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The Secretary,

Revenue Division,

Islamabad. …Respondent

Dealing Officer: Mr. Muhammad Akbar, Advisor

FINDINGS/DECISION

Present: Rana Muhammad Afzal, Advocate for the complainant.

Ms. Nasreen Nawaz, D.C. for the respondents.

The complainant supplied some of its products to textile units and filed its monthly sales tax returns alongwith summary of sales tax for the months of November 2005, January 2006 and March 2006 well within time. When complainant’s customers applied for refund to the Sales Tax Department, the respondents deferred payment of the refunds applied for, stating that the complainant (supplier) had not filed tax returns and the invoice summary. The complainant requested the Assistant Collector (A & P), Lahore vide letter dated 21.08.06 to verify sales tax returns and the summary for the months in question but he did not respond. On 31.08.06, the complainant requested Collector Sales Tax, Lahore to make entries of complainant’s records in STARR (Sales Tax Automated Refund Repository) ---which was the only source of verification of invoices---and verify the same so that complainant’s clients could get their refunds but the respondents failed to discharge their statutory duty. Respondents’ failure to make entries of the complainant’s records in the STARR data system and non-verification of the same amounted to ‘maladministration’. The concerned authority may be directed to make entries of complainant’s record in STARR data and verify the relevant record so that its clients did not face any problem.

2. In reply, the Collector of Sales Tax and Federal Excise, Lahore has submitted that the sales tax refund claims were paid by the department on verification of input tax paid by the claimants. In October 2002, the CBR introduced an automated system to assist Collectorate’s Refund Divisions in the task of verification with the help of computer data already available to the department. Once the data was verified by STARR, no manual scrutiny of documents was required and the admissible amount of refund was paid. In case of any mismatched documents, the claimed amount relating to such documents was deferred for verification or correction of data, as may be the case. On completion of the requisite processing, deferred amount was paid, if found admissible. The complainant had filed sales tax returns and invoice summary statements for the months of November 2005 and January 2006 but did not file sales tax return for March 2006. The returns so submitted were deposited in the bank, which sent them up to the department. The department had already asked the bank to trace out the returns. The customers of the complainant filed sales tax refund claims, including one for an amount of Rs.43528/- against supplies received from the complainant, which could not be cleared due to reasons that data related objections were raised by the computer system. The refund claimants could get their refund immediately if the computer system verified sales tax returns and invoice summary statements or else the amount of refund was deferred till correction of data and clearance of objections raised by the computer. The Collectorate had already sent the invoice summary statement to Data Entry Centre, Islamabad for feeding. Had the complainant addressed its letter dated 31.08.06 to the Lahore Collectorate, instead of addressing it to Collectorate of Islamabad it would have been helped more quickly because the Islamabad Collectorate was not concerned in the matter. No ‘maladministration’ was involved. The original data was sent by the Lahore Collectorate to Data Entry Centre, Islamabad well in time; few entries were though wrongly fed into the computer by Data Entry Centre due to oversight. The Collectorate had advised the Data Entry Centre to correct the entries. The department was following up on the matter and would be able to resolve the issue within 30 days.

3. During the hearing, the AR explained that for lack of timely and proper feeding of related data by the Data Entry Centre into STARR the refund claims of the complainant’s customers were being deferred by the department, which created problems for the complainant vis-à-vis its customers.

4. The DR stated that the Collectorate had sent the relevant data to the Data Entry Centre, Islamabad. The Centre had since fed the data. Meanwhile, in view of CBR’s instructions that the refund dealing officers could overrule objections raised by the STARR, the Collectorate, having removed the objections, had already sanctioned the refund claim of M/s Sheikhupura Textile Mills, complainant’s customer and the matter stood resolved. The DR placed on record a copy of the sales tax refund payment order. In view of this disclosure, the complainant’s AR vide application dated 13.12.06 submitted as under: -

The department has redressed grievance of my client and issued R.P.O.



It is therefore requested that the complaint may please be treated as withdrawn”.

5. The arguments of the two sides and records of the case have been considered and examined. While the respondents have redressed complainant’s grievance after it filed its complaint in this forum, it is difficult to ignore ‘maladministration’ on the part of the respondents. They failed to enter/feed the requisite data (returns and invoice statements) provided by the complainant into the computer system promptly. The data was neither fed promptly nor was it found to be ‘error-free’ as a result of which refund claims of complainant’s customers were deferred blocking their capital unnecessarily. However, ‘maladministration’ got considerably mitigated as the Collectorate of Sales Tax, Lahore, taking a positive initiative, overruled the objections raised by the STARR and issued the Refund Payment Order. An automated computerized system, by its very nature, aims essentially at precision, feeding of error-fee data and accelerated/speedy completion of the processes involved to eliminate undesirable delays. If the data intended to be fed into the system is not fed or is fed late or is not error-free it will frustrate the system as it will the users/clients. The Revenue Division, therefore, needs to institute a regular review to oversea the working of department’s automated computerized system in order to ensure timely and error-free feeding of requisite data to eliminate delays and to obtain faithful results on the computer. This will also help the Revenue Division reduce the incidence of similar complaints by the dealing public in future. Thus, while the complainant is allowed to withdraw its complaint, it is recommended that:

i. The Revenue Division adopt remedial measures so as to (i) improve quality of data (it should be error-free), (ii) ensure timely feeding of the relevant data to eliminate delays that cause and create problems for the clients through regular review and inspection of the system, (iii) ensure better and closer coordination between the Data Entry Centre, Islamabad and the field Collectorates for timely feeding of error-free data to streamline the working of computerized system.

ii. Compliance be reported within 30 days of the receipt of this order.



(Justice (R) Munir A. Sheikh)

Federal Tax Ombudsman


Dated: -2006

CASES RELATED

TO

INCOME TAX

BEFORE THE FEDERAL TAX OMBUDSMAN

REGIONAL OFFICE

KARACHI

COMPLAINT NO.637/2006

M/s. Marine (Pvt) Limited,

2nd Floor, Hassan Ali Centre,

M.A.Jinnah Road, Karachi.

Through : Mr. M.Mehtab Khan (Advocate),

Rizvi Chambers, 1st Floor, Akbar Road,

Saddar, Karachi. …Complainant

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