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The Secretary,

Revenue Division,

Islamabad. …Respondent

Dealing Officer …Mr. Muhammad Akbar, Advisor


Present: Mr. Mudassar Shujah, Advocate for the complainant.

Dr. Muhammad Adnan Akram, D.C., Sales Tax, Lahore for the respondents.

Facts of the complaint are that Deputy Collector (Adjudication), Gujranwala issued the complainant a show cause notice dated 22.11.03 framing various charges against it. The complainant contested the show cause notice. The D.C subsequently passed Order-In-Original No.195/04 dated 22.05.04 (despatched on 26.05.04, received by the complainant on 28.05.04), without lawful jurisdiction after the expiry of time limit provided in section 36(3) of the Sales Tax Act, 1990. The O-I-O, in fact, was passed after a lapse of 183 days of the date of issuance of show cause notice (received after 190 days). The impugned O-I-O was void because it was passed after expiry of time limit of 90 days set out in the proviso to the aforesaid section. The order could have been passed within 180 days, if an extension of another 90 days was allowed by the competent authority but no such extension in the time for deciding the case was ever obtained. The FTO had already held in complaint No.805/03 that time limit set out in section 36(3) of the Act was mandatory. The President of Pakistan endorsed FTO’s decision vide Law and Justice Division’s order No.185/04 dated 07.05.05. The FTO had allowed same relief and dispensation in identical cases. The complainant had filed appeal against the impugned O-I-O, which was rejected by Collector (Appeals). No further appeal was filed before the Appellate Tribunal. The O-I-O passed by the D.C may be declared without lawful jurisdiction and cancelled because it was hit by time limitation as provided in section 36(3) of the Act.

2. In reply, the Collector, Sales Tax, Gujranwala has submitted that the complainant had claimed refund against invoices received from units suspected of issuing fake/flying invoices. The complainant had failed to provide proof of mode of transportation, such as truck bilties and inward gate passes. Show cause notice was, therefore, rightly issued, asking the complainant why recovery of Rs.1232602/-, received by it as input tax credit/refund illegally, be not recovered together with additional tax and why penalty be not imposed. The case was decided vide O-I-O No.195/04 dated 22.05.04 ordering recovery of the aforesaid amount alongwith additional tax and penalty. The complainant’s appeal filed before Collector (Appeals) was rejected. At the adjudication stage, the complainant had neither submitted written reply to the show cause notice nor had it attended the hearings personally or through its counsel despite the fact that as may as six hearing opportunities were provided. Delay in deciding the case occurred due to heavy load of work and late submission of comments/replies from the parties. Delay may be ignored in the interest of government revenue. In so far as President of Pakistan’s decision cited by the complainant was concerned, the case in question was different from the present case. In the referred case, the complainant had filed claim of input tax refund, which was not given to him in time whereas in this particular complaint the complainant had received refund by producing fake/flying invoices and had thus contravened the provisions of Sales Tax Act, 1990. The complainant could not be allowed to evade government duty and taxes. The time limit provided in law was merely directory in nature, as held by various superior courts. The case had already been decided by two judicial forums in favour of the department. The complainant may be rejected.

3. During the hearing, the AR reiterated the arguments advanced in the written complaint, emphasizing that the O-I-O was passed much after the expiry of time limitation of 90 days as prescribed in sections 11(4) and 36(3) of the Sales Tax Act, 1990. There being no extension in the time for deciding the case, the O-I-O was hit by time limitation. Asked whether the complainant had taken the plea of time limitation before D.C (Adjudication) or Collector (Appeals), he admitted that no such plea was taken or agitated before any of the two forums. He further added that the respondents had failed to establish that complainant’s suppliers were fake units. The suppliers did not issue any fake invoices and the transactions were genuine. Refund was claimed lawfully.

4. The DR submitted that the complainant obtained refund of sales tax on the basis of fake invoices, which, when detected by the audit, led to the institution of the case against the complainant for recovery of illegally obtained refund. The adjudication officer did not delay the proceedings. It was the complainant who failed to submit its defense or appear before the adjudication authority as was evident from the O-I-O itself. The complainant received input tax credit unlawfully. It did not raise the plea of time limitation either before the D.C (Adjudication) or before Collector (Appeals). The adjudication officer passed the order on merits of the case. The Collector (Appeals) had passed a comprehensive and appealable order on the merits of the case. As regards complainant’s argument that the suppliers were genuine, he added that paragraph 8 of Collector (Appeals)’ order (on record) showed that the suppliers of the complainant were not found physical present even at the time the departmental representative visited the sites at addresses given in applications for registration.

5. The arguments of the two sides and records of the case have been considered and examined. Through show cause notice dated 22.11.03 the complainant was accused that it had illegally claimed refund against fake and flying invoices issued by units suspected of issuing such invoices. The D.C (Adjudication) decided the case vide O-I-O No.195/04 dated 22.05.04, ex-parte, because, as revealed by the O-I-O, the complainant did not attend hearings personally or through its counsel. The complainant is now seeking cancellation/annulment of impugned O-I-O 195/04 dated 22.05.04 on the ground that the adjudication authority passed the order after expiry of mandatory period of 90 days prescribed in section 36(3) of the Sales Tax Act, 1990 for passing an order. The aforesaid O-I-O was passed on 22.05.04. The complainant had the notice of the matter alleged in the complaint at the time the O-I-O was passed way back in May 2004 but at that time it did not file any complaint of ‘maladministration’. As per the provisions of section 10(3) of the FTO Ordinance, 2000, a complaint is required to be filed not later than six months of the day on which the person aggrieved first had the notice of the matter alleged in the complaint. This complaint was instituted in the FTO Secretariat on 26.06.06 long after the expiry of six months period from the day on which the complainant, aggrieved by the impugned O-I-O, first had the notice of the matter alleged in the complaint. As it is, this complaint of ‘maladministration’ alleged in respect of O-I-O No.195/04 dated 22.05.04 is not entertainable as the same is hit by time limitation as provided in section 10(3) of the FTO Ordinance, 2000. It is also observed that in the appeal filed before Collector (Appeals), the complainant raised a number of points of law and fact without raising before him the plea of time limitation as prescribed in section 36(3) of the Act. In fact, the complainant sought redress of its grievances from Collector (Appeals) on the merits of the case. Dealing with complainant’s arguments advanced before him, the Collector (Appeals) has passed an appealable order on the merits of the case. The complainant may, therefore, if so advised, appeal against Collector (Appeals)’ order before the Appellate Tribunal and obtain decision on the merits of the case.

6. The complaint is disposed of with observations made above.

(Justice (R) Munir A. Sheikh)

Federal Tax Ombudsman

Dated: -2006



M/s. Rakhsani Builders,

C-64, Railway Housing Society,

Joint Road, Quetta.

Through : M/s. Hasan & Company,

Rustam Jee Lane,

Off: Jinnah Road, Quetta. …Complainant

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