Law: Sales Tax Act, 1990

Section: 22(1)(a),23(1)(d),33(7),

Law: Federal Tax Ombudsman Ordinance, 2000

Section: 2(3)(i)(a)

DECISION /FINDINGS This complaint directed against Sales Tax authorities, Lahore alleges 'maladministration' on account of arbitrary deduction of an amount of Rs.25,000 by way of penalty from the complainant's sanctioned refund amount of Rs.952,864 without assigning any reason for imposition of penalty or disclosing the law under which it was imposed and subsequently deducted from the overall amount of refund. 2. The facts of the case as narrated by the complainant are that the respondents deducted an amount of Rs.25,000 out of its sanctioned refund for February, 2003 on account of recovery of so-called penalty imposed by them. As verbally told the penalty was imposed under section 33(7) of the Sales Tax Act, 1990 read with the Public Notice No.1 of 2002, dated 12-12-2002. Tax invoices issued against zero rated taxable supplies indicated the required description. Public notice referred to above had prescribed a criterion whereby all refund claims were to be disposed of by the authorities only after seeking detailed and complete information in respect of exported goods. Contrary to the prescribed criterion, the respondents unilaterally imposed and deducted a penalty of Rs.25,000 (Rs. 2500 for each of the ten shipping bills involved) without seeking detailed and complete information from the complainant as prescribed in the public notice. Neither any show-cause notice was issued nor was the opportunity of defence given. The act of deduction is arbitrary and unreasonable and the imposition of penalty militates against the principles of natural justice. The impugned order making a deduction of Rs.25,000 by way of imposition of so-called penalty may be set aside. Respondents may also be bound to follow the principles of natural justice so as to provide the complainant the opportunity of being heard before imposing any penalty. If this cannot be done, then, a penalty of Rs.25,00 per month (instead of Rs.2500 per shipping bill) should be sufficient under section 33(7) of the Sales Tax Act, 1990 to caution the exporters against any lapse on their part. 3. In reply, the respondents have submitted that the complainant filed refund claim for the month of February, 2003 on…

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