Pakistan Telecommunication Company fails to levy sales tax, excise duty on certain services for five

ISLAMABAD (December 02 2002) : The Pakistan Telecommunication Company Ltd (PTCL) failed to levy Central Excise Duty and Sales Tax on certain items and services for five years, according to the secret information provided by an informer who has claimed reward for the information.

The informer Amir Ahmed of Islamabad has complained to the Federal Tax Ombudsman that the CBR should expeditiously recover the evaded amount from PTCL and his reward be paid to him.

According to the informer an evasion of sales tax and central excise duty amounting to Rs 200 million from June 1996 to June 2001 was involved. The department on the other hand reported three contravention for evasion of excise duty of Rs 18 million.

The complainant further said that PTCL was confronted with payment of arrears of excise duty amounting to Rs 4,000 million but CBR agreed to accept Rs 850 million only. But when the Collector (Adjudication) passed an order for recovery of Rs 42.69 million duty for 96 and 97 from PTCL, the Collector sales tax sought guidance from the CBR whether to enforce recovery in view of the agreement with PTCL. The complainant said that CBR had no legal power to pardon PTCL from payment of taxes evaded up to June 30,1998.

The complainant urging for early action on the recovery so that reward could be paid to him had stated that since 1996, excise duty and sales tax was leviable on its leased circuits as well as other SR services and this should have been included in the PTCL bills but the Director-General Accounts PTCL issued orders in 1996 that central excise duty should not be included in the bills of mobile phones companies.

The complainant requested that Collector of Sales Tax and Central Excise Duty Rawalpindi should recover all evaded duty and taxes since June 1996, the agreement between CBR and PTCL be declared null and void and that the CBR should not recommend to government for waiver of any taxes and the ministry of science and technology should take serious action against PTCL officials.

The Collector of sales tax and central excise Rawalpindi admitted that information by the informer was that duty in excess of Rs 100 million was payable by the PTCL. On the basis of information the records were being audited and that the amount of sales tax allegedly evaded by PTCL would be determined after a thorough scrutiny/audit of record.

After further examination of the record and hearing the parties, the Federal Tax Ombudsman Justice Saleem Akhtar wrote in his finding that it has been established that duty/sales tax was not paid by PTCL on the services identified by the complainant.

In the self assessment regime, the primary responsibility for Charging tax and depositing it with the government lies with the taxpayer, therefore PTCL should be held primarily responsible for failure to charge and pay a colossal amount of tax.

At the same time, regular intensive audit of the taxpayer's record is the responsibility of the department, which too was not fulfilled. The Collector has admitted that on receipt of information from the complainant in June 2001, the audit team visited the PTCL offices and framed contravention cases in July 2001. The mal-administration of this proportion is a matter of serious concern for the CBR and controlling ministry of PTCL.

The FTO has recommended hat the CBR should direct the Collector of excise duty and sales tax

-To completes the ongoing audit within two months;

-decide the contravention cases reported in the complaint within two months and new cases if any within three months

-institute an inquiry about the failure of the department to conduct timely audit and detect the evasion of PTCL and take disciplinary action against the defaulting officials

-advise the ministry controlling PTCL for a similar probe and action; and reward claims of the informer be decided and information be furnished to this office within three months.

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