FINDINGS/RECOMMENDATIONS ABDUR RAUF CHAUDHRY, FEDERAL TAX OMBUDSMAN.---The complaint has been filed under Section 10(1) of the Federal Tax Ombudsman Ordinance, 2000 (the Ordinance) against non- issuance of refund for the period July 2007 to October 2010 determined on the basis of report of the Pre-audit Refund Committee.
2. The complaint was sent for comments to Secretary, Revenue Division, in terms of Section 10(4) of the Ordinance. In response, the FBR submitted its comments vide letter dated 28.12.2015, informing that there were some discrepancies in the pre-refund audit report and the matter has been revisited. The Complainant has been requested to provide the relevant supporting documents regarding following observations to finalize the pre refund audit:--
(i) Perusal of the comparison of Income Tax Returns with Sales Tax Returns for the period under reference revealed that the Complainant has declared more purchases/imports in sales tax returns i.e. Rs.364,792,157/- whereas import/purchases of Rs.337,650,193/- have been declared in Income Tax Returns for the corresponding periods.
(ii) Perusal of the available sales tax returns revealed that the Complainant is also involved in trading of Polypropylene Granules. The Complainant has been requested to provide the relevant record of supplies along with detail of trading to check the applicability of S.R.O. 488(1)/2004 dated 12.06.2004 for input tax admissibility.
(iii) Perusal of the sales tax returns revealed that the Complainant has shown sales of Rs.304 million to unregistered persons out of the total Rs.359 million which comes to 85% of their total sales which is not inconformity with the normal business practice by a manufacturer. Verification of the same, regarding suppression of supplies along with element of further tax is required from the sales tax invoices, supply record and bank receipts of the Complainant.
(iv) A sizeable difference in the value of opening stocks and closing has been observed in the year 2007-2008 in pre-refund audit report when the same is compared with Income Tax Return for the corresponding period. The Complainant has been requested to explain the same along with supportive record.
3. The AR informed that a committee was constituted for pre-refund audit. It recorded findings on 04.09.2013 for issuance of refund of Rs.6,472,671 out of total claim of Rs.14,742,370. Two and half years have since then elapsed without issuance of any refund. Also the deptt issued allegedly illegal notices for recovery during the period July 2014 to June 2015 on 12.08.2015. Complainant filed writ petition against this recovery notice which was without any basis i.e. Some audit report, contravention report, 0-in-0 and without selection of cases for audit under sections 25, 38 read with Section 72 of the Sales Tax Act, 1990 (the Act). The .FBR also did not select the case .For audit.
Numerous letters were issued but to no effect.
4. DR stated that the complaint is not maintainable in view of Complainant's Writ with the High Court. He also expressed his doubt about the genuineness of the claim of refund because this was the only case in this sector (manufacture of polythene bags) from imported granules (plastic molding compound). Apparently Complainant manipulated the sales price to understate sales and the sales tax liability but reduced amount of sales to create the refund. The case therefore required proper scrutiny and check.
5. The contentions of both sides have been considered along with examination of relevant record.
Departmental preliminary objection regarding jurisdiction due to writ petition filed by the Complainant is not relevant as that is against recovery notice issued by deptt. As main allegation in the complaint is that deptt. Is not paying refund of Rs.6,472,471/- (out of total claim of Rs 14,742, 370) cleared by pre-audit committee on 04.09.2013. It is evident that deptt. Has failed to settle refund claim of the Complainant within the time stipulated in Section 66 of the Act.
Findings:
6. Failure of the deptt. To settle refund claim of the Complainant within the time stipulated in Section 66 of the Act tantamounts to maladministration under Section 2(3)(i)(a) of the Ordinance.
Recommendations:--
7. FBR to direct the Chief Commissioner-IR to-
(i) settle refund claim of the Complainant, as per law, within 30 days; and
(ii) report compliance within 07 days thereafter.