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Official Citation: 2026 IHC 264306
Court / Jurisdiction: Islamabad High Court
Parties: PTA vs FBR etc
Ruling Summary: This decision was rendered by the Islamabad High Court, officially reported as 2026 IHC 264306. In this matter between PTA and FBR etc, 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: Islamabad High Court (Honourable Mr. Justice Inaam Ameen Minhas, Honourable Mr. Justice Muhammad Azam Khan) AUTHOR JUDGE: Honourable Mr. Justice Inaam Ameen Minhas DECISION DATE: 01-JUL-2026 CASE NO: Writ Petition-2398-2021 CITATION: 2026 IHC 264306 PARTIES: PTA VS FBR etc LAW / SECTION: Section 4(a) of the PTRA 1996 || section 3 of the Federal Excise Act, 2005 || SUBJECT: Tax & Banking, Tax REMARKS: PTCL Impugns show cause notice by enforcement wing FBR for recovery of unpaid federal excise duty as were as for impering penalty ============================================================ JUDGMENT SHEET ISLAMABAD HIGH COURT, ISLAMABAD JUDICIAL DEPARTMENT 1. WRIT PETITION NO. 2398 OF 2021 PAKISTAN TELECOMMUNICATION AUTHORITY THROUGH ITS DIRECTOR BUDGET & ACCOUNTS VERSUS FEDERAL BOARD OF REVENUE THROUGH ITS CHAIRMAN AND OTHERS 2. WRIT PETITION NO. 1570 OF 2020 PAKISTAN TELECOMMUNICATION AUTHORITY THROUGH ITS DIRECTOR GENERAL LAW & REGULATION VERSUS FEDERAL BOARD OF REVENUE THROUGH ITS CHAIRMAN AND OTHERS 3. WRIT PETITION NO. 1572 OF 2020 PAKISTAN TELECOMMUNICATION AUTHORITY THROUGH ITS DIRECTOR GENERAL LAW & REGULATION VERSUS FEDERAL BOARD OF REVENUE THROUGH ITS CHAIRMAN AND OTHERS 4. WRIT PETITION NO. 2433 OF 2021 PAKISTAN TELECOMMUNICATION AUTHORITY THROUGH ITS DIRECTOR BUDGET & ACCOUNTS VERSUS FEDERAL BOARD OF REVENUE THROUGH ITS CHAIRMAN AND OTHERS 5. WRIT PETITION NO. 3877 OF 2021 PAKISTAN TELECOMMUNICATION AUTHORITY THROUGH ITS DIRECTOR BUDGET & ACCOUNTS VERSUS FEDERAL BOARD OF REVENUE THROUGH ITS CHAIRMAN AND OTHERS 6. WRIT PETITION NO. 652 OF 2024 PAKISTAN TELECOMMUNICATION AUTHORITY THROUGH ITS DIRECTOR BUDGET & ACCOUNTS VERSUS FEDERAL BOARD OF REVENUE THROUGH ITS CHAIRMAN AND OTHERS
2 W.P. 2398, 2433, 3877 of 2021, 1570, 1572 of 2020 and 652 of 2024
Petitioners by: Mr. Umer Khan Verdag, Advocate. Respondents by: Mr. Osama Shahid, Advocate in writ petition no. 2433/2021 and. Malik Qamar Afzal, Advocate in all remaining writ petitions. ASSISTED BY: Muhammad Yahya Khan Niazi, Judicial Law Clerk. DATE OF HEARING: 07.04.2026
INAAM AMEEN MINHAS, J:- This common judgment shall decide the afore-titled writ petitions, as they involve similar questions of law and facts. 2. In writ petition no. 2398/2021, the petitioner has impugned Show Cause Notice dated 25.06.2021 wherein federal excise duty (“FED”) to the tune of Rs. 14,696,979,107/- and penalty amount of Rs. 734,848,955/- has been demanded from the petitioner. The petitioner has also sought a declaration that respondent no. 1/ Federal Board of Revenue (“Department”) has no authority to demand or levy any amount. Additionally, the petitioner has sought a direction that the Ministry of Finance to act in accordance with the Rules of Business, 1973 as the Department is bound by the legal opinion of the Ministry of Law and Justice until its parent department i.e. the Finance Division has resolved the issue through a reference to the cabinet. 3. Apart from the declaration and direction sought above the petitioner in writ petition no. 1570/2020, has impugned Show Cause Notice dated 18.05.2020 wherein FED to the tune of Rs. 1,246,820,802/- and penalty has been demanded from the petitioner and the petitioner has also impugned the vires of para 4 of the Section 49 of the Income Tax Ordinance, 2001 (“ITO 2001”). 4. In writ petition no. 1572/2020, the petitioner has impugned Show Cause Notice dated 18.05.2020 wherein FED to the tune of Rs. 53,239,038/- and penalty has been demanded from the petitioner. The petitioner has also sought
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the same direction and declaration sought in writ petition no. 2398/2021 and has also impugned the vires as assailed in writ petition no. 1570/2020. 5. In writ petition no. 2433/2021, the petitioner has impugned Show Cause Notice dated 25.06.2021 wherein FED to the tune of Rs.106,269,698/- and penalty has been demanded from the petitioner. The petitioner has also sought the same direction and declaration sought in writ petition no.2398/2021. 6. In writ petition no. 3877/2021, the petitioner has impugned Show Cause Notice dated 04.10.2021 wherein penalty of Rs.39,5000/- has been imposed from the petitioner. The petitioner has also sought the same direction and declaration sought in writ petition no. 2398/2021. 7. In writ petition no. 652/2024, the petitioner has impugned Show Cause Notice dated 16.02.2024 wherein federal excise duty to the tune of Rs.10,040,440,615/-and penalty has been demanded from the petitioner. The petitioner has also sought the same direction and declaration sought in writ petition no.2398/2021. 8. Learned counsel for the petitioner Authority contended that the petitioner does not render any services which may attract the levy of FED under the Federal Excise Act, 2005 nor does the petitioner Authority fall within the scope of the definitions provided under the said Act, as its role is confined to the regulation of the establishment, operation, and maintenance of telecommunication systems, as well as the oversight of telecommunication services provided by licensed operators in Pakistan. Learned counsel further submitted that under the Pakistan Telecommunication (Re-organization) Act, 1996 (“PTRA 1996”), no function has been assigned to the petitioner Authority for the provision of telecommunication services to any person. It was also argued that the respondent, Department has erroneously construed Section 4(a) of the PTRA 1996 by equating the issuance of licenses under the statutory and regulatory framework with franchise arrangements, thereby treating the licensees of the petitioner Authority as “franchisees.” Such an interpretation, it was contended, is wholly misconceived. Lastly, the learned counsel submitted that the Department lacks jurisdiction to impose or demand FED on the
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regulatory functions of the petitioner Authority, rendering the impugned notice without lawful authority, arbitrary, and liable to be declared ultra vires. 9. Conversely, Malik Qamar Afzal, Advocate learned counsel appearing on behalf of the Federal Board of Revenue/respondent Department, submitted that under Section 4(a) of the PTRA 1996, the petitioner Authority enjoys exclusive authority in respect of the provision of telecommunication services in Pakistan. It was argued that telecommunication services are licensed to various operators under agreements executed against payment of prescribed fees, thereby establishing, according to the respondents, a franchisor–franchisee relationship between the petitioner Authority and its licensees. Learned counsel further contended that a plain reading of Section 4(a) indicates that the petitioner Authority is engaged not only in regulation but also in the commercial domain through the grant and management of spectrum licenses. The transfer of rights to provide telecommunication services to operators in consideration of fees, it was argued, constitutes a contractual arrangement akin to franchising, thus attracting the levy of FED. On this premise, it was urged that the petition is not maintainable and is liable to be dismissed with costs. 10. Mr. Osama Shahid, Advocate appearing for the respondent in writ petition no. 2433/2021 raised preliminary objection to the maintainability of the petition. It was contended, first, that the petition is premature as the petitioners do not qualify as “aggrieved parties” within the contemplation of Article 199 of the Constitution. It was submitted that this statutory appellate framework ultimately culminates before the High Court, and any attempt to bypass it undermines the legislative intent and the constitutional separation of powers. Learned counsel while placing reliance on M/s Pakistan Oilfields Ltd. vs. FOP etc, (2020 PTD 110), PKP Exploration Limited vs. FBR etc, (2021 PTD 1644) and CIR etc. vs. Jahangir Khan Tareen etc., (2022 SCMR 92) submitted that this Court should not exercise writ jurisdiction in a manner that circumvents the statutory adjudicatory hierarchy. Lastly, allegations of mala fides were pressed, asserting that the petitioner has approached this Court with unclean hands.
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11. We have given anxious consideration to the arguments of the learned counsel for the parties and perused the record with their able assistance. 12. Briefly recapitulated the petitioner Authority has called in question the legality and validity of the Impugned Show Cause Notices whereby FED along with penalty, has been sought to be imposed on account of licenses issued to various providers of telecommunication systems and telecommunication services operating in Pakistan. Before adverting to the discussion, we would like, for reference and for ease of access, to reproduce hereunder the relevant portions of impugned notice:- “Whereas, it has been observed that M/s Pakistan Telecommunication Authority (PTA) having Sales Tax Registration No. 2600263492210 and NTN 2634922-1 located at Headquarter, F-5/1, Islamabad, is receiving payments on account of licenses issued to various operations of telecommunications system in Pakistan in the exclusive domain of M/s PTA. Examination of record available in the office shows that during review of available information M/s PTA has not paid Federal Excise Duty on account of Franchise Service rendered to its licensees / franchisees contrary to the provisions of section 3 of the Federal Excise Act, 2005 read with table II of the First Schedule of the Act. Review of financial statements of different cellular Companies also confirmed that they made payments to M/s PTA on account of franchise services in the shape of license fee, royalty or Technical Service Fee. 2. The Federal Government levied Federal Excise Duty @ 10% of charges on “Franchise Service, Royalty or Technical Service Fee” in terms of section 3 read with serial 11 of Table II of the First Schedule to Federal Excise Act, 2005. Section 3 of the Federal Excise Act, 2005 provides: “Subject to the provision of this Act and Rules made there under, there shall be levied and collected in such manner as may be prescribed duties of excise on— (a) ..................................................... (b) ..................................................... (c) ..................................................... (d) Service provided in Pakistan including the services originated outside but rendered in Pakistan. At the rate of “fifteen” percent advalorem except the goods and services specified in the First Schedule, which shall be charged to Federal Excise Duty as, and at the rates, set forth therein.”
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3. Moreover, the word “Franchiser” has been defined under sub- rule (mb) of Rule 2 of the Federal Excise Rules, 2005 and “Franchise” under sub-section (12a) of section 2 of the Federal Excise Act, 2005 as under:- “Franchiser” means any person who enters into franchise and includes any associate of franchiser to enter into franchise on his behalf, and the term “franchisee” shall be construed accordingly. “franchise” means an authority given by a franchiser under which the franchisee is contractually or otherwise granted any right to produce, manufacture, sell or trade in or do any other business activity in respect of goods or to provide service or to undertake any process identified with franchiser against a fee or consideration including royalty or technical fee, whether or not a trade mark, service mark, trade name, logo, brand name or any such representation or symbol, as the case may be, is involved.” 4. The Hon’ble Appellate Tribunal Inland Revenue, Islamabad in its consolidated judgment dated 13-08-2015, in appeals No. FEA No.26/IB/2012 and FEA No.27/IB/2012 filed by M/s PTA against the issue of chargeability of FED on Royalty, held that “M/s PTA in respect of Royalty for representing it in the field of Telecom section is clearly chargeable to duty in terms of Section 3(1)(d) of the Federal Excise Act, 2005 read with Rule 43A of the Federal Excise Rules, 2005 further read with Federal Excise General Order No. 05/2006 dated 05-08-2006”. 5. The function of the M/s PTA is described under clause (a) of section 4 of the Pakistan Telecommunication (Re-organization) Act, 1996, (herein after referred as Act) as to regulate the establishment, operation and maintenance of telecommunication systems and the provision of telecommunication services in Pakistan. Whereas, M/s PTA has conferred its rights to licensees under section 20 of the Act to establish, maintain or operate any telecommunication system or provide any telecommunication service on payment of prescribed fee. It is provided as under;- 20. Licensing of telecommunication services. —(1) No person shall establish, maintain or operate any telecommunication system or provide any telecommunication service unless he has obtained a license under this Act. 6. These provisions clearly provide that M/s PTA has a sole authority for the provision of telecommunication services in Pakistan and the provisions of telecom services were licensed to telecom operators under various agreements against payment of prescribed fee. It is thus established that M/s PTA being Franchiser authorizes its licensees as Franchisees to render the
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telecom services that are specifically identified with the M/s PTA under clause (a) of section 4 of the Act.” 13. While considering this background and the grounds raised by the parties, following questions need adjudication by this Court:- (i) Whether the petitioner Authority, discharging purely regulatory functions under the PTRA 1996, can be characterized as a “franchiser” within the meaning of the Federal Excise Act, 2005, and whether the issuance of licenses to telecom operators against prescribed fees constitutes a commercial franchise arrangement attracting Federal Excise Duty thereunder? (ii) Whether the petitioner Authority qualifies for exemption from taxation under Article 165 of the Constitution of Pakistan, being a limb of the State? 14. This Court shall now address the first question framed. The petitioner Authority was established pursuant to the promulgation of the PTRA 1996 by Parliament. Prior to the enactment of this statute, there existed no functional segregation between the roles of a regulator and those of a service provider in the field of telecommunication and allied services. The preamble of the PTRA 1996 is reproduced as under:- “An Act to provide for re-organization of telecommunication System WHEREAS it is expedient to provide for re-organization of telecommunication system in Pakistan by establishing the Pakistan Telecommunication Authority, the Frequency Allocation Board, National Telecommunication Corporation and the Pakistan Telecommunication Employees Trust, regulation of telecommunication industry, transfer of telecommunication services to private sector and for matter connected therewith or incidental thereto;” 15. A plain reading of the preamble of the PTRA 1996 makes it evident that the petitioner Authority was established as a statutory regulatory body for the purpose of reorganizing and regulating the telecommunication system in Pakistan. The legislative intent, as reflected in the said preamble, clearly envisages the petitioner as an authority entrusted with oversight, licensing, and governance of the telecom sector, including facilitating its transition to the private domain. The core functions of the petitioner authority are set out in Section 4 of the PTRA 1996 which is as under:-
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“4. Functions of the Authority.— (1) The Authority shall— (a) regulate the establishment, operation and maintenance of telecommunication systems and the provision of telecommunication services in Pakistan; (b) receive and expeditiously dispose of applications for the use of radio-frequency spectrum; (c) promote and protect the interests of users of telecommunication services in Pakistan; (d) promote the availability of a wide range of high quality, efficient, cost effective and competitive telecommunication services throughout Pakistan; (e) promote rapid modernization of telecommunication systems and telecommunication services; (f) investigate and adjudicate on complaints and other claims made against licensees arising out of alleged contraventions of the provisions of this Act, the rules made and licences issued thereunder and take action accordingly; (g) make recommendations to the Federal Government on policies with respect to international telecommunications, provision of support for participation in international meetings and agreements to be executed in relation to the routing of international traffic and accounting settlements; (h) perform such other functions as the Federal Government may, from time to time, assign to it (i) regulate arrangements amongst telecommunication service providers of sharing their revenue derived from provision of telecommunication service; (j) ensure effective compliance by licensees with Universal Services Obligations; (k) regulate Access Promotion Contribution; (l) settle disputes between licensees; and (m) regulate competition in the telecommunication sector and protect consumer rights.” 16. A closer and purposive examination of the functions assigned to the PTRA 1996 under Section 4 of the Act reveals that the Authority operates entirely within the regulatory domain, supervision, and governance, as opposed to any form of commercial service provision. Clause (a) of Section 4, which empowers the petitioner Authority to regulate the establishment, operation, and maintenance of telecommunication systems, is a clear manifestation of sovereign regulatory authority. The power to “regulate” inherently implies control, supervision, and standard-setting over entities operating within the telecom sector, rather than direct involvement in the provision of services.
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Through this clause, the petitioner Authority exercises oversight to ensure that telecommunication infrastructure is developed and operated in accordance with law, technical standards, and public interest considerations. Such functions are quintessentially governmental in nature, as they involve licensing, compliance enforcement, and systemic governance. At no point does this clause envisage the petitioner Authority as a market participant or a provider of telecommunication services, rather, it positions the petitioner Authority above the market as a watchdog and regulator. 17. Moreover, a contextual and purposive interpretation of the clause makes it abundantly clear that the said expression does not attribute the function of providing telecommunication services to the petitioner Authority, rather, it delineates the scope of regulatory control exercised by the Authority over other entities that are engaged in the provision of such services. The operative word in the clause is “regulate,” which governs both “the establishment, operation and maintenance of telecommunication systems” and “the provision of telecommunication services.” Thus, the petitioner Authority’s role is confined to supervising and controlling how such services are provided by licensed operators, not to provide those services itself. It is a settled principle of statutory interpretation that provisions must be read as a whole, and words cannot be isolated to distort legislative intent. If the interpretation advanced by the respondent Department is accepted, it would lead to an absurd conclusion whereby the regulator itself becomes a service provider, thereby collapsing the fundamental distinction between regulator and regulate, which is the cornerstone of modern regulatory frameworks. The PTRA 1996, read in its entirety including its preamble and Section 4 consistently positions the petitioner Authority as an oversight body and not a commercial entity. Therefore, the mere presence of the phrase “provision of telecommunication services” within a regulatory clause cannot be stretched to re-characterize the petitioner Authority’s statutory functions as taxable services. 18. Further, a deep analysis of Clauses (b), (d), and (e), relating to spectrum management, promotion of modern and efficient services, and sectoral development, demonstrate a policy-driven and facilitative role, aimed at
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creating an enabling environment for private service providers rather than competing with them. These clauses place the petitioner Authority in the role of a catalyst for sectoral growth, ensuring that the industry evolves in a competitive and technologically advanced environment under proper regulatory oversight. In the same vein, clauses (c), (j), and (m) further highlight the petitioner Authority’s role as a guardian of public interest. The obligation to protect consumer rights, ensure compliance with universal service obligations, and regulate competition reflects the essential characteristics of an independent regulator entrusted with maintaining fairness, transparency, and efficiency within the telecom sector. Such responsibilities are regulatory and supervisory in character, aimed at balancing the interests of stakeholders and ensuring orderly market conduct. They do not involve any element of commercial exchange or quid pro quo that could be construed as rendering a taxable service. Therefore, these provisions, when read harmoniously, leave no room for doubt that the functions of the Authority are strictly statutory and regulatory. 19. It is an undisputed position that the petitioner Authority does not, in law or in fact, provide any telecommunication services. The definition of “telecommunication service” as contained in Section 2(v) of the PTRA 1996 is to be read in the context of the regulatory domain of the petitioner Authority, delineating the scope of activities subject to its oversight, rather than conferring upon it the role of a service provider. Section 2(v) of the PTRA 1996 is reproduced as under:- “"Telecommunication service" means a service consisting in the emission, conveyance, switching or reception of any intelligence within, or into, or from, Pakistan by any electrical, electromagnetic, electronic, optical or optio-electronic system, whether or not the intelligence is subjected to re-arrangement, computation or any other process in the course of the service.” 20. In contrast, the charging provisions under the Federal Excise regime, particularly Section 3(d) read with Section 2(23) of the Federal Excise Act, 2005, clearly envisage the levy of duty upon services that are actually rendered, as specified in the First Schedule read with Chapter 98 of the Pakistan Customs Act. Telecommunication services, as classified under heading 98.12, are thus
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taxable only when they are provided in a commercial sense by entities engaged in the business of supplying such services to consumers or end-users. The statutory scheme, therefore, presupposes the existence of a provider–recipient relationship, involving the furnishing of services in consideration of payment. Tested against this legal framework, the position of the petitioner Authority stands on an entirely different footing. The petitioner Authority neither renders any of the telecommunication services enumerated under heading 98.12 to telecom operators, licensees, or the general public, nor does it operate or manage telecommunication systems in a commercial capacity. Its role is confined to issuing licenses, allocating spectrum, and ensuring regulatory compliance, all of which are performed under a statutory mandate on behalf of the Federal Government. These functions are inherently regulatory and supervisory, lacking the essential attributes of service provision as contemplated under the Federal Excise law. Indeed, the definition of “services” under Section 2(23) of the Federal Excise Act, 2005, when read in conjunction with the First Schedule, reinforces this conclusion, as it limits the scope of taxable services to those facilities, utilities, or services which are actually provided and are…
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