ISLAMABAD: Federal Tax Ombudsman (FTO) Abdul Rauf Chaudhry has ordered the Federal Board of Revenue (FBR) to direct the Regional Tax Office RTO-II, Karachi Chief Commissioner to withdraw impugned show-cause notices (SCNs) issued on already adjudged issues within 15-days.
The FTO further recommended if FBR wanted to issue fresh show-cause notices, it should re-open the Order-in-Appeal strictly in accordance with provisions of Sales Tax Act, 1990 and report compliance with in 21-days.
The FTO issued recommendation on a complaint no. 452/KHI/ST (236)/1518/2014 lodged by one M/S Raab Packages Private Limited Director Muhammad Ali against Revenue Division Secretary as respondent.
According to findings of the FTO, the complaint was filed against the RTO-II Karachi Zone-IV Inland Revenue Commissioner in terms of Section 10(1) of the Federal Tax Ombudsman Ordinance, 2000 for declaring the issuance of show-cause notices as void ab-initio on the issues already adjudged by IR Commissioner Appeals-II vide order dated May 26, 2014.
The complaint was referred to the Secretary, Revenue Division for comments in terms of Section 10(4) of the Ordinance. In response, the FBR submitted comments vide letter C. No, I (1518) S (TO-II)/ 2014 dated January 14, 2015 of the RTO-II Karachi Zone-IV IR Commissioner dated 07.01.2015.
It was contended that the Complainant had claimed input tax amounting to Rs7.15 million on the invoices of M/s Sunny Corporation, a fraudster blacklisted by the FBR.
Thus input tax claimed by the Complainant was inadmissible under Sections 2(14) (37), 3, 6, 7, 8(1) (d), A23, and 26 of the Sale Tax Act, 1990 (the Act) read with Rule (12) (5) of Chapter 1 of Sales Tax Rules, 2006 issued vide SRO 555(1)/2006, dated June 5, 2006.
Accordingly, after providing opportunity of hearing vide show-cause notices dated April 22, 2013, ‘Order-in-Original’ was passed against which the Complainant preferred an appeal.
The IR Commissioner-Appeals, however, set-aside the ONO dated July 17, 2013 passed vide Appellate Order No.86 dated May 26, 2014 on the ground that supplier was operative at the time of transaction.
It was further contended that as the case was set-aside, the department did not prefer second appeal. Fresh show-cause notices were issued against which the Complainant has filed the instant complaint.
It has been pleaded that law does not debar the department to take up the matter afresh, therefore, no grievance was caused to the Complainant and the complaint may be dismissed.
The Authorized Representative filed rejoined dated January 23, 2015 arguing that the first show-cause notice was issued allegedly for inadmissibility of input tax from the supplier namely M/s Sunny Corporation and ONO dated July 17, 2013 was passed. The IR Commissioner-Appeals, however, set-aside the said ONO.
It was held that the disallowance of input tax was uncalled for and unwarranted on the ground that the supplier M/s Sunny Corporation was found operative on May 26, 2013 whereas transactions in question were related to July 2011 to June 2012.
He further argued that order of the IR Commissioner-Appeals had attained finality as the department had admittedly not preferred an appeal before the Appellate Tribunal. He argued that the impugned show-cause notices dated June 19, 2014 and November 21, 2014 contained the same allegations which had already attained finality after the appellate order.
The department in its counter comments has contended that the Sales Tax Registration of Muhammad Rizwan Proprietor of M/S. Sunny Corporation Karachi, bearing STR No. 170036176875 and NTN: 3617687-7, from whom complainant had claimed illegal input tax was temporarily blocked/suspended on the recommendations of the Commissioner Inland Revenue, of Zone-IV, RTO-II, Karachi vide order No. CIR/ST/ZONE-IV/Audit Unit-01/RTO-II/khi/2012-13/2352, dated January 17, 2013 on account of obtaining fraudulent Sales Tax input tax to the tune of Rs 9.52 million.
Subsequently, M/S Sunny Corporation filed Constitutional Petition before the High Court of Sindh vide C.P, No.3607 of 2013. The High Court vide order dated October 08, 2013 gave the following directions and observations:-
“We have briefly considered the various para wise comments. Till next date by way of interim arrangement and entirely without prejudice to the case of any of the parties, Sale Tax I.D. suspension of each of the petitioners is hereby directed to be lifted with immediate effect.
However, it is clarified that while such removal of the blockage shall entitle each of the petitioners to conduct its sales tax affairs in accordance with law, this shall not for the time being and unless otherwise permitted or directed by the court entitle or enable any of the petitioners to claim any amount by way of refund or adjustment.
It is clarified that the interim order made today also extends to suspension of the blacklisting the petitioners”.
M/s. Sunny Corporation has done no business after the activation. The complainant M/s Raab Packages (Pvt) Ltd., NTN, 3193759-4 has claimed input tax refund from aforesaid supplier M/s Sunny Corporation NTN: 3617687-7. The High Court of Sindh has clearly directed the department that no refund or adjustment will be allowed until otherwise permitted.