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Criminal Liability under the Sales Tax Act, 1990 must follow the Adjudication and Determination of Tax Liability under Section 11 --- Islamabad High Court Grants Bail in Sales Tax Fraud Case

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Criminal Liability under the Sales Tax Act, 1990 must follow the Adjudication and Determination of Tax Liability under Section 11 --- Islamabad High Court Grants Bail in Sales Tax Fraud Case

Islamabad 26-12-2024: The Islamabad High Court (IHC), in a significant judgment, granted bail to Shahid Hussain Khawaja, a branch manager accused of aiding and abetting sales tax fraud amounting to Rs. 3.2 billion. Mr. Justice Babar Sattar delivered a scathing critique of the Federal Board of Revenue (FBR) and its officials for violating constitutional protections and established legal principles.

The petitioner was arrested under allegations of assisting Kineses Energy and Power Innovations (Pvt.) Limited in committing sales tax fraud. The FIR was registered under Section 2(37) of the Sales Tax Act, 1990, with potential punishment outlined in Section 33, Serial Nos. 11 and 13. The petitioner argued that no tax liability had been adjudicated under Section 11, making the arrest and detention unlawful.

Criminal liability under the Sales Tax Act, 1990 must follow the adjudication and determination of tax liability under Section 11. The Court reiterated the principles laid down in Taj International (Pvt.) LTD Vs. Federal Board of Revenue (2014 PTD 1807), upheld by the Supreme Court of Pakistan.

The Court found the FBR’s actions to be in breach of constitutional rights guaranteed under Articles 9, 14, 25, and 10A, which protect citizens’ liberty, dignity, and due process.

The Court expressed disappointment with the magistrate and trial Court for failing to apply the law correctly, accusing them of endorsing the FBR’s unconstitutional actions.

The petitioner was granted bail subject to furnishing bail bonds of Rs. 100/-. Mr. Justice Babar Sattar also directed the FBR to ensure compliance with the judgment in Taj International (Pvt.) LTD and warned against future abuse of authority.