SYED ARSHAD ALI, J. This consolidated judgement shall dispose of instant petition as well as the connected petitions as adjudication of common questions of law are involved therein. The particulars of the said petitions have been provided in Annexure 'A' to this judgement.
2. In all these petitions, the petitioners, while invoking the constitutional jurisdiction of this Court, have prayed that the impugned FIRs registered at Police Station I&P Branch, Customs House, Peshawar be declared as illegal and void ab-initio with direction to the respondents that pursuant to the impugned FIRs, their imports shall not be affected and to issue them delay detention certificate in respect of their delayed consignments.
3. Arguments heard and record of the case perused.
4. The essential grievances of all the petitioners are against the registration of the first information reports whereby they have been charged for their failure to honour their statutory obligation of providing consumption certificate in terms of Entry No.151 of the Sixth Schedule to the Sales Tax Act, 1990 and subsequent dishonouring of security instruments/cheques which they had provided at the time of releasing the imported goods against payment of taxes and duties.
5. We are conscious of the settled legal preposition that the Constitutional Court has very limited jurisdiction to interfere in any criminal investigation initiated/launched by a competent authority unless it is established that initiation of criminal proceedings is either tainted with mala-fide or the same is the result of excess or lack of jurisdiction.[1]
6. Similarly, it is trite that while criminal and civil proceedings can co-exist and proceed side by side, in cases where the subject matter of both the proceedings is so closely interrelated, so that the outcome of civil proceedings can have a material bearing on criminal proceedings, a safer course to adopt is to stay the criminal proceedings till the finalization of the civil matter.[2]
7. In order to ascertain whether the case of the petitioners falls within the exception of the rules laid down by the Apex Court in the case of Shahnaz Begum, we would like to refer to the factual as well as legal background of the case.
8. All the petitioners hail from Erstwhile Tribal Area and have also established their manufacturing unit therein. Furthermore, the import of raw material for sole consumption in the Erstwhile Federal Administered Tribal Area are immune from the levy of sales tax under the Sales Tax Act, 1990 ("the Act") as well as income tax under the Income Tax Ordinance, 2001 ("the Ordinance").
9. Prior to the 25th amendment in the Constitution, through Act No. XXXVII of 2018 dated 05.06.2018, there was a separate dispensation/mechanism for extension of laws to the erstwhile FATA. The relevant provision of the Constitution i.e. Article 247(3) for ease reference is reproduced as under: - "247 (3). No Act of [Majlis-e-Shoora (Parliament) shall apply to any Federally Administered Tribal Area or to any part thereof unless the President so directs, and no Act of [Majlis-e-Shoora (Parliament)] or a Provincial Assembly shall apply to a Provincially Administered Tribal Area, or to any part thereof unless the Governor of the Province in which the Tribal Area is situate, with the approval of the President, so directs; and in giving such a direction with respect to any law, the President or, as the case may be, the Governor, may direct that the law shall, in its application to a Tribal Area, or to a specified part thereof have effect subject to such exceptions and modifications as may be specified in the direction".
10. There remained a judicial consensus that the Income Tax as well as Sales Tax Laws were never extended to the PATA/FATA, prior to the promulgation of 25th amendment thereby omitting Article 247 from the Constitution. However, there has been a long standing dispute between the Federal Board of Revenue ("FBR") and the trade community/business community of Erstwhile Tribal area regarding the imposition of income tax as well as sales tax on the import of raw material for the manufacturing units, which were located in the erstwhile FATA. This Court in its celebrated judgment authored by his Lordship Justice Yahya Afridi, as he then was in this Court, in the case of Messrs Taj Packages Company (Pvt) Ltd.[3] has elaborately dealt with the issue of taxing the raw material/goods which were imported for the purpose of its consumption in the erstwhile FATA. The said judgment was also approved by the august Supreme Court of Pakistan in Hazrat Hussain case[4], wherein it has been unequivocally held that the business concerns/manufacturing units located in the PATA are immune from the impost of both, the income tax as well as sales taxes and that similarly, the goods or machinery, which they are importing for their home consumption are equally immune from the impost of both taxes at the import stage. However, in order to ensure that the consumption of goods do not cross the limits of non-tariff area, the importers have to provide a security in form of post-dated cheques equal to the value of leviable taxes against the imported goods.
11. After the 25th amendment in the Constitution, the trade community had demanded continuity of the said exemption from imposition of income tax and sales tax which was acceded to by the Federal Government by issuing SR0.1212 (1)/2018, dated 05.10.2018, and SRO. 1213(1)/2018, dated 05.10.20218, allowing the said exemption to the residents and domiciled of the erstwhile FATA/PATA.
The exemptions granted through the aforesaid SROs were, later, reflected through insertion of entry No. 151 in the sixth schedule of Sales Tax Act, 1990.[5] Similarly, Section 40D[6] was also inserted in the Sales Tax Act, 1990 through Tax Laws (Amendment) Act, 2020 relating to taxation of such goods which were imported for tribal area, in terms of entry No. 151, and later sold in the tariff area.
12. The aforesaid legal dispensation reflects that an industrial unit, located in the erstwhile FATA, can import raw material for its consumption within such area without payment of taxes and duties.
However, against the said leviable taxes and duties, security in shape of post-dated cheque equal to the amount of leviable sales tax is to be provided. The importer is required to provide a consumption certificate issued by the relevant Commissioner Inland Revenue/RTO and the said cheques would be returned when the said consumption certificate is produced. This does not, however, mean that the importer cannot sell the goods outside the tribal territory as evident from the clear verbiage of Section 40-D and entry No.74 of the 8th Schedule which states that in such an event the importer has to pay the applicable duty.
13. Close perusal of first provision to Entry No.151 would reveal that the goods imported for consumption at the Erstwhile Tribal area would be released against post-dated-cheques for the amount of sales tax payable under the Act and the same shall be returned to the importer after presentation of a consumption or installation certificate, as the case may be, in respect of goods imported as issued by the Commissioner Inland Revenue having jurisdiction. The Act is completely silent about the mechanism of issuance of consumption certificate. Similarly, Entry No.151 does not envisage that on failure of importer to provide consumption certificate, the instrument/post- dated-cheque would be presented for encashment.
14. The Federal Board of Revenue through Circular No.05 of 2021 has provided guidelines for issuance of a consumption certificate. The said notification is reproduced as under: - "Government of Pakistan Revenue Division Federal Board of Revenue Inland Revenue C.No.7(1)TIPU/1N2020 Islamabad,March26,202l Circular No. 05 of 2021 -- Operations (Sales Tax/Federal Excise)
Subject: Procedure for Issuance of Consumption Certificate for Import of Industrial Inputs by FATA/PATA Domiciled Industries In order to earnestly implement and enforce the tax-related incentives and benefits extended by the Parliament to residents of FATA/PATA, Circular No. 9 of 2021 dated March 1, 2021, has been issued. The Circular takes account of safe arrival of industrial inputs imported by FATA/PATA domiciled industries from the port to the intended manufacturing sites. Section 13(1) read with Serial No. 151 of Table I of Sixth Schedule to the Sales Tax Act, 1990, exempts import of "industrial inputs" to FATAJPATA-located industries "on presentation of a post-dated cheque for the amount of sales tax payable under..., and the same shall be returned to the importer after presentation of a consumption...certificate...in respect of goods imported as issued by the Commissioner Inland Revenue having jurisdiction." This particular benefit is subject to a further condition that if the goods produced from the exempted raw materials are "transferred or supplied outside the tribal areas, the tax exempted shall be paid at the applicable rate."
2. This makes CONSUMPTION CERTIFICATE issued by Commissioner Inland Revenue (CIR) the centerpiece of the tax-exempt cycle of importation of industrial inputs, production of finished goods by FATA/PATA-domiciled industries and their ultimate consumption within the FATANATA regions. It is therefore that a standardized procedure for the issuance of Consumption Certificate is being rolled out so as to ensure fair operationalization of the exemptions enshrined in the law.
3. A FATA/PATA based manufacturer/Registered Person (RP), who is also an "active taxpayer" in terms of section 2(1) of the Sales Tax Act, 1990 (hereinafter "the STA, 1990"), and intending to import raw materials for consumption at his own manufacturing site would make a written application to the CIR concerned providing therein: - i. Production capacity of the manufacturing unit, and if the same has increased over time, the month from which the enhanced production capacity was installed along with particulars of the additional manufacturing capacity; ii. Month-wise quantity of (a) raw material imported, and (b) purchased locally since July, 2020 (or l' month of the tax year); iii. Quantity of stock available from earlier imports; iv. Month-wise details of Gas and Electricity consumed since July, 2020 (or 1st month of the tax year); v. Month-wise particulars of goods produced; vi. Month-wise details of post-dated cheques (PDCs) deposited with Customs authorities, if any; vii. List of buyers of the goods produced; viii. Bank statement for the relevant periods; ix. Electricity & Gas bills for the relevant period; & x. Month-wise proof of Federal Excise paid -- only in case of goods covered under the Federal Excise Act, 2005.
3. The CIR would ensure that particulars supplied by the RP are verified before the issuance of Consumption Certificate. In case any data are not verified, the RP would be given an opportunity to complete the application, provide the required information, and make up the deficiency. The Consumption Certificate issued will be directly mailed to the Collector Customs concerned with a copy thereof being duly marked to Member (IR Operations) and Member (Customs Operations), and under no circumstances will be handed over to the taxpayer. If the CIR decides to reject the application for a Consumption Certificate, the previous PDCs deposited would be encashed"
15. This Court is not convinced from the assertions of the respondents that the failure on part of the petitioners to provide a consumption certificate, will lead to a presumption that the petitioners have evaded the relevant taxes and duties under the Act and the Ordinance. The Act has provided a wholesome procedure for scrutiny, audit and adjudication of the liability of the sales tax payable by a registered person. Since, all the petitioners are persons registered under the Act, therefore, they are required to maintain record as provided under Section 22[7] of the Act and are required to file their returns under Self-Assessment Scheme provided under Section 26[8] of the Act. The respondents have the authority to access the said record and conduct the audit of the petitioners under Section 25[9] of the Act. Similarly, the Board may also select person or class of persons for audit of tax affairs through computer ballot which may be random or parametric as the Board may deem fit in terms of Section 72B[10] of the Act. Any discrepancies relating to the short levy of the sales tax can be assessed under Section 11[11] of the Act through a proper assessment order against the taxpayer thereby adjudicating the actual tax liability along with the penalties as provided under Section 33 and default surcharge under Section 34 of the Act. Thus, a taxpayer cannot be termed as defaulter unless tax due is first assessed and determined under the provisions of the Act. Similarly, under Section 25(5) of the Act during and after the audit proceedings, the taxpayer has the option to deposit the tax along with default surcharge and penalties to avoid further proceedings.
16. Under Section 37A[12] of the Act, prosecution can be launched against the taxpayer by the competent authority who, on the basis of material evidence, has reasons to believe that the taxpayer has committed a tax fraud or any offence warranting prosecution under the Act. The phrase "tax fraud" is defined under Section 2(37)[13] of the Act which means that the registered person is with dishonest intention falsify sales tax invoices to avoid payment of duties and taxes to makes a false claim of refund.
17. The impugned FIRs were registered against the petitioners on the request of Commissioner Inland Revenue through letter dated 28.01.2022 wherein the Collector Custom was informed that since the petitioners have failed to cooperate while determining their liability relating to issuance of consumption certificate, therefore, security document be encashed. It is reiterated at the of cost of repetition that Entry 151 of the Sixth Schedule to the Act only envisages that the security instruments/cheques are returnable to the importer under the Concessionary regime once the consumption certificate has been provided under Entry No.151 ibid. Thus, it means that so far the importer under concessionary regime stated above does not provide consumption certificate, the respondent department should be at liberty to retain security instrument i.e. post-dated-cheque.
The said security instrument should be enforceable only when the liability of the petitioners, if any, is determined under Section 11 of the Act. Before the determination of the said liability, in view of the dispensation stated above, the respondents have illegally and without lawful authority presented the said cheques, which were provided by the petitioners in terms of Entry No.151 for presentation to the bank, therefore, the launching of criminal prosecution on the basis of dishonouring the said cheques is obviously pre-mature and without lawful authority. Besides, the respondents have acted in excess of their authority, therefore, the registration of impugned FIRs, on the basis of letter dated 28.01.2022, is not sustainable in the eyes of law. It would be important to note that in a good number of cases, the said letters/refusal to provide consumption certificates have been annulled by the Appellate Tribunal Inland Revenue vide order dated 10.03.2022.
18. In the case of Taj Packages Company (Pvt) Ltd,[14] the Lahore High Court, Mr. Justice Syed Mansoor Ali Shah, while dealing with somewhat similar cases, relating to the quashment of FIR, has made certain observations regarding the launching of criminal investigation when prima-facie the matter relates to adjudication of tax liability. The relevant paragraphs of the judgement are reproduced as under: - "22. Collective reading of sections 11, 25(5), 33, 37A and 72B of the Act indicates that the criminalization under the Act is principally to effectuate recovery or is being largely used to effectuate recovery. Two clear pointers are: dependence of fine on the "amount or loss of tax involved." and the window of compoundability available to the taxpayer who can pay the "amount of tax due along with such default surcharge and penalty as determined under the provisions of this Act." If the purpose was simple retribution and deterrence, there was no need to load the fine with the amount or loss of tax involved. However, if the fine under criminal prosecution is to be loaded with the amount or loss of tax, such a criminal construct must be prefaced with the mandatory requirement of assessm ent of tax through civil adjudication provided under section 11 of the Act. This precondition is the minimum constitutional requirement to ensure fair trial and due process under Articles 4 and 10-A of the Constitution.
23. It has been vehemently stated at the bar, by almost all the petitioners, that the department forcibly hauls up taxpayers under the threat of arrest and criminal prosecution and releases them after extraction of money (shown as the amount of tax due under section 37A). In the absence of tax assessm ent under section 11 of the Act and without knowing the "amount or loss of tax involved," neither compoundability is possible nor the award of sentence against the tax payer. Hence the process of hauling up taxpayers and effecting recovery of self-determined amount of sales tax by the officer of the Inland Revenue is brutally unconstitutional.
26. Even if the criminal prosecution under the present scheme of the Act is initiated after assessm ent of tax under section 11 as discussed above, the constitutionality of hurriedly invoking section 37A on the basis of material evidence requires consideration. Material evidence must be credible and definite if it is to deprive a citizen of his constitutional protection and safeguards under Articles 4 (due process), 9 (human liberty), 10A (fair trial) and 14 (human dignity). Setting in motion of the criminal prosecution cannot be left in the hands of any officer of the Inland Revenue, especially when the said Officers are under an obligation to recover the tax and meet tax targets before the close of the financial year set by the FBR. The process of initiation of criminal prosecution must comply with the requirement of due process and fair trial. The material evidence collected under section 37A needs to be credible and can best pass the test of fair trial and due process if it is an outcome of an inquiry or investigation envisaged under the proviso to section 25(2) of the Act.
The outcome of any such inquiry and investigation must be placed before an independent forum like the Directorate General (Intelligence and Investigation), Inland Revenue established under section 30A of the Act to first review the inquiry and investigation and the material evidence and then proceed under the law. Anything short of this process will not only lead to persecution of the tax payers, it will also make a mockery of the fundamental right of fair trial.
28. In view of the above, we hold that the pre-trial steps including arrest and detention cannot be given effect to unless the tax liability of the taxpayer is determined in accordance with section 11 of the Act. In this background, criminal proceedings initiated against the petitioners, and documented as the First Information Report in this case and cases mentioned in Schedule-A is quashed as being unconstitutional, violative of fundamental rights, ultra vires the Act and hence illegal and without lawful authority. For the above reasons all these petitions are allowed. In the light of the above discussion, we see no need to answer the question regarding the jurisdiction or competence of the officer who initiated the criminal proceedings in these cases."
19. Rahmat Hussain Jafferi J, as he then was, speaking for the Court in the case of Ghulam Sarwar Zardari,[15] while distinguishing the law laid down by the Apex Court in the case of Shahnaz Begum supra, has observed that there has been consensus of Supreme Court since 1971 onwards that the High Court has jurisdiction under Article 199 of the Constitution and is competent to correct such proceedings and pass necessary orders to ensure justice fair play. The authorities conducting the investigation have no right to run the investigation as per their whims, therefore, if the investigation is launched mala-fide or is beyond the jurisdiction of investigation agency, then the same can be corrected and appropriate orders can be passed.
20. The perusal of record and the law laid down by the Apex Court in the cases of Ghulam Sarwar Zardari and Taj International (Pvt) Ltd , we are convinced that this is an appropriate case for interference by the High Court, while exercising jurisdiction under Article 199 of the Constitution, as prima-facie the respondents have exceeded their authority by registering the impugned FIR and unless the liability of the petitioners relating to the payment of sales tax and income tax is determined under the concessionary regime stated above, the registration of FIR against all the petitioners was beyond the authority of respondents. Hence, as a corollary thereof, the impugned FIRs are directed to be quashed, however, the respondents would be at liberty to conduct audit of the petitioners in terms of Section 25 of the Act read with enabling provisions of the Ordinance and if any discrepancy is pointed out relating to the sale of goods in the tariff area, the matter may be adjudicated against the petitioners under Section 11 of the Act and relevant provisions of the Ordinance.
Annexure "A"
I. W.P No.1451-P/2022 (Muhammad Omer Vs. the Federation through Additional Attorney General, Peshawar & others).
II. W.P No.1468-P/2022 (M/S AK Tariq Foundary, District Khyber & others Vs. Commissioner Inland Revenue, RTO, Peshawar & others).
III. W.P No.2074-P/2022 (M/S Ihtesham Steel Mills (Pvt) Ltd Malakand House, Tehsil Dargai, Malakand through its authorized representative Mr. Asad Mehmood Vs. The State & others).
IV. W.P No.2533-P/2022 (M/S Universal Steel Mills, Tehsil Ghalani, District Mohmand through Authorized Representative, Mr. Haroon ur Rasheed Vs. Collector of Customs, MCC, Custom House, Peshawar & others).
V. W.P No.2795-P/2022 (M/S Sher Muhammad Customs Clearing Agency, Peshawar through its owner/proprietor Mr. Sher Muhammad Vs. Collector of Customs, MCC, Custom House, Peshawar & others).
VI. W.P No.2882-P/2022 (M/S M.R Steel Mills, District Khyber through its owner/proprietor Mr. Haji Rehmat Shah Vs. Collector of Customs, MCC, Custom House, Peshawar & others).
VII. W.P No.2990-P/2022 (Shah's Enterprises (Import & Export Custom Agency), Peshawar through its owner/proprietor Mr. Syed Farooq Shah Vs. Collector of Customs, MCC, Custom House, Peshawar & others).
VIII. W.P No.3301-P/2022 (M/S Mansha Steel Mills Manzari Baba, Tehsil Dargai Malakand, Swat through attorney Naveedullah Vs. Collector of Customs, MCC, Custom House, Peshawar & others).
IX. W.P No.4077-P/2022 (M/S Punjab Steel Works Tehsil Dargai Malakand, Swat through its attorney Mr. Muhammad Irtiza Adeel Vs. Collector of Customs, MCC, Custom House, Peshawar & others).
1. Shahnaz Begum Vs. Hon'ble Judge of the High Court of Sindh and Baluchistan (PLD 1971 SC 677), Anwar Ahmad Khan Vs. The State (1996 SCMR 24), Raja Rustam Ali Khan Vs. Muhammad Hanif (1997 SMCR 2008) and Choudhary Shah Muhammad, Inspector Vs. Mst. Ramzan Bibi (1998 SCMR 2415).
2. Akhlaq Hussain Kayani Vs. Zafar Iqbal Kiyani and others (2010 SCMR 1835), Muhammad Akbar Vs. State (PLD 1968 SC 281).
3. Messrs Taj Packages Company (Pvt) Ltd through Manager vs. The Government of Pakistan through Federal Secretary Finance and Revenue Division and 6 other (2016 PTD 203)
4. Pakistan through Chairman, FBR and others Vs. Hazrat Hussain (2018 SCMR 939)
[5]"151. (a) Supplies; and
(b) imports of plant, machinery, equipment for installation in tribal areas and of industrial inputs by the industries located in the tribal areas, as defined in the Constitution of Islamic Republic of Pakistan, as may till 30th June, 2023, to which the provisions of the Act or the notifications issued thereunder, would have not applied had Article 247 of the Constitution not been omitted under the Constitution (Twenty-fifth Amendment) Act, 2018 (XXXVII of 2018): Provided that, in case of imports, the same shall be allowed clearance by the Customs authorities on presentation of a post-dated cheque for the amount of sales tax payable under the Sales Tax Act, 1990, and the same shall be returned to the importer after presentation of a consumption or installation certificate, as the case may be, in respect of goods imported as issued by the Commissioner Inland Revenue having jurisdiction: Provided further that if plant, machinery and equipment, on which exemption is availed under this serial number, is transferred or supplied outside the tribal areas, the tax exempted shall be paid at applicable rate on residual value."
[6]"40D Provisions relating to goods supplied from tax. exempt areas.- (1) The conveyances carrying goods supplied from the tax-exempt areas, shall be accompanied by such documents in respect of the goods carried as may be prescribed under rules.
(2) The Regional Tax Office having jurisdiction may establish check-posts on the routes originating from tax exempt areas for the purpose of examining the goods carried and the documents related thereto. An officer not below the rank of Inspector, Inland Revenue, as authorized by the Commissioner, Inland Revenue, and assigned to such check posts, may stop vehicles on such routes as coming from tax exempt areas and examine documents for ascertaining their validity and conformity to the goods carried.
(3) In the absence of the prescribed documents or any discrepancy in such documents, the goods so carried shall be seized along with the vehicle carrying the goods by the officer as aforesaid under proper acknowledgment.
(4) The notices to the owner of the goods and the vehicle to show cause against imposition of penalty shall be issued within fifteen days of the seizure as aforesaid.
(5) For the purposes of this section, the expression "tax exempt areas" means Azad Jammu and Kashmir, Gilgit Baltistan, Tribal Areas as defined in Article 246 of the Constitution of the Islamic Republic of Pakistan and such other areas as way be prescribed."; Entry No.74 of the 8th Schedule S.No.DescriptionHeading Nos. of the First Schedule to the Customs Act, 1969 (IV of 1969)Rate of Sales TaxCondition 5[74Goods supplied from tax-exempt areas of erstwhile FATA/PATA to the taxable areasRespective headings 16% ] [7]22. Records.-- (1) A registered person making taxable supplies shall maintain and keep at his business premises or registered office in English or Urdu language the following records of goods purchased, imported and supplied (including zero-rated and exempt supplies) made by him or by his agent acting on his behalf in such form and manner as would permit ready ascertainment of his tax liability during a tax period
(a) records of supplies made shall indicate the description, quantity and value of goods, name and address of the person to whom supplies were made and the amount of the tax charged;
(b) records of goods purchased shall show the description, quantity and value of goods, name, address and registration number ofthe supplier and the amount of the tax on purchases;
(c) records of goods imported shall show the description, quantity and value of goods and the amount of tax paid on imports;]
(d) records of zero-rated and exempt supplies;
(da) double entry sales tax accounts;]
(e) invoices, credit notes, debit notes, bank statements, banking instruments in terms of section 73, inventory records, utility bills, salary and labour bills, cash book, rental agreements, sale purchase agreements and lease agreements;
(ea) Record relating to Gate passes, inward or outward and transport receipts;
(eb) Electronic version of records mentioned in clauses (a) to (ea) of this sub-section.
(f) such other records as may be specified by the Board: Provided that the persons paying retail tax shall keep such record as may be specified by the Board.
(1A) Notwithstanding anything in any other law for the time being in force, the Board may require, by notification in the official Gazette, a registered person or class of registered persons to declare and use only as many number of business bank accounts as may be specified by the Board in such notification to make or receive payments on account of purchase and sale transactions for the purpose of this Act or rules made thereunder and to make payment of due tax from such accounts only.
(2) The Board may, by notification in the official Gazette, specify for any class of taxable persons or any other person registered under this Act to keep such other records for the purposes of this Act.
(2A) The Board may, by notification in the Official Gazette, specify for any class of taxable persons registered under this Act to use such electronic fiscal cash registers as are approved by the Board in the manner as may be prescribed.
(3) The Board may, by notification in the official gazette, prescribe the procedure or software for electronically maintenance of records, filing of sales tax returns or refunds and for any other matter or approve any software for electronic maintenance of records and filing of returns or refunds by a person or class of such persons.
(4) The registered persons, whose accounts are subject to audit under the Companies Ordinance, 1984 (XLVII of 1984), shall be required to submit a copy of the annual audited accounts, along with a certificate by the auditors certifying the payment of due tax by the registered person.
[8]26. Return.-- (1) Every registered person shall furnish not later than the due date a true, complete and correct return in the prescribed form to a designated bank or any other office specified by the Board, indicating the purchases and the supplies made during a tax period, the tax due and paid and such other information, as may be prescribed.
Provided that the Board may, by notification in the official Gazette, require any person or class of persons to submit return on quarterly basis: Provided further that the Board may, by notification in the official Gazette, require any person or class of persons to submit such return as may be prescribed annually in addition to the monthly return or quarterly return: Provided also that the return filed electronically on the web or any magnetic media or any other computer readable media as may be specified by the Board shall also be deemed to be a return for the purpose of subsection (1) and the Board may, by notification in the official Gazette, make rules for determining eligibility of the data of such returns and e-intermediaries who will digitize the data of such returns and transmit the same electronically under their digital signatures.
(3) A registered person may, subject to approval of the Commissioner Inland Revenue having jurisdiction, file a revised return within one hundred and twenty days of the filing of return under subsection (1) or, as the case may be, sub-section (2), or under clause (a) or clause (b) of section 27, to correct any omission or wrong declaration made therein Provided that the approval under this sub-section shall not be required if revised return is filed within sixty days of filing of return and either the tax payable therein is more than the amount paid or the refund claimed therein is less than the amount as claimed, under the return sought to be revised.
(4) Notwithstanding the penalties prescribed in section 33, if a registered person wishes to file revised return voluntarily along with deposit of the amount of tax short paid or amount of tax evaded along with default surcharge, whenever it comes to his notice, before receipt of notice of audit, no penalty shall be recovered from him: Provided that in case the registered person wishes to deposit the amount of tax as pointed out by the officer of Inland Revenue during the audit, or at any time before issuance of the show cause notice, he may deposit the evaded amount of tax, default surcharge under section (34), and twenty five percent of the penalty payable under section 33 along with the revised return: Provided further that in case the registered person wishes to deposit the amount after issuance of show cause notice, he shall deposit the evaded amount of sales tax, default surcharge under section 34, and full amount of leviable penalty under section 33 along with the revised return and thereafter, the show cause notice, shall stands abated.
(5) The Board may, by notification in the official Gazette, require any person or class of persons, for any goods of such description or class, to furnish such summary or details or particulars pertaining to the imports, purchases and supplies during any tax period or periods, in such format as may be specified.
[9]25. Access to record, documents, etc.-- (1) A person who is required to maintain any record or documents under this Act or any other law shall, as and when required by 5 Commissioner, produce record or documents which are in his possession or control or in the possession or control of his agent; and where such record or documents have been kept on electronic data, he shall allow access to the officer of Inland Revenue authorized by the Commissioner and use of any machine on which such data is kept.
(2) The officer of Inland Revenue authorized by the Commissioner, on the basis of the record, obtained under sub-section (1), may, once in a year, conduct audit: Provided that in case the Commissioner has information or sufficient evidence showing that such registered person is involved in tax fraud or evasion of tax, he may authorize an officer of Inland Revenue, not below the rank of Assistant Commissioner, to conduct an inquiry or investigation under Section 38: Provided further that nothing in this Sub-Section shall bar the officer of Inland Revenue from conducting audit of the records of the registered person if the same were earlier audited by the office of the Auditor-General of Pakistan.
(2A) For the purpose of sub-section (2) of section 25, the Commissioner may conduct audit proceedings electronically through video links, or any other facility as prescribed by the Board.
(3) After completion of Audit under this section or any other provision of this Act, the officer of Inland Revenue may, after obtaining the registered person's explanation on all the issues raised in the audit shall pass an order under section 11.
(4A) After completion of the audit under this section or any other provision of law, the officer of Inland Revenue may, if considered necessary, after obtaining the registered person's explanation on all the issues raised in the audit shall pass an order under section 11 or section 36, as the case may be, imposing the correct amount of tax, charging default surcharge, imposing penalty and recovery of any amount erroneously refunded.
(5) Notwithstanding the penalties prescribed in section 33, if a registered person wishes to deposit the amount of tax short paid or amount of tax evaded along with default surcharge voluntarily, whenever it comes to his notice, before receipt of notice of audit, no penalty shall be recovered from him: Provided if a registered person wishes to deposit the amount of tax short paid or amount of tax evaded along with default surcharge during the audit, or at any time before issuance of show cause notice he may deposit the evaded amount of tax, default surcharge under section 34, and twenty five per cent of the penalty payable under section 33: Provided further that if a registered person wishes to deposit the amount of tax short paid or amount of tax evaded along with default surcharge after issuance of show cause notice, he shall deposit the evaded amount of tax, default surcharge under section 34, and full amount of the penalty payable under section 33 and thereafter, the show cause notice, shall stand abated.
Explanation.-- For the purpose of sections 25, 38, 38A, 38B and 45A and for removal of doubt, it is declared that the powers of the Board, Commissioner or officer of Inland Revenue under these sections are independent of the powers of the Board under section 72B and nothing contained in section 72B restricts the powers of the Board, Commissioner or Officer of Inland revenue to have access to premises, stocks, accounts, records, etc. under these sections or to conduct audit under these sections.
[10]72B. Selection of audit by the Board.-- (1) The Board may select persons or classes of persons for audit of tax affairs through computer ballot which may be random or parametric as the Board may deem fit.
(1A) Notwithstanding anything contained in this Act or any other law, for the time being in force, the Board shall keep the selection parameters confidential.
(2) Audit of tax affairs of persons selected under sub-section (1) shall be conducted as per procedure given in section 25 and all the provisions of this Act shall apply accordingly.
(3) For the removal of doubt, it is hereby declared that the Board shall be deemed always to have had, the power to select any persons or classes of persons for audit of tax affairs under this section.
[11]11. Assessm ent of Tax & Recovery of Tax not levied or short levied or erroneously refunded.-- (1)
Where a person who is required to file a tax return fails to file the return for a tax period by the due date or pays an amount which, for some miscalculation is less than the amount of tax actually payable, an officer of Inland Revenue shall, after a notice to show cause to such person, make an order for assessm ent of tax, including imposition of penalty and default surcharge in accordance with Section 33 and 34: Provided that where a person required to file a tax return files the return after the due date and pays the amount of tax payable in accordance with the tax return along with default surcharge and penalty, the notice to show cause and the order of assessment shall abate.
(2) Where a person has not paid the tax due on supplies made by him or has made short payment or has claimed input tax credit or refund which is not admissible under this Act for reasons other than those specified in sub-section (1), an officer of Inland Revenue shall after a notice to show cause to such person, make an order for assessment of tax actually payable by that person or determine the amount of tax credit or tax refund which he has unlawfully claimed and shall impose a penalty and charge default surcharge in accordance with sections 33 and 34.
(3) Where by reason of some collusion or deliberate Act any tax or charge has not been levied or made or has been short levied or has been erroneously refunded, the person liable to pay any amount of tax or charge or the amount of fund erroneously made shall be served with the notice requiring him to show cause for payment of the amount specified in the notice.
(4) Where, by reason of any inadvertence, error or misconstruction any tax or charge has not been levied or made or has been short-levied or has been erroneously refunded, the person liable to the amount of tax or charge or the amount of refund erroneously made shall be served with a notice requiring him to show cause for payment of the amount specified in the notice: Provided that, where a tax or charge has not been levied under this sub section the amount of tax shall be recovered as tax fraction of the value of supply.
(4A) Where any person, required to withhold sales tax under the provisions of this Act or the rules made thereunder, fails to withhold the tax or withholds the same but fails to deposit the same in the prescribed manner, an officer of Inland Revenue shall after a notice to such person to show cause, determine the amount in default.
(5) No order under this section shall be made by an officer of Inland Revenue unless a notice to show cause is given within five years, of the end of the financial year in which the relevant date falls, to the person in default specifying the grounds on which it is intended to proceed against him and the officer of Sales Tax shall take into consideration the representation made by such person and provide him with an opportunity of being heard: Provided that order under this section shall be made within one hundred and twenty days of issuance of show cause notice or within such extended period as the Commissioner may, for reasons to be recorded in writing, fix provided that such extended period shall in no case exceed ninety days: Provided further that any period during which the proceedings are adjourned on account of a stay order or Alternative Dispute Resolution proceedings or the time taken through adjournment by the petitioner not exceeding sixty days shall be excluded from the computation of the period specified in the first proviso.
(6) Notwithstanding anything in sub-section (1), where a registered person fails to file a return, an officer of Inland Revenue, not below the rank of Assistant Commissioner, shall subject to such conditions as specified by the Federal Board of Revenue, determine the minimum tax liability of the registered person.
(7) For the purpose of this section, the expression "relevant date" means--
(a) the time of payment of tax or charge as provided under section 6; and
(b) in a case where tax or charge has been erroneously refunded, the date of its refund.
[12]37A. Power to arrest and prosecute.-- (1) An officer of Inland Revenue not below the rank of an Assistant Commissioner of Inland Revenue or any other officer of equal rank authorised by the Board in this behalf, who on the basis of material evidence has reason to believe that any person has committed a tax fraud or any offence warranting prosecution under this Act, may cause arrest of such person.
(2) All arrests made under this Act shall be carried out in accordance with the relevant provisions of the Code of Criminal Procedure, 1898 (Act V of 1898).
(4) Notwithstanding anything contained in sub-section (1) to subsection (3) or any other provision of this Act, where any person has committed a tax fraud or any offence warranting prosecution under this Act, the Commissioner may, either before or after the institution of any proceedings for recovery of tax, compound the offence if such person pays the amount of tax due along with such default surcharge and penalty as is determined under the provisions of this Act.
(5) Where the person suspected of tax fraud or any offence warranting prosecution under this Act is a company, every director or officer of that company whom the authorized officer has reason to believe is personally responsible for actions of the company contributing the tax fraud or any offence warranting prosecution under this Act] shall be liable to arrest; provided that any arrest under this sub-section shall not absolve the company from the liabilities of payment of tax, default surcharge and penalty imposed under this Act.
[13]2(37) "tax fraud" means knowingly, dishonestly or fraudulently and without any lawful excuse (burden of proof of which excuse shall be upon the accused) --
(i) doing of any act or causing to do any act; or
(ii) omitting to take any action or causing the omission to take any action, including the making of taxable supplies without getting registration under this Act or
(iii) falsifying or causing falsification 5 of the sales tax invoices, in contravention of duties or obligations imposed under this Act or rules or instructions issued thereunder with the intention of understating the tax liability 6 or underpaying the tax liability for two consecutive tax periods or overstating the entitlement to tax credit or tax refund to cause loss of tax;
14. Taj Packages Company (Pvt) Ltd and others Vs. Federal Board of Revenue and others (2014 PTD 1807)
15. Ghulam Sarwar Zardari Vs. Piyar Ali alias Piraro and another (2010 SCMR 624)