Background discussions indicate that the FTO Registry Office, Lahore is very pro-active in getting the refund whether they are lawful or not and this practice has gained momentum after the exit of Dr Shoaib Suddle, former FTO, as during his time only he used to summon commissioners and that, too, on review applications.
The situation has now totally reversed on this count as advisers at Lahore Registry summon even the commissioners concerned to withdraw lawful orders.
In some cases, the Registry Office has directly approached sales tax refund office for passing telephonic instructions. This is in contrast with another revelation that one of the advisers, Haji Ahmed, was also working as private consultant dealing with refund issues while simultaneously discharging duties in FTO office.
M/s Irfan Textile Mills, one claimant, got five claims refunded out of turn by approaching FTO Registry Office. Similarly, two claims of M/s Eastern Spinning at serial number 383 and 377 have also been sanctioned out of turn on the instructions of the adviser of the FTO Lahore Office.
Seeing this practice, more and more taxpayers are approaching the FTO Lahore office for expediting their refunds. Recently, M/s US Apparel and M/s US Denim approached FTO and subsequently the FBR officers were issued instructions to sanction their refunds amounting to Rs300 million in a similar fashion.
There is an interesting case of M/s Siddiq Iron Industry which filed refund claim amounting to Rs555 million in complaint No 202/HR/ST (44)/337/2013. This claim was rejected, as the tax stated to have been paid at import stage was mis-declared. Accordingly, the refund was rejected and this order was confirmed by commissioner appeal but his action was declared as non-compliance of the FTO recommendation.
This action was contrary to earlier practice where the FTO used to recommend for processing the refund claim as per law. In the said case, the additional commissioner and young lady officers were summoned and asked to give in writing the schedule of refund which the FBR would issue to M/s US Apparel, a practice in violation of existing rules.
In another case, the FTO adviser earlier recommended that the refund of M/s Blackboard Industry amounting to millions of rupees should be processed as per law. As the officers concerned were in the process of concluding the proceedings, FTO office issued an order granting interim relief and instructed the officer not to pass an adverse action.
As ‘The News’ sent a list of questions to FTO for its version, the spokesman responding to a question about the adviser’s power said that the adviser had been delegated authority to summon and examine such officers as are relevant to the proceeding. However, they were silent on the point that the tax commissioners couldn’t be summoned by an official other than FTO himself, as they are supervisory officers.
On the question of registry office, the role in facilitating out of turn refund payment, the spokesman said there was no order for refund on ‘first come, first served’ basis.’ As a matter of fact, FBR issued these instructions vide letter C No 1(11)CSTRO/FBR/2013 directing tax officers to give priority to FTO recommendation. However, the FTO adviser can direct expedition in process only when a taxpayer is denied refund in normal proceedings whereas Lahore Registry Office invariably asked for sanctioning of refund by all means as was done in case of M/s Blackboard Industry through show of undue haste.
Contrary to spokesman’s version, the jurisdiction of FTO has been determined in section 9, sub-section (2) clause (b) of the Federal Tax Ombudsman Ordinance, 2000, which is re-produced as under: “The Federal Tax Ombudsman shall not have jurisdiction to investigate or inquire into matters which. (a) are subjudice before a court of competent jurisdiction or tribunal or board or authority on the date of the receipt of a complaint, reference or motion by him; or (b) relate to assessment of income or wealth, determination of liability of tax or duty, classification or valuation of goods, interpretation of law, rules and regulations relating to such assessment, determination, classification or valuation in respect of which legal remedies of appeal, review or revision are available under the relevant Legislation…(c) is contrary to law, rules or regulations or is a departure from established practice or procedure, unless it is bona fide and for valid reasons; (d) is perverse, arbitrary or unreasonable, unjust, biased, oppressive, or discriminatory; (e) is based on irrelevant grounds; or (f) involves the exercise of powers, or the failure or refusal to do so, for corrupt or improper motives, such as bribery, jobbery, favouritism, nepotism, and administrative excesses.
A plain reading of above law explains that the FTO is empowered to make inquiries where prima facie maladministration has taken place. It cannot take cognizance where departmental remedies are available as appear before commissioner (Appeals) or appellate tribunals. However, in routine or all cases involving refunds, the complaint is registered and inquiries are held. Then the officers from additional commissioners to commissioners are summoned given veiled threats to sanction the refunds, according to officials privy to the state of affairs in FTO Registry Office in Lahore.
To another question, the spokesman denied that Haji Ahmed was doing private practice. However, ‘The News’ confirmed from different sources that he was consultant with Arif Butt until recently while simultaneously discharging duties as FTO adviser.
Regarding contempt threats as a tool being used by advisers in the registry office, the spokesman denied this but stated that there were provisions that enabled the FTO to initiate contempt proceeding.
As a matter of fact, tax lawyers say, the FTO is empowered to do so but Lahore Registry adviser invariably invokes this provision for getting the refund sanctioned whether it is admissible under the law or not.
In M/s Blackboard Industry case, the spokesman said, there were inordinate delays in implementation of FTO recommendations and accordingly the officers concerned were cautioned till contempt petition was disposed of. No adverse action could be taken against the complainant. This was done as per complainant apprehension that his refund would be rejected arbitrarily raising demand against him.
The counter argument is that the officer concerned has right to pass the order as warranted under the law. He cannot be stopped from issuing an order which the law empowers him.
On M/s Siddiq Iron Industry (Pvt) Ltd and M/s Irfan Textile Mill cases, the spokesman said the adviser’s recommendations required that the department issued the refund as was due under law as they paid tax on import stage. However, the FBR officials say they did not pay any tax on the import stage on re-meltable scrap, which is refundable or adjustable. Rather the complainant through mis-declaration complained for refund that it has paid tax on import stage, they said. The FTO recommended refund on the grounds that they have paid tax on the import.
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