DECISION /FINDINGS This complaint of 'maladministration' is directed against Collector of Sales Tax, Lahore's Order, dated 20-8-2003 passed in terms of section 21(4). Of the Sales Tax Act, 1990 ordering suspension of complainant's registration.
2. Brief facts of the case, as narrated by the complainant, are that an audit team conducted complainant's audit in 2002 for the period July, 2000 to June, 2002. In its report which was approved by the D.C. And Collector the audit team had pointed out an amount of Rs.61,200 as payable owing to default of-the provisions of section 73 of the Sales Tax Act, 1990, which was paid. Later the complainant applied to the Collector for issuance of NOC but instead of issuing it the Collector A suspended his registration vide order, dated 20-8-2003 on the ground that the complainant was involved in the sale and purchase of fake/flying invoices. There is no evidence that the complainant is involved in buying and selling fake invoices. Collector's order is arbitrary, against the law and has been passed in breach of the procedure prescribed in subsection (4) of section 21 of the Act attracting defined 'maladministrasection'. The impugned order was passed without providing the complainant the opportunity of being heard. Collector's order, being illegal and arbitrary, may be vacated. The complainant may be granted any other relief as deemed fit.
3. In reply, the respondents have stated that complainant's registration was suspended under section 21(4) of the Sales Tax Act, 1990 because he was involved in the sale and purchase of fake invoices. The action was taken on the basis of audit report for the period from July, 2000 to June, 2002. Depositing the amount of Rs.61,200 on account of inadmissible input tax does not mean that the registered person is absolved of other violations mentioned in the audit report. The audit reported that the complainant had claimed input tax on invoices from negative suppliers. The order was passed according to the provisions of section 21(4) of the Act by following the procedure laid down therein. Name of the complainant was included in the list of suspect units---Suspected to be issuing fake/flying invoices---On 11-3-2002 on the grounds that the complainant was buyer of goods from another fake unit namely Messrs Marshall Textile, Lahore. The audit also observed that the complainant claimed (i) input tax amounting to Rs.823,783 (40% of the total input tax claimed) on invoices issued by six registered persons, included in the list of units found involved in issuance of fake/flying invoices, and (ii) made fake sales worth Rs.2,056,400 (14% of total sales) to Messrs Artex Textile and Messrs Texcot) who were also involved in issuance of fake/flying invoices.
Bank statement of the complainant shows that the complainant is involved in tax fraud by way of issuing fake/flying invoices. Bank account is being maintained only to circumvent the provisions of section 73 of the Act. Deposit and withdrawal of amounts are either on the same date or within two or three days which confirms that the complainant is involved in sale and purchase of fake/flying invoices. The complaint is baseless and may be rejected.
4. During the hearing the AR reiterated the points made in the written complaint emphasizing that the complainant's name was included in the list of suspect units on 11-3-2002. The complainant did not issue any fake invoices. Marshall Textile, at the time the complainant made purchases from them, was not blacklisted. No fake invoices were issued. Section 21(4) of the Sales Tax Act, 1990 does not hit them. The suspension order was issued without calling the complainant. Post-audit requirements were fulfilled. No tax was evaded. Actual transactions took place and the goods were physically transferred. Had the complainant been issuing fake/flying invoices the quantity of goods involved would have been much larger than actually bought and sold. Respondents' case is based on mere assumptions. Collector's order suspending registration was passed on 20-8-2003.
Although more than ninety days have already passed the inquiry has not been completed. The department may be directed to reinstate his registration and associate the complainant with inquiry in hand.
5. The DR submitted that the complainant whose name was included in the list of suspect unit on 11-3-2002 claimed input tax amounting to Rs.823,783 on invoices issued by six registered person included in the list of units found involved in issuance of fake/flying invoices. There was no physical transfer of goods. The complainant also issued fake/flying invoices to Messrs Artex and Texcot. The audit team pointed out in para. 6 of its report that the complainant was involved in tax fraud. The inquiry in hand is being progressed. The units from whom the complainant purchased the goods are absconding. The transactions made by the complainant are mere paper transactions. There is evasion of duty and taxes on account of input tax of Rs.823,783. Similarly the supplies made to Messrs Artex and Messrs Texcot were fake. The DR further submitted that inquiry when completed may lead to the contravention and a case will be made out for adjudication on merit.
6. The arguments of the parties and the record of the case have been considered and examined.
As to the complainant's contention that no action was warranted as an amount of Rs.61,200 pointed out by the audit had already been deposited it is observed that the audit report (on record) vide its para. 6 also pointed out that the registered person had been making transactions with units of negative lists i.e. Units whose names were included in the negative list issued by the Collectorate on 27-7-2002. Similarly the report pointed out that the complainant was selling goods to Messrs Artex and Texcot also suspected to be involved in issuing fake/flying invoices. The Collector vide his order, dated 20-8-2003 has blacklisted the complainant and suspended his registration in terms of section 21(4) of the Sales Tax Act, 1990. According to the aforesaid subsection the Collector, if satisfied that the registered person has issued fake invoices or evaded tax or has committed tax fraud, can blacklist such a person and suspend his registration pending inquiry. It also provides that the order suspending registration shall be in writing and a copy thereof will be communicated to the registered person and show-cause notice for recovery of evaded amount of tax and deregistration may be issued within 90 days of completion of inquiry. The Collector as per the sales tax record provided by the complainant has blacklisted him and suspend his registration on the basis of the audit report which pointed that the complainant has been purchasing and selling goods from and to suspect blacklisted units and were thus said to be indulging in claiming wrongful input tax adjustments, evading duty and taxes and committing fraud. Collector's order was communicated to B the complainant in writing and an inquiry is in hand. Part of second proviso to subsection (4) of section 21 of the Act reads "---and show-cause notice for recovery of evaded amount of tax and deregistration--- may be issued within 90 days of completion of inquiry". No doubt, the show-cause notice has to be issued within 90 days of completion of inquiry, the inquiry reportedly in hand has not yet been completed although the order suspending complainant's registration was issued on 20-8-2003. Asked as to when the inquiry was expected to be completed so that if, depending on the findings of the inquiry, a show- cause notice is to be issued to the complainant it be issued confronting him with the facts of alleged indulgence in fake/flying invoices/evasion of duty and tax fraud to enable him to defend his case, the DR stated that the inquiry was excepted to be finalized soon as if complainant's registration is liable to be cancelled a show-cause notice would be issued giving the complainant the opportunity of defence/being heard. The fact is that the registration has been suspended and not cancelled and for cancellation, if the inquiry so warrants the respondents on completion of inquiry are to issue a show-cause notice to the complainant to enable him to defend himself. In view of the foregoing position it is observed that the authority has acted in accordance with the provisions of law as the Collector being satisfied that the complainant was involved in buying and selling of invoices, suspended the registration pending inquiry. However, the inquiry should have completed within a reasonable period of time. Although more than 4 months have passed since suspension of registration, which is adversely affecting the complainant's business, yet the inquir,y has not been completed. No doubt the relevant provision of law does not prescribe any timeframe for completion of inquiry it ought to have been completed within reasonable time. Thus there has been C delay in completion of inquiry to the detriment of the complainant, which is an act of 'maladministration' well within the meaning of section 2(3)(ii) of the Establishment of the Office of the Federal Tax Ombudsman Ordinance, 2000. Accordingly, it is recommended that the C.B.R. Direct the Collector concerned to:--
(i) Complete the requisite inquiry promptly and take action as per the findings of the inquiry as prescribed in subsection (4) of section 21 of the Sales Tax Act, 1990 on merit but after providing the complainant the opportunity of defence/being heard.
(ii) Compliance be reported within 30 days. .