By: Indus Gazette
Karachi: Rift within Federal Board of Revenue (FBR) is now quite visible as the defunct body of PIRSA has demanded some core jurisdictional changes.


In a recent statement, PRISA declares that the sales tax at the import stage is purely the domain of IRS and considered it as an encroachment of Powers by Customs.


The statement further goes That, the sales tax is indirect tax which is pure domain of IRS but not of Customs. They can neither adjudicate/pass their O-In-Os in Sales Tax matters nor they can invoke sales tax provisions in their FIRs. Unfortunately, all O-in-Os and FIRs of Customs contain provisions of sales tax. It leads to revenue loss as judicial forums have given many decisions against the FBR on this ground.


It more narrates that, mentioning of word “tax” in S.32, Customs Act, 1969, does not empower Customs Authorities to assume powers under the provisions of Ss.11(2) & (3) of Sales Tax Act, 1990 and S.162(1) of Income Tax Ordinance, 2001, unless Legislature appoints them as “Officer of Inland Revenue/Commissioner of Income Tax”, who have powers under the sections to take cognizance in the matter relating to Sales Tax and Income Tax—Word “tax” inserted in Ss. 179 & 32 of the Customs Act, 1969, is only for assuming of powers on the basis of involved duty and taxes by the appropriate adjudicating authority for empowering the Officer of Customs to charge the taxpayer under the said provisions on the basis of duty and taxes, punishable under the provision of S.156(1) of Customs Act, 1969” (Honourable Customs Appellate Tribunal in Case of Messrs AHMED TRADING COMPANY reported with citation number (2022 P T D (Trib.) 484).


PRISA demands include that, unfortunately Customs’ Post Clearance Audit of Customs, Customs Intelligence, Various Collectorates of Customs and Customs Adjudication are performing our functions i.e. Functions of IRS which is not sustainable judicially. Hence, many of the cases are lost at appellate stage which cause loss to FBR.


According to statement, There are numerous instances of loss of sales tax at import stage in which judicial forums have given decisions against the FBR on the ground that Customs Authorities are mere “withholding agents of sales tax” & Customs Authorities can not adjudicate matters pertaining to sales tax at import stage. Few decisions are quoted below as reference.


It concluds as, The Honourable Customs Appellate Tribunal has also upheld the above position in numerous decisions including the case of Business Communication Karachi (2020 P T D (Trib.) 172, case of Messrs MIAN SHADI AGRICULTURAL MATERIAL (2020 P T D (Trib.) 877), case of Messrs HASSAN INTERNATIONAL (2019 P T D (Trib.) 1129.


Likewise, Honourable High Courts in numerous decisions have held that in sales tax matters, Customs can not lodge FIR. A few are quoted here in the below mentioned cases including Shahzad Ahmed 2021 P T D 2146-Karachi High Court, Muhammad Measum (2015 PTD 702), Muhammad Measum and others v. Federation of Pakistan through Secretary and others (2015 PTD 702), Babar Younus vs The State (2006 PCr.LJ 1427 = 2006 PTD 2190), Zaheer Ahmed vs Directorate General of Intelligence and Investigation-R and 4 others (2015 PTD 349), Gufran Ahmed and another v. The State (1983 PCr.LJ 620), Wang Xing vs The State through Customs Department SRDP Sost (2019 MLD 1252), Allah Bux and another vs The State (1988 PCr.LJ 2154), Taj International (Pvt.) vs The Federal Board of Revenue and others (2014 PTD 1807), M/s. Muhammad Shahzad Industries v. Federation of Pakistan and others (C.P. No.D-2755/2019.) Recommendations/Proposals.


PRISA demanded that the IRS should be given powers to adjudicate cases pertaining to Sales Tax at import stage & Customs may be barred from invoking sales tax in their O-in-Os & FIRs.the Monitoring desks of IRS needs to be established at Sea/Air/Dry Ports for monitoring of collection of sales tax at import stage by Withholding Agent i.e Pakistan Customs and The name of I&I-FBR (Custom Intelligence) should be changed to I&I-Customs as it represents only Customs.