ABDUL HABIB RAJWANI Versus SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.221/KHI/ST(102)/725 of 2015, decided on 30th October, 2015.

Result: Order accordingly.

Summary

The complaint was filed against the Chief Commissioner-IR, RTO, Karachi under Section 10(1) of the Federal Tax Ombudsman Ordinance, 2000 regarding the non-issuance of a balance sales tax refund. The core legal question concerned whether the withholding of the refund due to system issues and alleged non-compliance amounted to maladministration. The Federal Tax Ombudsman held that the failure to properly process the refund due to the operational ignorance of the field staff regarding the STARR system and the resulting inordinate delay constituted maladministration under Section 2(3)(ii) of the Ordinance. The complaint was disposed of with recommendations that the Federal Board of Revenue direct the Chief Commissioner-IR to process the balance refund claim after adding the remaining invoices manually using the Return Discrepancy option in the STARR system and report compliance within 30 days. The key principle laid down is that an inordinate delay in settling a sales tax refund claim caused by operational ignorance or failure of field staff to properly utilize available system options constitutes maladministration.

Questions settled in this judgment

Does inordinate delay in settling a sales tax refund claim constitute maladministration under the Federal Tax Ombudsman Ordinance, 2000?
Can a tax department withhold a sales tax refund due to the failure of its field staff to properly utilize manual invoice entry options in the system?
What remedies are available when purchase invoices fail to appear in the system through the Expeditious Refund System?

Laws & provisions referred

sales tax refundfederal tax ombudsmanmaladministrationExpeditious Refund SystemSTARR systemrefund payment order

FINDINGS/RECOMMENDATIONS

ABDUR RAUF CHAUDHARY, FEDERAL TAX OMBUDSMAN.--- The complaint is filed against the Chief Commissioner-IR (CCIR), RTO, Karachi, in terms of Section 10(1) of the Federal Tax Ombudsman Ordinance, 2000 (the Ordinance) for non-issuance of balance sales tax refund of Rs1,869,915 for the tax period June 2014.

2.The complaint was referred to the Secretary, Revenue Division for comments in terms of Section 10(4) of the Ordinance. In response, the FBR vide letter C.No.1(725)S(TO-II)/2015 dated 18.06.2015 submitted comments of the Chief Commissioner-IR (CCIR), RTO, Karachi dated 17.06.2015. It was contended that the Complainant was non-compliant registered person. The return was filed by the Complainant claiming refund of Rs.2,396,023/- but purchase invoices involving sales tax of only Rs.651,154/- were fed in the system out of which refund of Rs.526,108/- was sanctioned and Rs125,046 was deferred due to objections raised by the system. The Complainant requested for issuance of balance refund of Rs.1,593,869/-, The deptt was unable to issue refund amount as the Complainant had failed to feed invoices to this extent in the system. The Refund Payment Order (RPO), issued to the Complainant, sanctioning Rs.526,108/- clearly showed that there was deferred amount of Rs.125,046/- only and not Rs.1,539,869/- as claimed by the Complainant. The deptt. further contended that due refund was sanctioned to the Complainant. Moreover, since proceedings to suspend the Sales Tax Registration (STR) of the Complainant were underway as he had failed to supply requisite record despite reminders. Further added that any valid amount in the system could not be issued during the currency of suspension of registration.

3.The Complainant, engaged in the business of garment manufacturing and export, is registered with the deptt under the Sales Tax Act, 1990 (the Act). The AR reiterated that the refund application in this case was electronically filed by the Complainant on 04.10.2014 and 104 purchase invoices for Rs.2,239,884/- were included in total refund of Rs.2,396,023, out of which the FBR issued refund of Rs.526,108/- only on 05.03.2015 and has also issued RPO of Rs.222,466/- on 09.02.2015. Thus the deptt. was illegally retaining refund amounting to Rs.1,869,915/-. The AR further contended that he had, repeatedly requested the deptt including letter dated 25.03.2015 but the refund was not issued till to date.

4.The averments of both the parties have been given due consideration and available record perused. While finalizing draft Findings/Recommendations, it was inquired from FBR why balance invoices received through Expeditious Refund System (ERS) in this case were not appearing in the system. FBR/PRAL have informed that this happened as data was not properly loaded in the ERS. It was suggested to process the case at deferred stage by using option of Return Discrepancy in STARR system by adding the invoices manually in concerned RTO. It is evident that in the instant case probably the dealing staff of RTO was ignorant about option of Return Discrepancy in STARR system. Further that RTO staff failed to ask from FBR HQ or even the relevant PRAL staff, attached with the RTO, the reason of non-appearance of invoices received through ERS in the system. This shows lack of expertise in the system at operational level. It also reflects non-cooperative attitude of the field staff to help out the genuine tax payers.

Findings:

5.Inordinate delay in settling refund claim in the instant complaint tantamounts to maladministration in term of Section 2(3)(ii) of the Ordinance.

Recommendations:

6.FBR to direct the Chief Commissioner-IR to-

(i)process balance refund claim of the complainant after adding remaining invoices manually by using option of Return Discrepancy in STARR system; and

(ii)report compliance within 30 days.

KMZ/104/FTO Order accordingly.

Judges on this bench

Abdur Rauf Chaudhary78 judgments
Federal Tax Ombudsman30 judgments