Tax ombudsman decides unique case against CBR officials' excesses

ISLAMABAD (April 09 2003) : Though bribery is rampant in CBR's hierarchy but very few cases come to the Federal Tax Ombudsman. Here is a unique case against CBR senior officers who tried to extort money and harassed the taxpayer, trying in vain to unlawfully stretch the rules.

In the case, a deputy Superintendent of Sales Tax Collectorate, Karachi, had allegedly demanded Rs 300,000 from the complainant.

The complainant, an importer, alleged that Rs 300,000 was demanded from him, of which he produced the record of taped conversation.

The complainant was charged of having evaded custom duty of Rs 1.3 million for importing coconut seeds on which, in fact, no duty was leviable.

Relevant facts culled out from a 15-page finding of the FTO, former Justice Saleem Akhtar are given below:

The complainant 73-year old S.I.A. Kazi, of Karachi, submitted that his business premises were raided by sales tax auditors who behaved with him as if he were a criminal.

The raiding party took away one diary and records of sales of imported consignments of coconut seeds/semi-husked coconut and 68 files.

The raid party was led by Deputy Superintendents Najeebullah Jafferi and Tehseen Saleem.

After some days, the former telephoned Kazi's son and demanded Rs 300,000 to close the case.

The other deputy superintendent visited the house and asked for arranging the money.

On their refusal, the Sales Tax officials submitted a report against them to the Assistant Collector and the Deputy Collector who issued a show cause notice asking for a recovery of Rs 1.3 million for violation of different sections of Sales Tax Act.

The complainant further stated that coconut seed was subject to 15 percent duty and zero tax under the Sixth Schedule to the Sales Tax Act.

The import of coconut semi-husked was liable to 15 percent duty and 15 percent sales tax.

Under the amnesty scheme, the complainant had paid sales tax and additional tax amounting to Rs 83,921.

As the matter was taken to the adjudication, the complainant pointed out to the Deputy Collector Adjudication that there was no order that the imported coconut seeds could not be sold anywhere else in Pakistan.

He further submitted that according to list of imports maintained by PRAL, none of the importers had paid any sales tax or was penalised on that count.

The complainant added that even then the Deputy Collector (Adjudication) issued a show cause notice requiring him to pay sales tax of Rs 804,834 along with an additional tax Rs 5,52,116.

The complainant wrote an appeal, but the Collector refused to entertain the application and directed his PA not to receive it the entire amount is deposited in the treasury.

It was at this stage, the two deputy superintendents demanded Rs 300,000 to sort out the matter.

The collector in his response told the FTO that according to the regulation of Federal Seeds Certification Department, Ministry of Food, an importer could import seed under the concessionary regime and avail sales tax only when the consignment was utilised for sowing/growing.

The importers were supposed to give this undertaking to the seeds department before making import.

The data provided by PRAL of the imports was the basis for levying the duty and the additional tax.

The advocate for the complainant Mohammed Ishaq argued there were no orders of the Seed Certification forbidding sale of imported coconut seed in the market anywhere in Pakistan nor were there any restrictions on import of coconut seeds in the sales tax act or by the provincial agriculture department.

He further submitted that none of the 35 importers of coconut seeds as indicated by PRAL had paid sales tax, or asked by the authorities to pay the tax.

Only the complainant had been singled out for extorting bribe and the subsequent harassment.

The finding also gives excerpts of the Deputy Collector's answers to question based on the above observations.

As to how many importers were asked to pay sales tax, the deputy collector had no answer.

He was also unable to give an answer when asked under what law the case was made against the complainant as import of coconut seeds was exempt under the Sixth Schedule.

Unique case after going through the submissions of both sides, the FTO observed that this was a unique case in that the collector of sales tax arrogated unto himself the functions of the policy maker, the regulator and the enforcement agent and took the view that since in his opinion the complainants were selling/ dispatching the goods to wrong parties they were liable to sales tax and not entitled to exemption prescribed in the Sixth Schedule.

“The CBR or the Federal government had not prescribed any rules nor issued any instructions for the importers and the department or given any directive about exercising control on the sale of coconut seeds genuinely and lawfully imported and cleared by the customs authorities.

In his order the Tax Ombudsman further noted that the fact establish that the action taken by the department the Collector and his subordinate officials, the adjudication order passed by the Deputy Collector and the refusal of the Collectorate (Appeals) not to allow the complainants even to file an appeal were all contrary to law perverse, arbitrary and un-reasonable, unjust, oppressive and a regrettable example of administrative and judicial excess in misuse of powers which constitute mal-administration under the FTO ordinance 2000.

The order reads: The other issue involved is in respect of allegations of corruption, rude behaviour and harassment by staff members particularly Najeebullah Jafferi and Tehseen Saleem. On this issue evidence was recorded.

A perusal of the statements recorded makes it clear that the staff members particularly, Tehseen Saleem and Najeebullah Jafferi have behaved rudely in the office of the complainant.

They had taken away all the files including the files of complainant's son and his clients who is carrying on his business of clearing agency in the same premises where his father (complainant) has his office.

However, illegality was identified that no proper receipt enumerating each and every file or document seized was given to the complainant at the time of inspection of record or seizing them.

A receipt only stating the number of files was issued. This is not a correct procedure.

It was necessary to make inventory of all files, documents or articles and provide a receipt to the complainant duly signed by the authorised officer immediately at the time of seizure and removal from the premises.

Besides this, from the evidence it seems clear that Najeebullah Jafferi had demanded bribe from the complainant.

Witnesses were examined on behalf of the complainant corroborate the statement of Kaukab Iqbal who had produced tape-recorded talks between him and Najeebullah Jafferi.

Although during cross-examination Najeebullah Jafferi challenged the veracity of the tape-recorded statement, it seems from his statement as well that he admits that the tape-recorded talk contained his voice and that he had talked with Kaukab Iqbal.

Further more the talk between Kaukab Iqbal and Najeebullah Jafferi at the latter's residence in the night is supported by two witnesses.

Although the veracity of their statements had been challenged yet while considering such cases one should keep in mind facts and circumstances where traders hardly make false allegations of corruption and bribe out of fear and revenge action.

It is therefore necessary that full enquiry should be made and disciplinary action may be taken against Najeebullah Jafferi.

As regards Tehseen Saleem except his rude behaviour allegation of demanding bribe is not established.

He has clarified his position and filed documents to show that prima facie his assets were legally acquired.

Considering all facts and circumstances of the case, the Ombudsman recommended that CBR should set aside the order passed by the Deputy Collector and quash the entire proceedings; institute an enquiry and take disciplinary action against Najeebullah Jafferi.

Further he recommended that a letter be issued to Tehseen Saleem not to behave rudely with taxpayers.

Moreover, instructions be issued that while seizing the records/documents/articles of any unit complete inventory should be prepared on the spot and delivered to the unit duly signed by the authorised officer before the removal from the premises.

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