings, on seven different dates. Instead of implementing the recommendations the CIR initiated pre-refund audit of the Complainant under Rule 29 of Sales Tax Rules 2006, allegedly just to frustrate the recommendations.
Federal Tax Ombudsman has decided to hear the case to know the reasons of non-implementation and legal position of initiating pre-refund audit by the C.I.R, before initiating any other legal action. The concerned officers are required to appear in person before Federal Tax Ombudsman to explain the reasons of non implementation of the recommendations on June 15, 2015.
Meanwhile, the order sheet of the FTO Regional Office Lahore dated June 15, 2014 stated that findings/recommendations dated 10.07.2014 in Complaint No.142/LHR/ ST/319/2014 were partially implemented by the Department whereby 08 refund claims for Rs 23.405 million were sanctioned and balance 07 claims for Rs 24.895 million were not settled.
Notices were issued to the Chief Commissioner IR, RTO, Lahore and the Commissioner IR, RTO-I, Lahore requiring them to appear in person before the Federal Tax Ombudsman and explain the reasons for non implementation and initiation of audit proceedings.
The concerned tax officials including CCIR, CIR and CIR appeared before the FTO office and CEO of the complainant also attended.
The CFO of the complainant submitted that total 15 refund claims for Rs 48.300 million were lodged for the period July, 2011 to February, 2013. He intimated that five (5) refund claims for 2011 and three (3) claims for 2012 were sanctioned by the Department and balance seven claims for periods 2012 and 2013 were not settled. Instead, the Department initiated audit u/s 25 of the Sales Tax Act in order to frustrate the issuance of refunds. He also levelled certain allegations of corruption against the Departmental officers.
The CCIR controverted by stating that requisite evidence was not filed by the Complainant due to which balance refunds for the remaining period could not be settled. He explained further that no audit u/s 25 of the Sales Tax Act was initiated but only inquiry was undertaken in order to establish the genuineness of the claims in terms of Rule 29(4) of the Sales Tax Rules 2006. He committed that the balance 07 claims for the period 2012 and 2013 would be settled after examining the requisite evidence to be filed by the Complainant.
After hearing both sides, the FTO issued directions that CFO would submit the requisite evidence for the balance refund claims and the CCIR would settle the same within 15 days. The CFO would furnish an affidavit regarding his allegations against the Departmental officers for consequential proceedings under the law.
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