Mohsin Siddiqui (Chief Reporter)
Lahore High Court (LHC) has instructed the Federal Board of Revenue (FBR) to enact sales tax legislation within the framework of the Sales Tax Act, 1990. The directive aims to eliminate delays in sales tax refund payments, particularly in cases involving pre-refund audit proceedings, as per the LHC order.
Emphasizing the importance of safeguarding taxpayer rights, the LHC order underscores the necessity for timely refund disbursements during pre-refund audit procedures. The court’s order serves as a decisive step towards ensuring efficient tax refund processes and preventing undue delays.
The directive issued by the LHC reiterates that the FBR cannot indefinitely withhold taxpayer rights concerning tax refund claims. It mandates the conclusion of pre-refund audit proceedings in accordance with Section 10(3) of the Sales Tax Act.
The ruling follows a petition filed by a Public Limited Company engaged in fertilizer manufacturing, challenging the legality of pre-refund audit proceedings initiated by the FBR. The petition sought to declare such proceedings unlawful and requested prompt refund of excess input tax payments.
Despite timely submission of refund claims and requisite documentation, the company faced prolonged delays in refund disbursements by the FBR. The LHC, in its assessment, emphasized the need for a thorough examination of refund claims under Section 10 of the Sales Tax Act.
Furthermore, the LHC order directs the FBR to adhere strictly to the statutory timeframe outlined in Section 10(3) of the Act. Failure to obtain approval within the specified timeframe necessitates ex-post facto approval before further proceedings.
Additionally, the LHC underscores the significance of Section 67 of the Act, highlighting its applicability in cases of delayed refunds. The court stresses the violation of taxpayers’ fundamental rights under Articles 23 and 24 of the Constitution due to non-adherence to statutory time limits.
Addressing the policy implications of such non-compliance, the LHC urges the Federal Government to prioritize necessary legislative measures. The government is directed to consider legislative amendments to delineate consequences for non-adherence to Section 10(3), thereby safeguarding taxpayer rights effectively.
