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The Customs Authorities cannot adjudicate or recover short levies of Sales Tax or Income Tax once goods have been cleared and released --- Such Actions fall within the jurisdiction of the FBR or Tax Authorities --- Islamabad High Court, Islamabad

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Islamabad 16-01-2025: In a landmark judgment, the Islamabad High Court (IHC) quashed the seizure report, recovery notice, and Show Cause Notice (SCN) issued by the Directorate General of Intelligence and Investigation (DG I&I) to Raz Textiles. Mr. Justice Babar Sattar ruled that the actions of DG I&I and other customs authorities were unlawful and beyond their jurisdiction under the Customs Act, 1969.

The Court clarified that DG I&I’s primary role is to prevent smuggling under Sections 15, 16, and 17 of the Customs Act. The DG I&I cannot reassess or seize goods that have already been cleared under Sections 79 and 80 of the Customs Act.

The Court ruled that the seizure of Raz Textiles’ goods in Islamabad was without jurisdiction, as it was based on non-application of a 2020 valuation ruling, which was invalid for imports made in 2021. The valuation ruling is merely an estimate and cannot serve as a basis for penal action under Section 32 of the Customs Act.

Mr. Justice Babar Sattar emphasized that the Collector Customs (Adjudication) does not have the authority to confiscate goods under Section 180, read with Section 32(1), unless there has been a prior conviction by a Special Judge under Section 185 of the Customs Act.

The Court ruled that customs authorities cannot adjudicate or recover short levies of sales tax or income tax once goods have been cleared and released. Such actions fall within the jurisdiction of the Federal Board of Revenue (FBR) or tax authorities under the respective laws.

While DG I&I lacks jurisdiction to seize goods on valuation discrepancies, it can share intelligence with the FBR or relevant authorities for further investigation.

The judgment heavily relied on prior case law to delineate the jurisdictional limits of DG I&I and customs authorities, including:

M/s Meerab Enterprises Vs. Federation of Pakistan (2021 PTD 1764)
Shahzad Ahmed Corporation Vs. Federation of Pakistan (2005 PTD 23)
Sadia Jabbar Vs. Federation of Pakistan (2018 PTD 1746)
Nestle Pakistan Ltd. Vs. FBR (2023 PTD 527)

The Islamabad High Court (IHC) allowed the petition, declaring the seizure report and SCN void ab initio. The Court directed customs authorities to release the security deposit submitted by Raz Textiles and emphasized adherence to jurisdictional limits under the Customs Act.

This judgment is expected to have far-reaching implications for the enforcement of customs laws and the role of DG I&I in taxation matters. Legal experts believe it will serve as a precedent to ensure due process and prevent overreach by customs authorities.