ISLAMABAD:
As Federal Board of Revenue (FBR) has framed rules ensuring tax refund
on ‘first come, first served’ basis, the fat and shrewd claimants are
using the officials of Federal Tax Ombudsman (FTO) for breaking the
queue and getting their money, either by hook or by crook.
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.
