ISLAMABAD (June 01 2004): The Federal Tax Ombudsman, Justice Saleem Akhtar, has decreed that a circular of CBR regarding new conditions for registration under sales tax is void and should be withdrawn. In its place, the conditions should be made part of the rules through correct procedure of law.
The ruling was given in a case by Ziaullah of Gojra who said that the department had deliberately delayed his application for registration under sales tax. He said that the condition of personal appearance before the assistant collector of sales tax, presentation of identity cards duly certified by Nadra, and other points were demanded for some ulterior purpose.
The complainant had alleged that extra conditions were imposed because of some ulterior motive and to harass the applicants.
During hearings of the case Kamal Afzal, AC, Sales Tax, Faisalabad, presented a letter of Dr Kamal Azhar Minhas, Secretary (St-L&P0) dated 16.8.2003. The letter has prescribed the condition of personal appearance, visit to the premises and presentation of Nadra-certified NIC.
The delay in registration occurred because these conditions were not fulfilled in time.
The FTO found that the grievance of delay had been removed but on perusal of the new sales tax registration it was noticed that these were not framed according to law.
The circular of Sales Tax Secretary reads:
SUBJECT: NEW SALES TAX REGISTRATION: As the existing rules/procedure for sales tax registration do not provide sufficient check to ward off the applicants who want to abuse the system and in order to provide safeguard against possible abuse of the system, the Collectorate of Sales Tax and Central Excise (East) Karachi carried out an exercise of processing new application of sales tax registration.
After considering the outcome of the exercise, the following instructions are laid for the registration:
— All individual applicants (persons other than manufacturers/companies) for new registration be asked to appear in person before the registration authority for verification of their person, identity, along with supportive documents.
— Apart from declaration of business address of head office, manufacturing/business premises, branch offices etc in the application form, it shall be made mandatory for the applicants to declare home address and provide details of the property in their names;
— All applicants shall be required to submit a certificate from their banks, certifying the financial worth of the business concern;
— Authenticity of the applicant's ID card shall be checked by getting it verified from Nadra's record; the survey or verification of premises declared by the applicant shall be undertaken by a team comprising one Deputy Superintendent and one inspector. The Superintendent, Registration Division may get counter-verification done in at least 20 percent of newly registered cases; and
— The telephone numbers, cell numbers declared in the application form shall be got verified from the concerned department/company.
NOTE: It shall be the personal responsibility of Sales Tax Registration authority to ensure that all the columns of the application are properly filled in and duly verified and fed in the computer by the responsible sales tax functionaries. In case, it is found at any subsequent stage that the particular/ statements as furnished by the applicant were false/fabricated and have been wrongly verified the Assistant Collector who had issued the registration will be held responsible.
Signed (Dr Kamal Azhar Minhas) Secretary (ST-L&P)
The FTO's order adds: The perusal of the circular shows it seeks to materially modify the Sales Tax Registration Rules 1996 and contains new requirements for registration which are not even remotely envisaged in the law or rules.
In fact the opening words of the circular show that it was issued to overcome perceived deficiencies in the rules.
The very purpose of the letter was thus to obviously invalid because substantive change in law or rules cannot be brought about through circular instructions. If the rules were considered deficient, these should have been amended f by following the correct legal procedure.
The CBR has no power to add any conditions, which are not contained in the rules.
The FTO therefore concluded that the CBR letter dated 16.8.03 thus amounts to an act of maladministration as defined in section 2(3)(i)(a) and (b) of the ordinance of 2000.
The FTO recommended that the CBR should withdraw the circular and compliance be reported within 30 days.