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Official Citation: 2026 SHC 1190
Court / Jurisdiction: Sindh High Court
Petitioner: Const. P. 1088/2026 (D.B.) Sindh High Court, Karachi - M/s. Pioneer Tobacco & Trading Company (Petitioner)
Ruling Summary: This decision was rendered by the Sindh High Court, officially reported as 2026 SHC 1190. In this matter between Const. P. 1088/2026 (D.B.) Sindh High Court, Karachi - M/s. Pioneer Tobacco & Trading Company (Petitioner) and the Respondent, the court adjudicated key questions of statutory construction, procedural regularity, and legal precedent under Pakistani law.
Core Holding: The honorable bench evaluated governing statutory provisions and judicial authorities to establish the rights of the parties, delivering the binding reasoning set out below.
COURT: Sindh High Court CASE NO: Const. P. 1088/2026 (D.B.) Sindh High Court, Karachi CITATION: 2026 SHC KHI 1190 PARTIES: M/s. Pioneer Tobacco & Trading Company (Petitioner) ORDER DATE: 01-JUN-26 BENCH: Hon'ble Mr. Justice Muhammad Saleem Jessar, Hon'ble Mr. Justice Nisar Ahmed Bhanbhro(Author) A.F.R: Yes ------------------------------------------------------------ IN THE HIGH COURT OF SINDH, KARACHI
Present: Mr. Justice Muhammad Saleem Jessar Mr. Justice Nisar Ahmed Bhanbhro
Const. Petition No. D-1088 of 2026 (M/S Pioneer Tobacoo v. Federation of Pakistan and others)
Petitioner : Through Mr.Ahmed Maqsood Advocate Respondents No 1 to 3 : Through Ms. Shazia Ahmed Hanjrah Deputy Attorney General for Pakistan
Respondent No 9 : Mr. Altamish Arab Advocate Respondents No 10 & 11
Mr. Khurram Rashid Advocate Respondents No 4 to 8
: Mr. Khalid Rajper Date of hearing & short Order
: 12.05.2026 Date of Reasons : 01 .06.2026
JUDGMENT
NISAR AHMED BHANBHRO, J:- Through this petition, the petitioner has claimed the following relief(s): i. Declare that the Impugned Warrant dated 18.02.2026 is illegal and void; ii. Declare that the Impugned Notice, raid and seizure dated 18.02.206 is illegal and void; iii. Declare that the Respondents No 5,7 & 8 acted illegally and with material irregularity while executing Impugned Warrant & Impugned Notice Dated 18.02.2026. iv. Declare that the Respondent No 5 does not have the jurisdiction to conduct raid within the EPEZ and that the Respondent No 7 does not have jurisdiction to search on premises within the EPEZ or seize goods in presence of valid bill of lading. v. Direct the Respondents to return the goods seized from the subject site.
vi. Restrain the Respondents and any all other persons acting through or under them from taking any coercive action against the Petitioner in lieu of the Impugned Warrant and Impugned Notice dated 18.02.2026. vii. Grant any other relief that this Court may deem fit and proper.
2. Initially Petitioner had filed instant petition by arraying officials of Inland Revenue and Customs Authority of Federal Board of Revenue (FBR) as party, however, during proceedings Pakistan Toba cco Company Ltd, Philip Morris Brands Sarl and Philips Morris Pakistan Limited filed applications being CMA No 7032/2026 and CMA No 5608/2026 under Order I Rule 10 C.P.C. seeking impleadment as party to the petition. Both the applications were allowed by c onsent vide order dated 16.04.2026. Accordingly all three business entities were added as respondents No 9 to 11 in the petition.
3. Learned counsel for the petitioner contended that Petitioner Company is partnership concern engaged in the business of whole sale and retail trade, registered under the laws and carrying business since year 2018. He contended that Petitioner obtained license to operate within Karachi Export Processing Zone (KPEZ) in year 2015 to conduct its business in the said premises. He con tended that in year 2023 and 2024 Export Processing Zone Authority (EPZA) granted permission to Petitioner to carry out additional industrial activity including manufacturing and trade of Cigarette, Tobacco and Tipping Paper. He contended that on 18.02.202 6 officials of Inland Revenue Conducted raid on the premises in KPEZ. During raid imported goods were seized without any lawful authority. He contended that search warrant was obtained under the garb of sales tax fraud on the ground that Petitioner Company was not registered under STA. He further contended that Respondents raided the premises of Petitioner in KEPZ under the garb of warrant dated 18.02.2026 issued under section 40 of the Sales Tax Act, 1990 (STA), conducted search of the premises and seized articles under section 163 of the Customs Act, 1969 (TCA). He contended that search and seizure was done without issuing any notice under section 26 and in absence of any proceedings under section 37 and 38 of STA. He contended that KEPZ was established u nder the provisions of Export Processing Zones Authority Ordinance, 1980 (the
Ordinance) and was declared a bonded area and treated separate from the tariff area. He contended that by exercising powers conferred under section 25 of the Ordinance, the Feder al Government vide S.R.O No 881 dated 23.08.1980 exempted KPEZ from customs duties and sales tax imported or exported from the zone. He contended that neither any recovery memo was prepared nor inventory prepared, and raid was conducted with ulterior moti ves at the instance of other competing companies to stop Petitioner Company’s sharp growth in business. He contended that all the proceedings were conducted in violation of laws and principles of natural justice, were arbitrary and discriminatory, thus off ended the fundamental rights of the Petitioner guaranteed under article 4, 9, 10 -A, 18 and 25 of the Constitution of Islamic Republic of Pakistan, of 1973 (the Constitution). He relied upon unreported judgment of this Court in the case of The Commissioner Inland Revenue, Legal Zone (MTO) Vs. Team A -Ventures (Pvt) Ltd. (H.C.A No 11 of 2022), unreported judgment in the case of H.M. Motors V. Federation of Pakistan and others (CPD No 4910 of 2025), Mohammad Hassan Nadeem V. Model Customs Collectorate (Enforcem ent and Compliance) through Collector and 4 others (2021 PTD 764), Collector of Customs through Additional Collector of Customs V Messrs Forte Impex (2002 PTD 245), Collector of Customs, Model Customs Collectorate, Peshawar V Noor Sher Ali (2021 PTD 822), Messrs Popular Juice Industries (Pvt.) Ltd. Through Authorized Officer and 6 others V. Federation of Pakistan through Chairman Federal Board of Revenue and 3 others (2021 PTD 1329), Messrs Kamran Industries V. The Collector of Customs (Exports) 11 th Floor, Customs House, Karachi and 4 others (PLD 1996 Karachi 68). He lastly prayed that petition may be allowed as prayed.
4. Learned Counsel for Respondent No 3 to 8 contended that Petitioner Company registered itself under the Income Tax Ordinance, 2001 (ITO ) as Retailer in the jurisdiction of RTO - II Karachi. He contended that perusal of Returns of Income filed by Petitioner Company for tax year 2025 appeared to be suspicious, therefore, FBR initiated inquiry in its business activities. He contended that up on receipt of credible information that Petitioner Company was engaged in unlawful manufacture of tobacco products / cigarettes and supplies to Tariff Area which were taxable under Federal Excise Act, 2005 (FEA). He contended that in order to ascertain the factual position FBR obtained search warrant from Learned Judicial Magistrate Malir on 18.02.2026. He
further contended that during search substantial quantity of imported cigarette brands and Sheesha/Hookah flavour were found stored in the premises, howe ver no operational manufacturing facility, machinery or other evidence of of any manufacturing activity or international undertaking was found. He contended that since activity involved imported items therefore concerned customs authority was taken on board. He contended that action was taken by Tax Authority and Custom Authority in accordance with law. He contended that the Petition was not maintainable as it contained disputed questions of law and fact, which required evidence. He contended that Petition er stored huge quantity of tobacco items without import documents, thus seized articles were liable to confiscation. He therefore prayed to dismiss the petition.
5. Learned Counsel for the Respondent No 9 contended that pursuant to search and seizure sample s of cigarettes and Hookahs were taken and sent by Customs Authority to Respondent No 9 for the forensic analysis. He contended that analysis of samples revealed that the branded items did not belong to Respondent No 9 (Pakistan Tobacco Company). He conten ded that Petitioner used the labels of Respondent No 9 and sold cigarette in the market. He contended that Customs Authority rightly seized the articles which were liable to confiscation. He prayed to dismiss the petition.
6. Learned Counsel for the Responde nts No 10 and 11 contended that Petitioner Company though imported the seized items under a valid invoice but the seized items were near to expiry and Petitioner Company was selling poison, therefore, instead of returning the articles to Petitioner Company the same may be ordered to be destroyed. He prayed to dismiss the Petition
7. Learned Deputy Attorney General for Pakistan contended that Petitioner Company was involved into evasion of sales tax and illicit trade activities and FBR while conform ing to provisions of CTA, TCA and ITO conducted raid over the premises after obtaining permission from concerned Magistrate. She contended that there is no illegality in the proceedings, therefore, no case for indulgence of this Court at this stage is
made out. While further relying upon the arguments of Learned Counsel for Respondents No 3 to 8, she prayed to dismiss the petition.
8. Heard arguments of the parties and perused the material made available before us on record.
9. Scanning of the material availabl e on record revealed that Deputy Director intelligence & Investigation -IR Karachi sought search warrant from the area Magistrate to conduct search of the premises of M/s Pioneer Tobacco Karachi (Petitioner Company) located at Plot No 10 Sector A -IV KEPZ La ndhi Karachi. Per contents of application seeking search of premises (page 105 of Court File), it was alleged that Petitioner Company was involved in illegal and unauthorized manufacturing of Tobacco Products/ Cigarettes and accused of making taxable supp lies without issuance of Sales Tax Invoices. It was further alleged that documents and electronic devices are kept at the premises. Learned Area Magistrate vide its order dated 18.02.2026 granted permission to conduct search of the premises for the purpose s of investigation, further restraining Deputy Director from arresting any person.
10. Pursuant to search warrants, search of the premises was conducted. Per compliance report submitted to concerned Magistrate (Page 113 of Court File) no operative manufacturing facility or evidence of any international undertaking was found there, however a substantial stock of imported cigarette brands as well as Sheesha/hookah was found lying in the store. Since stock of imported cigarettes and sheesha/hookah flav ors comprised imported goods falling within the jurisdiction of the Customs Authorities, therefore the concerned Customs Authorities were informed by phone. On information a customs team headed by Mr. Javed Iqbal arrived at the premises and approximately 5 000 cartons of cigarettes and 1600 cartoons of sheesha flavors found at the premises were handed over to Customs Authorities under proper memo.
11. It further transpired from record that seized articles were sent to Philip Morris (Pakistan) Limited and Paki stan Tobacco Company Limited for verification of authenticity and authorization of Cigarettes bearing Marboro trademark and Benson & Hedges Trademark recovered from premises.
12. Philip Morris (Pakistan) Limited in its report dated February 26, 2026 informed that Petitioner Company was not an authorized/recognized importer, exporter distributor, manufacturer or any other authorized business partner for MARLBORO and seized articles were counterfeit.
13. Pakistan Tobacco Company Ltd. sent cigarette samples for verification to British American Tobacco (BAT), the manufacturer of Benson & Hedges. In its report dated 10th March, sen to Pakistan Tobacco Company Ltd., it was informed that product did not comply to BAT’s packaging standards and specifications, though th e product resembled with the manufacture by BAT but in fact was a counterfeit.
14. Petitioner’s case involves two fold actions. Initially the permission to search the premises was obtained to ascertain availability of any manufacturing facility, that was not recorded with FBR and resulted in sale tax evasion, followed by seizure of goods under the provisions of the Customs Act, 1969.
15. Sales Tax 1990 is the governing law to check sales tax fraud. Petitioner Company was suspected of Sale Tax Fraud. In the given situation, Section 37 A of STA empowered an officer of Inland Revenue not below the rank of Assistant Commissioner or any other officer authorized by FBR to initiate an inquiry on the basis of material evidence pointing to the commission of tax fraud or a n offence warranting prosecution under STA upon approval by the Commissioner. For the purpose of an inquiry, the officer of Inland revenue enjoys the powers of a civil court trying a suit under the Code of Civil Procedure,1908(Act No. V of 1908), in respe ct of the matters to summon and enforce the attendance of any person and examine him on oath; and requiring the discovery and production of documents and receiving evidence on affidavits and to complete the inquiry within six months. During inquiry proceed ings, the officer of Inland Revenue is obligated to an opportunity of being heard to the person alleged to have caused tax fraud warranting prosecution under this Act, and confront the person with the details of tax fraud committed or caused to be committe d by such person for explanation. The officer of Inland Revenue shall submit inquiry report along with reasons to be recorded in writing indicating the amount involved in tax fraud worked out as a result of such inquiry to the
Commissioner to obtain prior approval for investigation or the closure of inquiry without any further investigation. The Commissioner, on the basis of inquiry report and after recording reasons in writing, shall either approve initiation of investigation, or require the officer of In land Revenue to submit such further information or documents as he may direct for his decision; or close the inquiry by rejecting the report or accepting the report, as the case may be. After approval of investigation under sub -section, the officer of Inland Revenue shall complete investigation within three months and prepare investigation report for submission before the competent court. The three-member committee notified by the Chairman, FBR may authorize the Commissioner to issue warrant of arrest of a person, if it is satisfied on the basis of facts brought before it, that the tax fraud falls within the ambit of sub -clauses (a), (b), (c), (d), (e) and (f) of clause (37) of section 2; the amount involved in tax fraud exceeds fifty million rupees; and it has been established during the course of investigation by the Inquiry Officer that the accused is intentionally or willfully not joining the investigation after three duly served notices; the accused is attempting to abscond; or there are sufficient groun ds that the accused would temper with the evidence, the officer of inland revenue may arrest a person alleged to have committed a tax fraud. For the ease of reference section 37A of STA is reproduced below
37A. Power to inquire, investigate offences warranting prosecution under this Act and Arrest of a person.- (1) Notwithstanding anything contained in Section 11E of this Act, an officer of Inland Revenue not below the rank of assistant commissioner or any other officer authorized by the Board in this behalf on the basis of material evidence pointing to the commission of tax fraud or an offence warranting prosecution under this act may initiate an inquiry upon approval by the Commissioner. (2) For the purpose of an inquiry under this Act, the officer of Inland revenue shall have the powers of a civil court trying a suit under the Code of Civil Procedure,1908(Act No. V of 1908), in respect of the following matters, namely: (a) summoning and enforcing the attendance of any person and examining on oath; and (b) requiring the discovery and production of documents and receiving evidence on affidavits.
(3) The officer of inland revenue shall complete the inquiry while exercising the powers under the provisions of section 37, 38, 38A, 38B, 40 or any other section of the Act, wherever required within six months. (4) During inquiry proceedings, the officer of inland revenue shall give an opportunity of being heard to the person whose actions alleged to have caused tax fraud warranting prosecution under this Act, confronting the person the details of tax fraud committed or caused to be committed by such person for explanation. (5) The officer of inland revenue shall submit inquiry report along with reasons to be recorded in writing indicating the amount involved in tax fraud worked o ut as a result of such inquiry to the Commissioner to obtain prior approval for investigation or the closure of inquiry without any further investigation. (6) The Commissioner, on the basis of inquiry report under sub section (5) and after recording reasons i n writing, shall either — (i) approve initiation of investigation, or (ii) require the officer of Inland Revenue to submit such further information or documents as he may direct for his decision; or (iii) close the inquiry by rejecting the report or accepting the report, as the case may be. (7) After approval of investigation under sub -section (6), the officer of inland revenue shall complete investigation within three months and prepare investigation report f or submission before the competent court. (8) The three-member committee notified by the Chairman, may authorize the Commissioner to issue warrant of arrest of a person, if it is satisfied on the basis of facts brought before it, that (a) the tax fraud falls wit hin the ambit of sub -clauses (a), (b), (c), (d), (e) and (f) of clause (37) of section 2; (b) the amount involved in tax fraud exceeds fifty million rupees; and (c) it has been established during the course of investigation by the Inquiry Officer that the accused is intentionally or
willfully not joining the investigation after three duly served notices; the accused is attempting to abscond; or there are sufficient grounds that the accused would temper with the evidence. (9) Notwithstanding anything contained in sub -section (8), the officer of inland revenue may arrest a person alleged to have committed a tax fraud after obtaining an arrest warrant from the Special Judge in a case of a fraud falling within the ambit of the subclauses of clause (37) of section 2 during the course of investigation if:- (i) the accused is intentionally or willfully not joining the investigation after three duly served notices; (ii) the accused attempting to abscond; or (iii) there are sufficient grounds that the accused would temper with the evidence. (10) 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 officer of inland revenue has reason to believe is personally responsible for actions of the co mpany 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 pen alty imposed under this Act. (11) Notwithstanding anything contained in 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 inquiry or investigation, compound the offence if such person pays the amount of tax evaded or sought to be evaded as determined in the inquiry or the investigation along with default surcharge and penalty as provided under this Act. (12) Any person accused of an offence who is arrested unde r this Act shall at the time of arrest be informed of the grounds of arrest in writing on the basis of which he has been arrested.
(13) 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): Provided that no arrest under this section shall be made before the completion of inquiry under sub -section (1) of this section. (14) The accused arrested may approach the competent court for his release on bail under the provisio ns contained in sections 497 and 498 of the Code of Criminal Procedure, 1898 (Act V of 1898). (15) The purpose of prosecution under the provisions of sections 37A and 37B of this Act shall remain to — (a) create sufficient deterrence against tax fraud; and (b) provide for retribution for commission of tax fraud.
16. From perusal of above provisions of law it is crystal clear that an inquiry into tax fraud shall be initiated on the basis of material evidence. Prior to taking any adverse action the person under alle gation has to be heard. But in the case of Petitioner Company none was heard. Even notice of hearing was not given to the Petitioner Company. Section 37 A requires the approval of Commissioner to initiate an inquiry, but no such approval was either placed before learned Magistrate while seeking permission to raid the premises or before this Court, which established that no inquiry or proceedings were initiated against the Petitioner Company. Section 38 of STA further empowers the authorized officer to have free access to business or manufacturing premises, registered office or any other place where any stocks, business records or documents required under this Act are kept or maintained belonging to any registered person or a person liable for registration or whose business activities are covered under this Act or who may be required for any inquiry or investigation in any tax fraud committed by him or his agent or any other person; and such officer may, at any time, inspect the goods, stocks, records, data, d ocuments, correspondence, accounts and statements, utility bills, bank statements, information regarding nature and sources of funds or assets with which his business is financed, and any other records or documents, including those which are required under any of the Federal, Provincial or local laws maintained in any form or mode and may take into his custody such records, statements, diskettes, documents or any part thereof, in original or
copies thereof in such form as the authorised officer may deem fit against a signed receipt. The registered person, his agent or any other person acting on his behalf shall be bound to answer any question or furnish such information or explanation as may be asked by the authorised officer. The department of' direct and i ndirect taxes or any other Government department, local bodies, autonomous bodies, corporations or such other institutions shall supply requisite information and render necessary assistance to the authorised officer in the course of inquiry or investigatio n under this section. Section 38 -A of STA empowered the Commissioner to call for information, by notice in writing from any person including a banking company, to furnish such information or such statement in connection with any investigation or inquiry i n cases of tax fraud, as may be specified in such notice. Section 38B obligated the person required to maintain the record under the STA, on demand by an officer, not below the rank of an Assistant Commissioner Inland Revenue, by notice in writing, as and when specified in the notice, to produce for examination, such documents or records which the officer of Inland Revenue considers necessary or relevant to the audit, inquiry or investigation; allow the officer of Inland Revenue to take extracts from or co pies of such documents or records; and appear before the officer of Inland Revenue and answer any question put to him concerning the documents and records relating to the audit or inquiry or investigation. An officer of Inland Revenue conducting an audit, inquiry or, as the case may be, an investigation under the Act, may require in writing any person, department, company or organization to furnish such information as is held by that person, department, company or organization which, in the opinion of the o fficer of Inland Revenue, is relevant to such audit, inquiry or investigation. The FBR may require, in writing, any person, department, company or organization, as the case may be, to provide any information or data held by that person, department, company or organization, which, in the opinion of the Board, is required for purposes of formulation of policy or administering the Customs, Sales Tax, Federal Excise or Income Tax. Every person, department, company or…
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