MUHAMMAD MEASUM VS FEDERATION OF PAKISTAN through Secretary
2015 P T D 702
[Sindh High Court]
Before Aqeel Ahmed Abbasi and Muhammad Junaid Ghaffar, JJ
MUHAMMAD MEASUM and others
versus
FEDERATION OF PAKISTAN through Secretary and others
Constitutional Petitions Nos. D-3830, D-3629, D-3630, D-3950 and D-3693 of 2014, decided on 22/11/2014.
(a) Sales Tax Act (VII of 1990)---
----S.4---Notification S.R.O. 670(I)/2013, dated 18-7-2013---Constitution of Pakistan, Art.199---Constitutional petition---Zero rating facility---Applicability---Grievance of petitioners was that Provisional Certificate issued to them was cancelled on the ground that they did not have in-house facility for manufacturing, therefore, they were not entitled for zero rating facility---Validity---Provisions mentioned in Provisional Certificate could not be invoked retrospectively, except in case of some wilful mis-declaration or concealment of material facts at relevant time of seeking such benefit or if documents furnished in such regard were found to be forged and that too after confronting manufacturer-cum-importer through notice after providing an opportunity to explain his position---Provisions of notification S.R.O. 670(I)/2013, dated 18-7-2013, itself did not provide for any retrospective cancellation of Provisional Certificate, merely on allegation that manufacturer-cum-importer did not have manufacturing facility, whereas exemption certificate was issued only after physical verification and complete fulfilment of all codal formalities---Provisional Certificate was issued in terms of notification S.R.O. 670(I)/2013, dated 18-7-2013 and any condition attached or stipulated in Provisional Certificate could not go beyond the mandate of the S.R.O. itself---Commissioner Inland Revenue did not have any power to give retrospective effect to cancellation of a certificate already issued and on the basis of which some vested rights had accrued to petitioners who had already imported raw material and claimed to have consumed the same in manufacturing of goods---Commissioner Inland Revenue was required in law to issue mandatory notice, prior to taking any such adverse action against petitioners---No retrospective effect could be given to any such cancellation letter and such letter by authorities was issued without any show-cause notice or affording opportunity of being heard, therefore, the same was not sustainable in law and was set aside---Petition was allowed accordingly.
(b) Sales Tax Act (VII of 1990)---
---S. 4---Notification S.R.O. 670(I)/2013, dated 18-7-2013---Criminal Procedure Code (V of 1898), S. 561-A---Constitution of Pakistan, Art.199---Constitutional petition---Quashing of FIR---Inherent jurisdiction of High Court---Zero rating facility---Customs authorities got FIR registered against petitioners alleging that they did not have in-house facility for manufacturing, therefore, they were not entitled for zero rating facility---Validity---Conditions attached to notification S.R.O. 670(I)/2013, dated 18-7-2013, made it clear that entire mechanism and manner provided either for grant of exemption/zero rating or recovery of sales tax in case of any alleged violation was entrusted to concerned Commissioner Inland Revenue having jurisdiction in the matter and not with Customs authorities---Registration of FIR which entailed penal/criminal consequences was not based on proper appreciation of law as well as conditions stipulated in Notification S.R.O. 670(I)/2013, dated 18-7-2013---Customs authorities acted without any lawful authority and jurisdiction while registering FIR wherein different sections and penal clauses of Sales Tax Act, 1990, and Income Tax Ordinance, 2001, had been incorporated---Once it was established that an Authority acted without jurisdiction and in excess of lawful authority, the aggrieved person was well within its right to seek quashment/annulment of FIR and proceedings, from High Court by invoking its Constitutional jurisdiction---Directing petitioners to approach Trial Court for remedy, would only prolong agony of petitioners which could amount to abuse of process of law and justice---High Court while exercising inherent jurisdiction under S. 561-A, Cr.P.C. and Art. 199 of the Constitution, quashed FIR and proceedings emanating therefrom---Petition was allowed accordingly.
Miraj Khan v. Gul Ahmed and 3 others 2000 SCMR 122; Maqbool Rehman v. The State and others 2002 SCMR 1076; Khurram Farooq Siddiqui v. Department of Customs and Excise, Collectorate of Customs (Export) and another 2009 PTD 992; Messrs Lucky Cement Ltd. v. Federation of Pakistan and others Constitutional Petition No.D-216 of 2013; Zaheer Ahmed v. Directorate General of Intelligence and Investigation-IR and others Constitutional Petition No.3337 of 2013; Messrs Yasir Enterprises through Ch. Bsher Ahmed v. Federation of Pakistan through Secretary and 7 others 2013 PTD 821; Babar Younus v. The State PTCL 2007 CL 71; Ch.Pervez Ellahi v. The Federation of Pakistan 1995 MLD 615 rel.
Zain A. Jatoi along with Azhar Nawab Rizvi for Petitioner (in Constitutional Petition No.3950 of 2014).
Dilawar Hussain Standing Counsel for Respondent No.1.
M. Khalil Dogar for Respondent No.3 (in Constitutional Petition No.D-3830 of 2014).
Kashif Nazeer for Respondent No.4 (in Constitutional Petition No.D-3830 of 2014).
Ashiq Ali Anwar Rana for Respondent No.2 (in Constitutional Petition No.D-3950 of 2014).
Iqbal Khurram for Respondent No.3 (in Constitutional Petition No.D-3693 of 2014).
Samad holding brief and M. Sarfraz Ali Metlo for Respondents Nos. 2 to 4 (in Constitutional Petitions Nos.D-3629 and D-3630 of 2014).
Mrs. Masoods Siraj for Respondents Nos. 3 and 4 (in Constitutional Petition No.D-3950 of 2014)
Khalid Mahmood Dhoon for Respondent No.2 (in Constitutional Petition No.D-3693 of 2014).
Date of hearing: 23rd September, 2014.
JUDGMENT
MUHAMMAD JUNAID GHAFFAR, J.---Through this common judgment we will dispose of the aforesaid petitions at Katcha Peshi as these involve common questions of fact and law except the facts of Constitutional Petition No.3950 of 2014 which has been filed by the tax consultant of the petitioners who has been implicated in the FIR along with importers, however, has sought similar relief. For the sake of brevity and to avoid duplication, we would be referring to the facts as stated in Constitutional Petition No.D-3830 of 2014, wherein, following relief has been sought:--
"(a)Declare that the FIR dated 29-6-2014 - lodged by sixth respondent, an officer subordinate to the fourth and the fifth respondent - to the extent that it affects the petitioner and those connected and associated with his business, is outright illegal, without jurisdiction and mala fide and to quash/strike down the same;
(b)Declare that the letter dated 8-7-2014 whereby the petitioner's Provisional Certificate 30-1-2014 has been cancelled retrospective by the second respondent has been illegally issued in a mala fide manner and without the application of mind and without affording the petitioner an opportunity to be heard and to set aside/strike down the same;
(c)Declare that the Provisional Certificate dated 30-1-2014 as issued by the second respondent to the petitioner's business concern RELIABLE ASSOCIATES in terms of S.R.O. 670(I)/ 2013 dated 18-7-2013 is a valid and legal document issued under lawful authority;
(d) Declare that the third, fourth, fifth and sixth respondents do not have the jurisdiction to initiate any recovery and/or penal proceedings in respect of the goods imported under S.R.O. 670(I)/2013 dated 18-7-2013 and to direct them to release the petitioner's held consignment forthwith under Delay and Detention Certificate without impeding the future clearance his consignments otherwise than in due course of law;
(e)Restrain the respondents form taking any coercive action -including effecting and/or causing the arrest/restrain, blocking of the NTN/User-ID and/or commencing penal/recovery proceedings---against the petitioner emanating from or as a consequence of the FIR dated 29-6-2014;"
2.Briefly, the facts as stated in the Memo. of Petition are, that the petitioner is a supplier of Milk dealing under the name and style of "REAL MILK" and is also a manufacturer of plastic products comprising of disposable bottles used for the purposes of packaging of milk for supply and retail sale thereof. The petitioner imports raw material namely Plastic Moulding Compounds of various types used in the manufacture of Plastic Bottles which is exempt/zero rated from payment of Sales Tax under S.R.O. 670(I)/2013 dated 18-7-2013. The petitioner has been issued a Provisional Certificate dated 30-1-2014 by the respondent No. 2 in terms of the said S.R.O. for Zero rating of Sales Tax, whereas another Exemption Certificate dated 2-5-2014 has been issued to the petitioner from payment of advance Income Tax at the import stage. It is further stated that the petitioner had been regularly importing its raw material since February 2014 which was cleared by the respondents Nos. 3 and 4 (Collector of Customs, Appraisement, Karachi, East and West) without any hindrance, whereas, suddenly seven consignments of the petitioner were put to hold on the directions of respondent No.4 without any justification and lawful authority against which the petitioner filed a petition bearing No D-3031/2014 before this Court. It is further stated that during pendency of the said petition, various letters dated 12-6-2014 and 16-6-2014 were issued by the respondents Nos. 3 and 4, whereby, the petitioner was required to furnish certain documents in respect of the manufacturing facilities available with the petitioner. However, on 29-6-2014 respondents Nos. 4 and 5 registered an FIR, whereby it was alleged that the consignment which had been shipped in the name of the petitioner, was attempted to be cleared by Messrs Winsome Packages vide GD dated 23-6-2014. It is further stated that simultaneously a letter was also addressed to the respondent No. 2, whereby, certain queries were made and it was also requested that the Provisional Certificate dated 30-1-2014 issued in favour of the petitioner, be withdrawn retrospectively. The respondent No. 2 thereafter vide its letter dated 8-7-2014 informed the petitioner that the Provisional Certificate dated 30-1-2014 stands cancelled retrospectively. It is further stated that since the earlier petition bearing No. 3031/2014 was filed against the unlawful detention of consignments, during the pendency of the which an FIR was also lodged against the petitioner, the said petition was withdrawn by the petitioner vide order dated 15-7-2014 whereby, the petitioner was allowed to file a fresh petition challenging the fresh cause of action including the registration of the FIR. Through instant petition the petitioner has sought quashment of the FIR as being without jurisdiction and lawful authority, and has further prayed for setting aside the letter dated 8-7-2014 issued by respondent No. 2, whereby, the Provisional Certificate of the petitioner has been cancelled with retrospective effect. The petitioner also seeks release of the consignments which have been detained by the respondents during pendency of such proceedings.
3.Mr. Zain A. Jatoi learned counsel appearing on behalf of the petitioners, vehemently argued that the registration of the impugned FIR by the Customs Authorities in the instant matters, besides being mala fide and vexatious, is without any lawful authority and jurisdiction, as according to learned counsel, the matter pertains to the alleged short levy of Sales Tax and Income Tax, which does not fall within the domain of the Customs Authorities. Per learned counsel, at the most, action if any could be initiated by the Commissioner Inland Revenue, having jurisdiction in respect of Sales Tax and Income Tax and not by the Customs Authorities, which cannot take cognizance in respect of allegations of evasion of Sales Tax or Income Tax. Learned counsel submitted that the petitioners were issued Provisional Certificates by the Commissioner Inland Revenue, concerned in terms of S.R.O. 670(I)/ 2013 dated 18-7-2013, after fulfilment of the requisite conditions as stipulated in the said S.R.O., whereas, according to the learned counsel, the said S.R.O. itself provides a mechanism and the manner in which the exemption of Sales Tax is to be regulated. Per learned counsel in the entire scheme of the said S.R.O., it is only the Commissioner Inland Revenue, who has been authorized to conduct and monitor the affairs of the petitioners with regard to fact that as to whether the raw material imported under zero rating facility of Sales Tax has been used in the manufacture of the products or not. In support of such contention the learned counsel has referred to clause 'c' and clause 'k' of S.R.O. 670(I)/2013 dated 18-7-2013. Per learned counsel, once the goods have been cleared by the Custom Authorities after grant of zero rating facility in terms of S.R.O. 670(I)/2013 dated 18-7-2013; they become functus officio in so far as any alleged short recovery of the Sales Tax is concerned. Learned counsel further contended that the Custom Authorities can only inform or intimate the respondent No. 2 for any such alleged act and for this reason they had themselves written a letter dated 29-6-2014 hence any further action initiated by them, including registration of the FIR and or any adjudication proceedings are without jurisdiction and any lawful authority. Learned counsel also referred to the contents of the FIR as well as the Interim Challan and has contended that the only alleged violation which has been pointed out by the Customs Authorities is to the effect, that the petitioner has availed the exemption of Sales Tax without having any manufacturing facilities. According to the learned counsel such exercise cannot be undertaken by the Customs Authorities in respect of Sales Tax matters, as the same falls within the exclusive jurisdiction of Commissioner Inland Revenue; therefore, the FIR which has been lodged/registered by the Customs Authorities is without lawful authority and jurisdiction; hence, liable to be quashed. Learned counsel further contended that in so far as the letter of cancellation of exemption dated 8-7-2014 issued by the Commissioner Inland Revenue Zone-I RTO, Sukkur, is concerned, the same is also not sustainable in law, as it has been issued on the directives of the Customs Authorities, without affording any opportunity of being heard to the petitioner, and even without issuance of a Show-Cause Notice before arriving at such a decision. Learned counsel further contended that even otherwise, the cancellation letter/order dated 8-7-2014 cannot be applied retrospectively, whereby; the vested rights accrued to the petitioners are being impinged and infringed. Learned counsel also referred to Inspection Report dated 18-6-2014 issued by the Officers of respondent No. 3, which reflects that in compliance with the order dated 12-6-2014, the Factory premises of the petitioner was inspected and on physical verification, various machineries were found to be installed and were being used in the production activities for manufacturing of plastic bottles. Learned counsel also referred to a survey report dated 14-7-2014 issued by the Director IOCO (Input Output Co-efficient Organization), whereby, it has been confirmed that after verification of the factory premises and the manufacturing facilities, the input output ratio and the wastage has been determined by the Survey team. Per learned counsel the petitioner is very much in existence at the given address and has referred to a courier receipt and the envelope, whereby certain letters/notices were dispatched by the Regional Tax office of FBR Sukkur, and were received on the same address by the petitioners which has been disputed by the Customs Authorities. While concluding his submissions, the learned counsel has prayed that the impugned FIR dated 29-6-2014 as well as letter dated 8-7-2014 may be quashed/set aside and the consignments of the petitioners lying at the Port for which the goods declarations have already been filed by the petitioners may be ordered to be processed and released forthwith in accordance with law.
4.Conversely Mr. Kashif Nazeer learned counsel appearing on behalf of the respondent No. 4 has contended that any short levy of Sales Tax can be recovered in terms of section 32 of the Customs Act, 1969; hence, the impugned FIR was registered with lawful authority and jurisdiction and cannot be quashed on this ground alone by this Court. Learned counsel further contended that the petitioners at the very outset are not entitled for any zero rating exemption in terms of S.R.O. 670(I)/2013 dated 18-7-2013 as the zero rating facility is not admissible on the raw material for the packing material. Learned counsel further contended that such short recovery of Sales Tax can be recovered in terms of section 32 of the Customs Act, 1969 and violation of this section entails punishment under Clause 14 of Section 156(1) of the Customs Act, 1969, under which the adjudicating authority can impose penalty or fine, whereas the Special Judge, Customs and Taxation, can take cognizance of the FIR registered on behalf of the respondent No. 4. Ashiq Ali Anwar Rana learned counsel appearing for respondent No. 2 in Constitutional Petition No. 3950/2014 contended that since FIR has been registered, the petitioners may approach the trial Court for quashment of the FIR in accordance with law. The other learned counsel appearing on behalf of the respondents have adopted the arguments advanced by Kashi Nazeer and Mr. Ashiq Ali Anwar Rana.
5.We have heard all the learned counsel and perused the record. By consent of the learned counsel appearing for the parties, the aforesaid petitions are being heard and disposed of at Katcha Peshi stage through this common judgment.
6.It appears that pursuant to Notification S.R.O. 670(I)/2013 dated 18-7-2013 issued in terms of section 4 of the Sales Tax Act, 1990 the petitioners who claim to be manufacturers of various products as notified in the Table to the S.R.O., applied for obtaining the requisite entitlement prescribed in Annex-A to this notification, by providing the complete list of their annual requirements of the inputs, intended to be imported or purchased locally by them for the manufacture of goods specified in column (2) of the said Table, to the concerned Commissioner Inland Revenue, having jurisdiction in respect of the petitioners. The Commissioner Inland-Revenue Zone-I RTO, Sukkur, has issued a Provisional Certificate dated dated 30-1-2014 in respect of zero rating/exemption from Sales Tax, whereas, another certificate dated 2-5-2014 was also issued in terms of section 159 of the Income Tax Ordinance 2001 for exemption from deduction of advance tax at import stage under Section 148(1) of the Income Tax Ordinance, 2001. It further appears from the record that after issuance of the Provisional Certificate dated 30-1-2014, the petitioner imported various consignments of raw material for the manufacture of disposal plastic bottles used in the packing of milk by the petitioner. Subsequently, in the month of May 2014, seven consignments of the petitioner were put to hold by the officers of respondent No. 4, on the ground that the petitioner allegedly did not possess any manufacturing facility, and was involved in the misuse of zero rating/exemption of Sales Tax under the said Notification. The petitioner thereafter filed Constitutional Petition bearing No. D-3031/2014 and during pendency of the petition, an FIR dated 29-6-2014 was registered against the petitioners, whereafter, the said petition was withdrawn by the petitioner and this Court vide order dated 15-7-2014 allowed the withdrawal of said petition with a permission to file a fresh petition. Thereafter, instant petitions have been filed by all the petitioners who have been nominated in the FIR dated 29-6-2014 and Interim challan dated 14-7-2014.
7.Record further reveals that after registration of the FIR at the request of respondent No. 4, the respondent No. 2 vide letter dated 8-7-2014 has also cancelled the Provisional Certificate dated 30-1-2014, retrospectively, without issuance of any Show-Cause Notice, and opportunity of being heard to the petitioners. Through instant petitions all the petitioners have impugned the FIR dated 29-6-2014 and Interim challan dated 14-7-2014, as well as the retrospective cancellation of Provisional Certificates issued to them by seeking quashment of the FIR as well as setting aside of the retrospective cancellation of the Provisional Certificates by the Commissioner Inland Revenue.
8.There are two basic legal issues before us in so far as the aforesaid petitions are concerned which are required to be examined and adjudicated upon by this Court. The first is, whether or not the Customs Authorities working under the Customs Act, 1969 specially the respondent No. 4 and its subordinate officers who have registered the impugned FIR dated 29-6-2014, had any authority or jurisdiction to do so in respect of the alleged evasion and or misuse of Sales Tax zero rating/exemption under S.R.O. 670(I)/2013 dated 18-7-2013. The Second is, that as to whether, respondent No. 2 i.e. the Commissioner Inland Revenue was justified in cancelling the Provisional Certificates issued to the petitioners under S.R.O. 670(I)/2013 dated 18-7-2013, retrospectively and that too without issuing any Show-Cause Notice or affording any opportunity of hearing to the petitioners. We would like to deal with the second issue first. In this regard it would be advantageous to refer to the Provisional Certificate dated 30-1-2014 which reads as follows:--
"OFFICE OF THE
COMMISSIONER INLAND REVENUE
ZONE-I, RTO SUKKUR
No. JUD/CIR/ZONE-I/RTO/Suk/2013-14/535Dated 30-1-2014
PROVISIONAL CERTIFICATE
(1)Messrs Reliable Associates, Head office at C-345, Frere Road, Sukkur and Factory at Plot No. DP-45, Sector 12-D, North Karachi Industrial Area, Karachi having NTN 3615453-9 have applied to the Commissioner Inland Revenue, Zone-I, RTO, Sukkur for issuance of zero rate/low rate certificate in respect of concessionary import of raw material in terms of S.R.O. 670(I)/2013 dated 18-7-2013 for use in the manufacturing of disposable Plastic Bottles for Milk and Dairy Products. Their application along with undertaking on stamp paper has been examined and Provisional Quota of requested/applied quantities for concessionary import of raw materials is being allowed for the financial year 2013-14 in respect of following raw material falling at Serial Nos. 9 to 13 of the Table of Concessionary Notification vide S.R.O. 670(I)/2013 dated 18-7-2013. The Provisional Certificate shall be enforced to the input Output Organization (IOCO) for determination of input output ratio and wastage percentage, in respect of concessionary raw materials used/applied by the registered person and after such determination along with ascertainment of In-house facility, the quota shall be finalized in respect of manufacturing of the applied Dairy Products i.e. Milk under the brand name and style of Real Milk.
2.The following table shows the provisionally allowed quantity of requested raw material in terms of S.R.O. 670(I)/2013 dated 18-7-2013.
| S. No. | ARTICLES | DESCRIPTION OF RAW MATERIAL | H.S. | QUANTITY REQUESTED | QUANTITY ALLOWED D (50%) |
| 1 | DAIRY MILK UNDER THE BRAND NAME OF "REAL MILK" | POLYPROPYLENE, PROPYLENE, COPOLYMERS, LLD/LOW DENSITY POLYETHYLENE, HIGH DENSITY POLYETHYLENE AND ACRYLONITRILE BUADIENE-STYRENE | 3902.1000 3902.3000 3901.100 3901.2000 and 3903.3000 | 7200 MT | 4200 MT |
3.The above Provisional Certificate is admissible subject to the following conditions:--
(i)The raw materials, parts and sub-component be released against post dated cheques/indemnity at the time of clearance before concerned Collector of Customs to the concessionary amount of Sales Tax and other tax/duties shall be recovered in cash, in case of any violation. The post dated cheques/indemnity Bonds shall released on receipt of written confirmation regarding consumption of goods of the manufacturer for the satisfaction of the Collector of Customs as covered under S.R.O. 670(I)/2013 dated 18-7-2013.
(ii)The manufacturer shall maintain record of imports/local purchase and the goods manufactured from imported and local inputs.
(iii)Local suppliers of inputs shall issue zero rated invoices under section 23 of Sales Tax Act, 1990 mentioning the names, STRN/NTN and approval No. of buyers under S.R.O. 670(I)/2013.
(iv)Issuance of Provisional Certificate does not entitle for concession, if such is either not covered under S.R.O. 670(I)/2013 or is barred under any other instructions, directives issued by the Commissioner Inland Revenue, Zone RTO, Sukkur or FBR in this behalf.
(v)In case of withdrawal of concession, the unutilized raw material shall be charged subject to the statutory rate of duties/ taxes.
(vi)The Provisional Certificate shall be cancelled retrospectively, if it is found that the manufacturer cum importer/beneficiary has misdeclared or concealed any material facts or submitted fake/forge documents.
(vii)All conditions of S.R.O. 670(I)/2013 dated 18-7-2013 shall be met and requirements are required to be fulfilled by the applicant for claiming said requirements are required to be fulfilled by the applicant for claiming said concession.
(viii) Clearance from Custom House and Port Muhammad Bin Qasim, Karachi.
Sd/-
(ABDUL BULLO)
COMMISSIONER"
9.The aforesaid Provisional Certificate dated 30-1-2014 was issued by the respondent No. 2, on the application of the petitioner, in terms of Clause 2(a) of S.R.O. 670(I)/2013 dated 18-7-2013, and while issuing the said certificate, it was observed by the respondent No.2, that the application along with undertaking submitted by the petitioner has been examined and provisional quota of requested/ applied quantities for concessionary import of raw material is being allowed for the year 2013-14 in respect of the raw material listed at serial Nos. 9 to 13 of the Table to S.R.O. 670(I)/2013 dated 18-7-2013. It was further observed that the Provisional Certificate will be endorsed to the Input Out-put Organisation (IOCO) for determination of the input output ratio and wastage in respect of concessionary raw material, and after such determination along with ascertainment of In-house facility, the quota shall be finalized in respect of manufacturing of milk under the brand name and style of "Real Milk". In Para 2 of the Provisional Certificate, the details of raw material and the quantity applied for and the quantity allowed provisionally, have been stated. On perusal of the same it appears that the petitioner had applied for a total quantity of 7200 metric tons of various types of Plastic Moulding Compounds, whereas a provisional quantity of 4200 metric tons was allowed to the petitioner. In addition to various other conditions attached, the Provisional Certificate further provides, that it shall be cancelled retrospectively, if it is found that the manufacturer has mis-declared or concealed any material facts or submitted any forged/fake documents. The said certificate has been issued in terms of S.R.O. 670(I)/2013 dated 18-7-2013 and for convenience the relevant portion of the S.R.O. is also reproduced herein under:--
"GOVERNMENT OF PAKISTAN
MINISTRY OF FINANCE, ECONOMIC AFFAIRS
STATISTICS AND REVENUE
(REVENUE DIVISION)
Islamabad, the 18th July,2013.
NOTIFICATION
(SALES TAX)
S.R.O.670(I)/2013.---In exercise of powers conferred by clause (c) of section 4 of the Sales Tax Act, 1990, the Federal Government is pleased to direct that the import and supply of goods mentioned in column (2) of the Table below and the raw materials, packing materials, sub-components, components, sub-assemblies and assemblies imported or purchased locally for the manufacture of the said goods shall be charged to sales tax at the rate of zero percent subject to the conditions specified below the Table, namely:--
| S. No. | Description of goods | PCT Heading |
| (1) | (2) | (3) |
| 1. | | |
| 2. | | |
| 3. | | |
| 4. | | |
| 5. | | |
| 6. | | |
| 7. | | |
| 8. | | |
| 9. | Milk including favored milk | 04.01 and 0402.9900 |
| 10. | Yogurt | 0403.1000 |
| 11. | Cheese | 0406.1010 |
| 12. | Butter | 0405.1000 |
| 13. | Cream | 04.01 and 04.02 |
| 14. | | |
| 15. | | |
| 16. | | |
| 17. | | |
| 18. | | |
| 19. | | |
CONDITIONS
(i)The zero-rating under this notification shall be available subject to determination of input/output ratios by the Input-Output Co-efficient Organization (hereinafter referred to as "IOCO"), if not already determined under an earlier concessionary notification issued for such goods:
Provided that this condition shall not be applicable in case of import of finished goods and their supply in same state; and
(ii)For import and local procurement of raw materials, packing materials, subcomponents, components, sub-assemblies and assemblies for the manufacture of the goods specified in "column (2) of the said Table, the following conditions and procedure shall be followed, namely:-
(a)A sales tax registered manufacturer of the goods specified in the said Table having suitable in-house facilities shall submit, in the format prescribed in Annex-A to this notification, the complete list of his annual requirement of the inputs he intends to import or purchase locally for the manufacture of goods specified in column (2) of the said Table, to the Commissioner Inland Revenue having jurisdiction;
(b)The Commissioner shall approve the declaration of input-output ratio of the manufacturer without physical verification in case the declared input-output ratio and input requirement is in accordance with the prevailing industry average or the inputs consumption pattern of the applicant manufacturer or as already determined by IOCO under an earlier notification issued for such goods, in the format of approval prescribed as Annex-B to this notification.
(c)In case the Commissioner is not satisfied with the declared input-output ratios of the goods to be manufactured because of their being prima facie not in accordance with the prevalent average of the relevant industry or in case the input-output ratios are not already determined by IOCO, he, may, after allowing a six months provisional quantity, make a reference to the IOCO for final determination thereof. On receipt of report from IOCO the Commissioner shall then determine the final annual quantitative entitlement of inputs and grant final approval for zero-rated purchases or imports. In case of non-receipt of report from IOCO within four months of the application made by the manufacturer, the Commissioner shall provisionally allow another six months quantity to the applicant manufacturer;
(d)In case of goods to be imported by the registered manufacturer, the authorized officer of Inland Revenue shall furnish all relevant information online to Customs Computerized System as per Annexure-C to this notification against a specific user ID and password obtained under section 155D of the Customs Act, 1969 (IV of 1969).
(e)Where a registered person supplies goods to a registered manufacturer of goods specified in the said Table, he shall issue a zero-rated invoice under section 23 of the Sales Tax Act, 1990 mentioning the name, sales tax registration and approval number of the buyer.
(f)The registered manufacturer of goods specified in the said Table will be entitled to claim refund of input tax paid on utilities and such inputs, which are purchased by him after payment of sales tax, in terms of section-10 of the Sales Tax Act, 1990 read with the relevant provision of the Sales Tax Rules, 2006;
(g)The registered manufacturer shall maintain complete records of the inputs imported or locality purchased and the goods manufactured therefrom.
(h)The input goods allowed under clause (ii) shall be consumed within twelve months of purchase or import thereof, where the consumption period shall start from the date of purchase or import of input goods. However, the input goods shall be purchased or imported before the expiry date of the approval;
(i)The manufacturer shall communicate to the concerned Commissioner of Inland Revenue in writing about the consumption of imported or locally procured inputs within ninety days of their consumption. The indemnity bond shall be released on receipt of written confirmation regarding consumption of goods by the manufacturer.
(j)In case the input goods are not consumed within the period allowed in the approval, the manufacturer shall pay the amount of sales tax involved or obtain extension from the Commissioner of Inland Revenue under intimation to the Collector of Customs;
(k)The concerned Commissioner Inland Revenue, whenever he deems necessary but not more than once in a calendar year, may get the records of the manufacturer audited. In case it is found that the inputs have not been properly accounted for or consumed in the manufacture and supply of goods as prescribed, the Commissioner may initiate proceedings for recovery of the sales tax involved on the unaccounted inputs besides penal action under the relevant provisions of the Sales Tax Act, 1990, and
(l)Under circumstances of exceptional nature and for reasons to be recorded in writing, the concerned Commissioner may relax any of the conditions, if he is satisfied that such condition is detrimental to the bona fide purposes of manufacturers' business, subject to such surety or guarantee he may deem appropriate to secure the sales tax and to ensure proper accountal and utilization of the imported or locally procured goods."
10.On perusal of the letter dated 8-7-2014, whereby the respondent No. 2 has cancelled the Provisional Certificate dated 30-1-2014 retrospectively, it appears that the same has been addressed to the petitioner and states that, as provided in sub-Para (a) of Para 2 of S.R.O. 670(I)/2013 dated 18-7-2013, one Mr. Shahid Hussain Shaikh, Auditor was deputed to conduct enquiry and investigate regarding status of the registered person, and on physical verification it is confirmed that the registered person submitted incorrect particulars while applying for the Certificate for zero rating facility as no suitable In-house facility for manufacturing was available, hence the petitioner is not entitled for availing Zero rating facility as per S.R.O. 670(I)/2013 dated 18-7-2013. It also referred to clause (vi) of the Provisional Certificate dated 31-1-2014 which provides for retrospective cancellation of the said certificate. We have examined the contents of the cancellation letter dated 8-7-2014, which itself reflects that no Notice of any such intended cancellation was issued to the petitioner, whereas, in the cancellation letter dated 8-7-2014, no specific date or reference has been provided that as to when the physical inspection of the unit of the petitioner was carried out and as to whether any Notice for such physical inspection was ever issued to the petitioner or not. Insofar the condition (vi) incorporated in the Provisional Certificate for allowing retrospective cancellation of the same is concerned, we are of the opinion that those provisions cannot be invoked retrospectively, except in case of some wilful mis-declaration or concealment of material facts at the relevant time of seeking such benefit, or if the documents furnished in this regard are found to be forged, and that too, after confronting the manufacturer-cum-importer through Notice and after providing an opportunity to explain his position. We may further observe that the Notification S.R.O. 670(I)/2013 dated 18-7-2013, it-self does not provide for any retrospective cancellation of the Provisional Certificate, merely on the allegation that manufacturer-cum-importer did not have the manufacturing facility, whereas, exemption certificate is issued only after physical verification and complete fulfilment of all codal formalities. The Provisional Certificate has been issued in terms of S.R.O. 670(I)/2013 dated 18-7-2013 and any condition attached or stipulated in the Provisional Certificate, cannot go beyond the mandate of the S.R.O. itself; hence, the Commissioner Inland Revenue, did not have any power to give retrospective effect to the cancellation of a certificate already issued, and on the basis of which some vested rights have accrued to the petitioners, who have already imported the raw material and claim to have consumed the same in the manufacturing of goods. The respondent No. 2 was required in law to issue a mandatory notice, prior to taking any such adverse action against the petitioners. The S.R.O. 670(I)/2013 dated 18-7-2013, itself provides a mechanism for audit and proceeding further, if any alleged misuse of the Zero rating/exemption has come on record. It is not the mandate of law or principles of natural justice to allow anybody to act in a manner, whereby, the business of a tax payer can be ruined by giving retrospective effect to a cancellation letter, without even affording any opportunity of hearing or showing cause for such alleged violation of the S.R.O. In view of hereinabove facts and circumstances of this case, we are of the view that no retrospective effect could be given to any such cancellation letter and further hold that the impugned letter dated 8-7-2014 which has been issued without issuing any Show-Cause Notice or affording an opportunity of being heard, is not sustainable in law, hence the same is hereby set aside.
11.The second issue which has been raised in the instant petition is in respect of the authority and jurisdiction of the Customs Authorities to register FIR in respect of the alleged misuse of Zero rating/exemption of Sales Tax under S.R.O. 670(I)/2013 dated 18-7-2013. This is the important and the crucial legal issue raised on behalf of the petitioners as it goes to the very root of the subject controversy. From careful examination of the provisions of S.R.O. 670(I)/2013 dated 18-7-2013, it appears that the same has been issued in terms of clause (c) of section 4 of the Sales Tax Act, 1990 which provides for Zero rating of Sales Tax on such goods as the Federal Government may by Notification in the Official Gazette specify. The aforesaid Notification states that the Federal Government is pleased to direct that the import and supply of goods mentioned in column (2) of the table below and the raw materials, packing materials, sub-components, components, sub-assemblies and assemblies for the manufacture of the said goods shall be charged to Sales Tax at the rate of 0%, subject to the conditions specified in the aforesaid Notification. The goods in question for which the petitioners have obtained Zero rating facility of Sales Tax are listed at serial Nos. 9 to 13 of the Table to the S.R.O. The conditions attached to the said Notification requires that the person who intends to avail the facility of Zero rating, shall make an application to the concerned Commissioner Inland Revenue having jurisdiction, stating the annual requirement of the inputs intended to be imported or purchased locally, for the manufacture of goods specified in Column 2 of the Table to the SRO Condition (ii)(b) of the Notification provides that the Commissioner, thereafter, shall approve the declaration of input output ratio of the manufacturer without physical verification, in case the declared input-output ratio and input requirement is in accordance with the prevailing industry average or the inputs consumption pattern of the applicant or as already determined by IOCO under an earlier Notification issued for such goods. Whereas, condition (ii) (c) of the Notification provides that in case the Commissioner Inland Revenue is not satisfied with the declared input-output ratios of the goods to be manufactured, shall after allowing a six months provisional quantity, make a reference to the IOCO for final determination of the quantity/entitlement thereof. Once the report from IOCO has been received, the Commissioner Inland Revenue shall then determine the Final annual quantitative entitlement of inputs and grant final approval for Zero-rated purchases or imports. The case of the petitioners is more specifically covered under clause (ii) (c) of the Notification as they have been issued Provisional Certificate for a period of six months. As per condition (ii) (k) of the Notification the input goods allowed under clause (ii) are required to be consumed within a period of twelve months of the import thereof, whereas, under clause (ii)(i), the manufacturer is required to communicate in writing to the Commissioner, Inland Revenue, about the consumption of the imported or locally procured inputs within 90 days of their consumption and the indemnity bond shall be released on receipt of written confirmation regarding consumption of goods by the manufacturer. The most relevant of the conditions is condition (ii) (k) of the Notification which provides, that the concerned Commissioner Inland Revenue, whenever he deems necessary, but not more than once in a calendar year, may get the records of the manufacturer audited and in case it is found that the inputs have not been properly accounted for or consumed in the manufacture and supply of goods as prescribed, the Commissioner Inland Revenue may initiate proceedings for recovery of the Sales Tax involved on the unaccounted inputs, besides penal action under the relevant provisions of the Sales Tax Act, 1990. On perusal of the aforesaid conditions attached to the Notification S.R.O. 670(I)/2013 dated 18-7-2013, it is abundantly clear that the entire mechanism and manner, provided either for the grant of exemption/Zero rating or the recovery of Sales Tax in case of any alleged violation has been entrusted to the concerned Commissioner Inland Revenue having jurisdiction in the matter, and not with the Customs authorities. This is perhaps for the reason that the levy and collection of Sales Tax, the grant of exemption and recovery, as well as admissibility of input adjustment and refunds, now vests with the Inland Revenue Department and the officers of the Inland Revenue Department have been notified as the appropriate officers under the Sales Tax Act, 1990 for such purposes. Merely for the fact that the person who has been granted Zero rating facility in terms of S.R.O. 670(I)/2013 dated 18-7-2013, imports any material for which he is in possession of a Provisional/or Final Certificate and has to seek clearance of the same from the Customs Authorities, the jurisdiction for recovery of Sales Tax at any subsequent stage, would not vest with the Customs Authorities. The Notification itself provides a mechanism for recovery of any alleged misuse of Zero rating facility of Sales Tax thereof, and such authority for recovery vests with the Commissioner Inland Revenue having jurisdiction in the matter. The Customs Authorities in case of any information regarding mis-declaration or concealment of some material facts by the importer, can only inform, at the most, such violation to the concerned officer of Inland Revenue, which in fact had already been done through letter dated 29-6-2014, whereas, the Commissioner Inland Revenue, has also acted on such communication/letter of the Customs Authorities to further examine the claim of exemption. Therefore, the registration of FIR which entails penal/criminal consequences, is not based on proper appreciation of law, as well as the conditions stipulated in the S.R.O. 670(I)/2013 dated 18-7-2013. In our opinion the Customs Authorities in the instant matter have acted without any lawful authority and jurisdiction, while registering an FIR, wherein different sections and penal clauses of the Sales Tax Act, 1990 and the Income Tax Ordinance, 2001 have been incorporated. Once it is established that an authority has acted without jurisdiction and in excess of lawful authority, the aggrieved person is well within its right to seek quashment/annulment of the FIR and the proceedings from this Court by invoking its Constitutional jurisdiction. The petitioners have not challenged the FIR merely on any irregularity, or defect in the procedure adopted while registering the FIR nor have they rested their case on merits that as to whether any offence had been committed by them or not, rather they have challenged the very jurisdiction of the Customs Authorities to act and proceed any further in the matter, hence, we are of the view that since the FIR registered in the instant matter is without jurisdiction, therefore, directing the petitioners to approach the trial Court for remedy, would only prolong the agony of the petitioners which may amount to abuse of the process of law and justice. Accordingly, while exercising the inherent jurisdiction as vested in this Court under section 561-A, Cr.P.C. and under Article 199 of the Constitution, we hereby quash the FIR and the proceedings emanating therefrom in case of all the petitioners.
12.Lastly we would like to deal with the objection raised by one of the learned counsel appearing on behalf of the respondents, that since FIR has already been registered and cognizance has been taken by the Special Judge (Customs and Taxation), the petitioners may approach the trial Court by filing an application under section 265-K, Cr.P.C., to seek quashment of the FIR In our opinion, in the given facts and circumstances of instant case, such contention is not based on proper appreciation of law, and is misconceived. Though there is no cavil to such proposition, however, if the Court comes to the conclusion that the very act or the authority purportedly under which the FIR has been registered, is without jurisdiction and for which the officer had no authority, this Court under Article 199 of the Constitution is competent to quash the FIR to stop the abuse of process of law any further. It appears to us, prima facie, that if such proceedings are allowed to be continued any further, the same would cause gross injustice, harm and injury to the petitioners, as once we have come to the conclusion that the impugned action is without jurisdiction, it would not be appropriate to ask the petitioners to approach the trial Court and seek such remedy. The rule that a party must approach the trial Court in the instant matter is not applicable, as this case is an exception for its own peculiar facts. The petitioners have ably demonstrated that the impugned action is without jurisdiction, hence, any further proceedings in the matter would be an abuse of process of law. There is a plethora of the case-law on this issue which has been discussed herein below.
13.The Hon'ble Supreme Court in the case of Miraj Khan v. Gul Ahmed and 3 others (2000 SCMR 122) has observed as follows:--
"There is no absolute bar on the power of the High Court to quash an FIR and it is not always necessary to direct the aggrieved person to first exhaust the remedy available to him under section 249-A, Cr.P.C. It is cardinal principle of law that every criminal case should be adjudged on its own facts. The facts of one case differ from the other and, therefore, no rule of universal application can be laid in a certain case so as to be made applicable to other cases. Even in the case reported in PLD 1997 SC 275, relied on by the learned counsel for the petitioner this principle has been recognized that the High Court in exceptional cases can exercise jurisdiction under section 561-A, Cr.P.C. without waiting for trial Court to pass orders under section 249-A or 265-K, Cr.P.C., if the facts of the case so warrant. The main consideration to be kept in view would be whether the continuance of the proceedings before the trial forum would be futile exercise, wastage of time and abuse of process of Court or not. It on the basis of facts admitted and patent on record no offence can be made out then it would amount to abuse of process of law to allow the prosecution to continue with the trial."
14.Similarly in the case of Maqbool Rehman v. The State and others (2002 SCMR 1076), the Hon'ble Supreme Court has observed as follows:--
"9. In law, there is no warrant for the argument that since the charge had been framed by the trial Court, proceedings could not be buried by way of quashment. The petitioner appears to be laboring under a misconception of law that in all cases where the accused persons are summoned by a Court of law, it is incumbent upon the Court to record the evidence. There is no invariable rule of law and it will depend on the facts of each case whether to allow the prosecution to continue or to nip in the bud."
15.A learned Division bench of this Court again dealing with a matter in which an FIR was lodged by the Customs authorities in the case of Khurram Farooq Siddiqui v. Department of Customs and Excise, Collectorate of Customs (Export) and another (2009 PTD 992) speaking through Justice Anwar Zaheer Jamali, (as his lordship then was) has been pleased to hold as follows:--
"7. We have carefully considered the submissions placed before us by the parties counsel and perused the material placed on record. Admittedly, the petitioners have invoked the jurisdiction of this Court for seeking quashment of FIRs Nos.SI/MISC/34/ 2005/EXP-PQ, dated 15-9-2005 and SI/MISC/162/2005/Exp-PQ, dated 26-8-2005, on 5-6-2008 i.e. after more than two and half years to the lodging of these FIRs, 2005, which related to the commission of offences by the petitioners in the year, 2005, at a stage when no interim challan was submitted in the two crimes. The fact of failure of respondent No.1 and the I/O of the crimes to conduct proper investigation of the crimes for such a long period is significant to see whether lodging of such FIRs has some basis or the same were lodged merely to pressurize the petitioners for achieving some other results, best known to the complainants. Even after filing of these petitions, respondent No.1 and I/O took another period of more than six months in submitting "interim challan", again carrying with it no other material in the form of documents or oral evidence to show that prima facie petitioners are guilty of the offence for which they have been charged. There is no provision in law for submission of interim challan after three years, therefore, it is to be deemed as final challan, which carry no material for connecting the petitioners with the commission of said crimes. In our opinion inordinate delay of over three years in the investigation of crimes; submission of interim challans without collecting any evidence against the petitioners, is indicative of fact that the pendency of such proceedings in the Customs Court will be nothing but an abuse of the process of law, which is to be prevented in order to secure the ends of justice. Moreover, in the facts and circumstances of the case, there seems to be no possibility/likelihood of conviction of the petitioners in the two crimes, in case proceedings emanating from crime No.SI/MISC/34/2005/Exp-PQ, dated 15-9-2005 and Crime No.SI/MISC/ 162/2005/Exp-PQ, dated 26-8-2005, which relate to an attempt to defraud the national exchequer by fraudulently claiming the inadmissible duty drawback and sales tax refund, are allowed to continue. If any case-law as needed to fortify this view, reference may be made to the following judgment of the Superior Courts:-
(1)Mian Munir Ahmed v. The State (1985 SCMR 257).
(2)State through Advocate-General, N.W.F.P. and others v. Gulzar Muhammad and others (1998 SCMR 873).
(3)Ch. Pervaiz Ellahi v. The Federation of Pakistan through Secretary, Ministry of Interior, Islamabad and 3 others (1995 MLD 615).
8. Mindful of the fact that at the time of institution of these petitions, quashment of the two FIRs was sought by the petitioners, but during its pendency on 29-11-2008, interim challans have been submitted, the relief claimed is required to be amended as per changed circumstances, we had therefore, treated these petitions as petitions for quashment of proceedings under section 561-A, Cr.P.C. and accordingly, ordered quashment of the proceedings arising out of Crime No.SI/MISC/34/2005/Exp-PQ, dated 15-9-2005 and SI/MISC/ 162/2005/Exp-PQ, dated 26-8-2005."
16.Similarly another Division Bench of this Court in an unreported case of Messrs Lucky Cement Limited v. Federation of Pakistan and others (Constitutional Petition No. D-216 of 2013) vide judgment dated 26-2-2013 has been pleased to set-aside and quash the proceedings emanating out of an FIR registered under the Customs Act 1969, before the Court of Special Judge (Customs and Taxation), Karachi, by exercising jurisdiction under Article 199 of the Constitution. The FIR iin that matter had been registered for the alleged evasion of advance income tax liable to be deducted at import stage. Though, the court came to the conclusion that the petitioner was liable to pay advance tax at import stage, however, further held that the Customs authorities had no jurisdiction to register the FIR under the Customs Act, 1969. It would be advantageous to refer to the relevant finding in the said judgment available at Paras 25 to 28, which is as under:--
25.The FIR has been registered by invoking clauses (14), (14A) and (77) of section 156(1) of the Customs Act. Now clause (14) makes a criminal offence of a violation of section 32(1) and clause (14A) makes a criminal offence of a violation of section 32A(1). Both these provisions begin with near identical words. Section 32(1) provides as follows: "If any person, in connection with any matter of customs..." and then follow the proscribed acts that are criminalized in clause (14). Section 32A(1) opens as follows: "If any person, in connection with any matter related to customs..." and again, then follow the proscribed acts that are criminalized in clause (14A). It will be seen that it is of the essence in each case that the offence should have been committed in connection with any matter of or relating to customs. In our view, this essential element is entirely, and necessarily, missing in the present case. Whatever is done in terms of section 148 is in connection with or relating to income tax, and not to customs. The jurisdiction conferred on the Collector of Customs is obviously only by way of administrative convenience. He is a creature of the Customs Act and is empowered and obligated under that statute to collect, and if necessary recover and enforce, customs duty. The 2001 Ordinance (like the 1979 Ordinance) found it expedient to empower him to a carefully limited extent in respect of collection of advance income tax. But the fact that the Collector of Customs is dealing with such collection does not make the matter of it a matter of or relating to customs. It remains and retains its character of being a matter exclusively of income tax. Since a key element, laid down at the very beginning of sections 32 and 32A is entirely (and necessarily) not applicable in relation to section 148, it follows that no offence under the former provisions could be made out for the purposes of clauses (14) and (14A) of section 156(1) of the Customs Act in respect thereof.
26. Clause (77) of section 156(1) has three sub-clauses of which only the first could conceivably apply in the present case. This provides as follows (emphasis supplied):
"If any person counterfeits, falsifies or fraudulently alters or destroys any declaration, statement or document in the transaction of any business relating to the customs or any seal, signature, initials or other mark made or impressed by any officer of customs in the transaction of any business relating to customs" [he then commits an offence].
As the portions emphasized indicate, the same reasoning applies in relation to clause (77) as just noted in relation to section 32/ clause (14) and section 32A/clause (14A). Therefore, it likewise follows that no offence under this clause could be made out in respect or for purposes of anything done in relation to section 148.--
27. It is also pertinent to note that in the FIR itself, in para No.9 where the nature of the offence has to be stated, it is noted as follows: "Attempt to evade Income Tax @ 5% amounting to Rs.44795897 through fraudulent documentation by misusing exemption". Thus, even the customs authorities themselves expressly recognize that the matter was one relating solely and exclusively to income tax and not to anything in relation to or in connection with customs. This serves to further confirm the conclusions already arrived at.
In view of the foregoing, we are of the view that the customs authorities had no jurisdiction to register the FIR under the Customs Act in relation to the petitioner's claim that it is not obligated to pay advance income tax, and in any case, that matter being entirely in relation to income tax could not be an offence under any of the three clauses of section 156(1) that have been invoked. It follows that the FIR is a nullity and completely contrary to law. It cannot be sustained and is liable to be quashed. In view of the foregoing position, it is not necessary for us to examine the matter on the merits in relation to the FIR"
17.Another Division Bench of this Court, speaking through one of us namely, Aqeel Ahmed Abbasi, J., in another unreported case of Zaheer Ahmed v. Directorate General of Intelligence and Investigation-IR and others (Constitutional Petition No 3337 of 2013) vide judgment/ order dated 11-6-2014 has been pleased to quash the FIR registered under the Sales Tax Act, 1990, by exercising jurisdiction under Article 199 of the Constitution. The relevant findings at Paras 8 and 16 of the judgment which are reproduced hereunder:--
8. Under Article 203 of the Constitution of Islamic Republic of Pakistan, 1973, High Court is responsible for the entire administration of justice, and being charged with responsibility of supervising all Courts subordinate to it, this Court is competent to take all appropriate measures for preventing mal-administration of justice and abuse of the process of law in appropriate cases. When the case is of no evidence or very registration of the case is proved to be mala fide or the case is of purely civil nature or when there is unexceptional delay in the disposal of the case causing deplorable mental, physical and financial torture to the person proceeded against, this Court is competent to take cognizance of the matter and by exercising inherent powers under section 561-A, Cr.P.C, to correct a wrong by ordering quashment of FIR and proceedings emanating there from. Powers vested in High Court under section 561-A, Cr.P.C. are co-extensive with the powers vested in trial Court under sections 249-A and 265-K, Cr.P.C, and in appropriate cases, can be invoked directly without resorting to decision by the trial Court under sections 249-A and 265-K Cr.P.C. to void abuse of process of Court.
16. In view of hereinabove facts and circumstances of this case and the candid statement of the learned counsel for the respondents as well as by the I.O. of the case, and by respectfully following the ratio of the case-law as referred to hereinabove, we are of the opinion that the impugned FIR and the proceedings emanating there from are without lawful authority, whereas, the officials of the Directorate of Intelligence and Investigation I.R. in the instant case have acted without jurisdiction and in violation of express provisions of law. Accordingly, while exercising inherent jurisdiction vested in this Court and in order to avoid abuse of the process of law, we have quashed the FIR and the proceedings pending before the Special Judge (Customs and Taxation), Karachi, since 2012 without any useful progress, vide our short order dated 11-6-2014 and these are the reasons for such short order.
18.Further reference in this regard may be made to the cases of Messrs Yasir Enterprises through Ch. Bsher Ahmed v. Federation of Pakistan through Secretary and 7 others (2013 PTD 821), Babar Younus v. The State (PTCL 2007 CL 71), Ch.Pervez Ellahi v. The Federation of Pakistan (1995 MLD 615).
19.Though the petitioner's have raised a question with regard to their availability at the given address as well as the capability of manufacturing, but since all these questions are premised on factual assertions of the petitioners which have been disputed by the respondents in their comments, hence, we are not inclined to examine such disputed facts while exercising Constitutional jurisdiction under Article 199 of the Constitution. We have only dilated upon a legal question of jurisdiction on the basis of admitted facts and the record placed before us by the petitioners, as well as the respondents. While doing so we have come to the conclusion that in the given facts and circumstances of the instant case, the impugned action of Customs authorities, whereby, an FIR has been registered by them against the petitioners, is without jurisdiction and any lawful authority. However, insofar as the jurisdiction conferred upon the Commissioner Inland Revenue is concerned, the observations hereinabove shall not prejudice or have any bearing on such authority and jurisdiction conferred upon the Commissioner Inland Revenue in the instant matter.
20.It will not be out of place to observe that the allegations as contained in the impugned FIR do not attract penal provisions of the Sales Tax Act, 1990, hence do not justify the initiation of any direct criminal proceedings against a tax payer, and would only allow the Concerned Assistant Commissioner Inland Revenue, to take cognizance of the matter after issuance of a notice for payment of the alleged short levy of Sales Tax and to provide a reasonable time for payment of the alleged short levy/payment of Sales Tax and may proceed any further only in case of failure or default thereof. The Customs Authorities have invoked section 3(b) and section 6 of the Sales Tax Act, 1990 punishable under section 33 of the Sales Tax Act, 1990. It would be advantageous to refer to penal clause 5 of section 33 of the Sales Tax Act, 1990 which provides for the offence and penalty with regard to violation of sections 3 and 6 of the Sales Tax Act, 1990 which have been invoked in the FIR, and reads as under:--
| 5. | Any person who fails to deposit the amount of tax due or any party thereof in the time or manner laid down under this Act or rules or orders made there under | Such person shall pay a penalty of ten thousand rupees or five percent of the amount of tax involved, whichever is higher: Provided that, if the amount of tax or any part thereof is paid within fifteen days from the due date, the defaulter shall pay a penalty of five hundred rupees for each day of default: Provided further that no penalty shall be imposed when any miscalculation is madefor the first time during a year:Provided further that if the amount of tax due is not paid even after the expiry of a period of sixty days of issuance of the notice for such payments by an officer of [Inland Revenue not below the rank of Assistant Commissioner Inland Revenue], the defaulter shall, further be liable, upon conviction by a Special Judge, to imprisonment for a term which may extend to three years, or with fine which may extend to amount equal to the amount of tax involved, or with both. | 3, 6, 7 and 48 |
21.From perusal of the above, it appears that any person who fails to deposit the amount of tax due or any part thereof, in the time or manner laid down under this Act or rules or orders made there under, shall be liable to pay a penalty of 10,000 rupees or 5% of the amount of tax whichever is higher, provided that the amount of tax or any part thereof is paid within 15 days from the due date, the defaulter shall pay a penalty of 5000 rupees for each day of default and further provides that no penalty shall be imposed if any miscalculation is made for the first time during the year. The aforesaid clause further provides, that if the amount of tax due is not paid even after the expiry of period of 60 days of the notice for such payment by an officer of Inland Revenue, not below the rank of Assistant Commissioner Inland Revenue, the defaulter shall further be liable upon conviction by a Special Judge, to imprisonment for a term which may extend to 3 years or with fine which may extend to the amount of tax involved or with both. The aforesaid provisions which have been invoked by the Customs Authorities in the FIR, even do not provide for registration of an FIR, directly without issuance of a notice with a grace period of 60 days by the Assistant Commissioner, Inland Revenue concerned, whereas, neither the Customs Austerities had any jurisdiction in the matter nor any notice required as aforesaid, was even issued and the FIR has been registered by invoking the aforesaid provisions without following the mandatory requirement provided itself in the aforesaid clauses of Section 33 of the Sales Tax Act, 1990. Therefore, even if we were to hold that the Customs Authorities had any jurisdiction in the matter, which they had not, no FIR could be registered under the aforesaid sections/penal clauses by the Customs Authorities until a notice for making payment and a grace period of 60 days for making payment of such alleged short payment/levy of Sales Tax was issued to the petitioners.
22.Insofaras the invoking the provisions of section 148 of the Income Tax Ordinance, 2001, are concerned, the same also appear to be misconceived in as much as, the said provision only deals with the manner and mechanism for Collection of advance tax on the goods at import stage. By implication, it does not convert the levy of Income Tax into a Customs duty merely for the fact that it is being collected at import stage. The jurisdiction conferred upon the Collector of Customs under section 148 of the Income Tax Ordinance, 2001, is only by way of convenience and as an administrative measure, and under no circumstances and by no stretch of imagination the collection of advance income tax at the import stage would convert it into a customs duty, for the recovery of which the provisions of section 32 of the Customs Act, 1969, punishable under clause (14) of section 156(1) ibid, could be invoked. Hence, the FIR in this respect is also unwarranted, without jurisdiction and any lawful authority and is liable to be quashed.
23.Before parting with this judgment, we may as a matter of record clarify that, though there are other provisions under the Sales Tax Act, 1990, which may confer jurisdiction on the officers of Customs for collection of Sales Tax at import stage in the same manner as if it was a customs duty, however none of these provisions have been referred to or argued before us by any of the learned counsel for the respondents, therefore, we have not dilated upon such authority or the jurisdiction of the Customs Authorities under such circumstances. Whereas, the facts of the instant matters are peculiar in nature, hence the findings and the observations hereinabove are in relation to the provision of S.R.O. 670(I)/2013 dated 18-7-2013 which governs the Zero rating of Sales Tax in the instant matters. The said S.R.O. was even otherwise time bound and has already expired on 30-6-2014. Nothing hereinabove shall be construed to the contrary, whereas we have left open the interpretation and the implication of the said provisions of the Sales Tax Act, 1990, to be decided in an appropriate case as and when the same are brought before this Court.
24.In view of herein above facts and circumstances of the instant case on 23-9-2014 we had allowed the aforesaid petitions in the following terms:--
"For the reasons to be recorded later on, the FIR No. 03/2014 dated 29-6-2014 and the, proceedings emanating therefrom are hereby quashed. The order dated 8-7-2014 passed by the Commissioner, Inland Revenue, Zone-II, R.T.O. Sukkur of Retrospective Cancellation of provisional certificate issued under S.R.O. No. 670/(I)/2013 dated 18-7-2013 in respect of the petitioner is hereby vacated, with directions to the concerned Commissioner to provide an opportunity of being heard to the petitioner before passing any order in this regard. However, the G.Ds. filed by the petitioner claiming the benefit of aforesaid S.R.O. before expiry date i.e. 30-6-2014 shall be processed by the Customs Department in accordance with law, whereas, the request of the petitioner for issuance of Delay and Detention Certificate shall also be examined strictly in accordance with law."
25.The above are the reasons for such short order.
MH/M-195/SindhPetitions allowed.