Legal Principle & Question Decided

Ruling Summary: This decision was rendered by the Peshawar High Court on 2022-12-31, officially reported as 2024 PTD 776. In this matter between Commissioner Inland Revenue, Peshawar Zone and M/s Maneri International JUDGMENT, 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.

Full Judgment Text & Judicial Ruling

Court Name: Peshawar High Court Judge(s): Abdul Shakoor, Syed Arshad Ali Title:Commissioner Inland Revenue, Peshawar Zone vs M/s Maneri International

JUDGMENT

Reported As: 2023 PHC 324, 2024 PTD 776 Result: Reference Allowed Judgment JUDGMENT SYED ARSHAD ALI, J:- This consolidated judgment shall dispose of instant Sales Tax Reference as well as connected Sales Tax Reference Nos. 06-P, 07-P & 08-P/2020 because all these matters are arising out of one and the same judgment/order of the Appellate Tribunal Inland Revenue (Pakistan), Peshawar Bench, Peshawar dated 06.09.2019 ("Tribunal"). Sales Tax Reference No. 05-P/2020 Department/Applicant's case as provided in the show cause notice dated 07.02.2018 "Whereas consequent upon a credible information that a mazda truck shall attempt to carry Pak made non-duty paid cigarettes to Peshawar. Anti Evasion authorized FED squad No. 1,2 & 3 was constituted to foil this attempt. The raiding squads make nakka near Peshawar Interchange Peshawar. At 06:00 AM the said truck bearing registration No. Z-9411 Peshawar was seemed coming from Islamabad side towards Peshawar which was followed by the squads members and intercepted in front of one Godown opened in the name of Mansab Traders situated on Ring Road near Charsadda bus stand Peshawar. On questioning the driver of the Truck produced a billy No. 09 dated 06.02.2018 and a tax invoice/advice No.01 dated 06.02.2018. The driver of the truck was also asked to show its unloading place who pointed the said place of storage. Therefore the owner of the said godown was also asked to show its legal storage. Who produce two invoices having Sr. No. 01 & 02 dated 13.01.2018 and 11.10.2017 issued in the name of Amjad Khan Pathang Chowk Peshawar and Mansab Trades, Ring Road Peshawar respectively by Rahman Traders, Akbar Khan Killi Tehsil Razzar Distt: Swabi. On scrutiny of the available record produced by

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the owner of the gown as well as the documents of the truck driver it has been ascertained that the distributor of the cigarettes is engaged in evasion of duty and taxes leviable on the local manufactures cigarettes by issuing double tax invoices on one serial no. as well as affixing same serial no. in the said invoices as given in the table mentioned below: Sr#DateTax Invoice /Advice No.Sr. No of Packages Name of Seller Name of Buyer From To 0111-10- 201702 81 160Rahman Traders Akbar Khan Killi, The: Razzar Swabi.Amjid Khan Pathang Chowk Peshawar. 0213-01- 201801 01 180Rahman Traders Akbar Khan Killi, The: Razzar Swabi.Mansab Traders, Ring Road, Peshawar. 0306-02- 201801 01 276Rahman Traders Akbar Khan Killi, The: Razzar Swabi.Amjid Khan Pathang Chowk Peshawar. Keeping in view the above position the consignment intercepted lying in the truck i.e. 276 packrites as well as stock available in the godown i.e. 66 pacicrities of C-Pack 20FT (HL) Cigarettes along with truck were taken into possession and brought to FFED office situated opposite Locomotive factory Nowshera Mardan Road Sokai Laraq District Nowshera and seized under the relevant provision of Law for violation of Section 26/19 (11) of the Federal Excise Act 2005 read with Rules-29 of Federal Excise Rules 2005". Reply of the respondent 2. The respondent did not contest the contents/allegations of the show cause notice and has agreed to pay the amount of excise duty etc in the following manner: "It is therefore, requested an amount of Rs. 1,000,000/- of FED vide CPR No. FE-20180222-0300- 1206851 dated 22/02/2018 and Rs. 1,000,000/- will be depositing up to 28/02/2018 and posted dated check also enclosed, and remaining amount will be deposited in the next month in March, 2018". Order of the Assessing Officer 3. In view of the clear-cut admission of the respondent to pay the disputed amount, however, when the same could not be paid during the agreed period, the order of assessment was passed holding the respondent to pay an amount of Rs. 2,736,000/- as Federal Excise Duty under section 14 of the Federal Excise Act, 2005 along with default surcharge and penalty. The first appellate forum has confirmed the order of the Assessing Officer through judgment dated 28.05.2019. Judgment of the Appellate Tribunal 4. The Appellate Tribunal was swa yed by the non-compliance of mandatory requirement of search i.e. search warrant was not obtained from the competent forum/Magistrate etc before entering the premises of respondent and thus has annulled/set aside the assessment order. Sales Tax Reference No. 06-P/2020 Department/Applicant's case as provided in the show cause notice dated 17.07.2017 "Whereas on the basis of credible information that M/s Maneri Tobacco International is maintaining the record for storage of raw material and finished goods some undeclared facility

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premises which is not on the record of FBR system, raid was conducted dated 24.05.2017 by the authorized team of Regional Tax Peshawar vide the Commissioner Corporate Zone, RTO, Peshawar Letter C. No. ST&FED/Tobacco Sector/Corporate Zone/2017/1233 dated 24.05.2017 under Rules 62 of the Federal Excise Rules 2005 read with Section 45 of the Federal Excise Act, 2005 & Section 38 of the Sales Tax Act, 1990, for search and investigation of the premises. The following stock of finished goods and raw material were found at the time of raid. The team accordingly visited the premises in question under Rile 62 of the Federal Excise Rules, 2005, and found huge stock of 447 packrites of Hitlaer brand Cigarettes stored in the warehouse. Detailed stock taking revealed that different raw materials to be used in the illicit manufacture of cigarettes (as mentioned above) were also stored in the same warehouse. Some serious violations of Federal Excise and Sales Tax law & Procedure, leading to and establishing factum of tax evasion and tax fraud. Some glaring details are given hereunder. The physically available stock at the premises was never declared in their record or returns filed to the department. These goods have never been recorded in the statutory record as per Federal Excise Act, 2005, Federal Excise Rules, 2005 and SRO 2017(1)/2010 dated 31.03.2010. The following finished goods, raw materials and packing materials were therefore, seized under Section 26 of the Federal Excise Act, 2005 and Section 19(11) of the Act ibid. Description PackriteFED Sales Tax Hitler 447 7,371,0302,185,830 Stem 2500 KG VFC 2500 KG Pak/Leaf 660 KG Glue/Chemical 1730 KG HL plates cartons158 Empty carton 1000 Card Real 16 Tipping paper cartons18 BOP 18 Filter Rod 03 Aluminum Foil cartons09 Cellophane cartons 05 Whereas in view of the above, government dues amounting to Rs. 2,185,830/- as principal amount of Sales Tax and an amounting to Rs. 7,371,030/- as principal amount of Federal Excise Duty is recoverable from you along with default surcharge and penalty (to be calculated at the time of final payment). Reply of the respondent "It is stated that we have already made payment in instant case in two instalments on your directions and third instalment is due on 25th of this month. Therefore, the notices issued may kindly be withdrawn as we are already making payments. The following payments are already made vide the followincz CPRS. Date CPR Amount 31/07/2017FE-20I 70731-0406-12277041, 500,000/- 24/08/2017FE-20170824-1759-11889381 ,500,000/-

Order of the Assessing Officer

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"Since the respondent has failed to defend his case against the substantive evidence detecting during the stocktaking exercise., Hence, the charges levelled in show cause notice against the respondent stands established and 1 therefore order for recovery of Rs. 2,185,830/- as principal amount of Sales Tax which is recoverable under section 11(2) of the Sales Tax Act, 1990 for violation of section 3,6,7,26 of the Sales Tax Act 1990 and penalty of Rs. 250,000/- under section 33(3) of the Sales Tax Act, 1990 apart from default surcharge (to be calculated at the time of actual payment) under section 34 of the said Act. Moreover, an amount of Rs. 7,371,030/- as principal amount Federal Excise under Sections 14(2) of the Federal Excise Act 2005 is recoverable for violation of section 3,4,17,18 & First Schedule of Federal Excise Act 2005 and Rules 4,7,15,44 of the FED Rules 2005 and SRO 217(1)/2010 dated 31.03.2010. Moreover, penalty of Rs. 500,000/- is also imposed under section 19(3) (a) of the Federal Excise Act 2005 along with default surcharge (to be calculated at the time of actual payment) under section 8 of the said Act". The first appellate forum has confirmed the judgment of the Assessing Officer through judgment dated 28.05.2019. Judgment of the Appellate Tribunal 5. The Appellate Tribunal was swa yed by the non compliance of mandatory requirement of search i.e. search warrant was not obtained from the competent forum/Magistrate etc before entering the premises of respondent and thus has annulled/set aside the assessment order. Sales Tax Reference No. 07-P/2020 Department/Applicant's case as provided in the show cause notice dated 06.04.2018 "Whereas, on consequent upon the information authorized Anti Evasion Squad of the RTO Peshawar conducted a raid an unknown godown situated at Ring Road Near Charsadda Adda Peshawar on M/S Mansab Traders and found huge quantity of non-duty paid cigarette. During the course of further inquiry and search Mr. Qamar Zaman/Mr. Sohail Manager of M/s Mansab Traders reported that the same consignment of cigarette was purchased from M/S Maneri International Tobacco Company Village Maneri Swabi District. Authorization letter and Recovery Memo alongwith Witnesses was handed over to Mr. Sohail who refused to receive the same. The person was asked to provide any proof of payment of duty and taxes and the same was denied that nothing is available with them in shape of FED Paid Challan and Invoices. Keeping in view of the above the same are hereby seized under section 26 of the Federal Excise Act 2005 alongwith Rules made thereunder for violation of section 3 of the Federal Excise Act 2005 along with Table 10/9 of the first Schedule to the Federal Excise Act 2005 and for violation of section 4,8,10,11,12,14,14A, 17,14, 17,18,19(1) (2) (3) (a) (b) (c) (4) (5) (6) (7) (8) (10) (11) (12), 27 and SRO 217(1)12010 dated 31.03.2010 of the Federal Excise Act 2005 along with Rules 62 made thereunder and section 347,88,8A,22,23,26 &27 read with section 2(16) (17) (20) (33) (35) (37) (39) (40) (41) of the Sales Tax Act 1990 read with section 33 &34 of the said Act. The contravention report of Rs. 2,128,000/- as principal amount of Federal Excise Act and Rs. 1,064,000/- principal amount of Sales Tax is submitted to the adjudicating authority for further necessary action under the law" Order of the Assessing Officer "Despite the fact that ample opportunities of being heard was given to the taxpayer & the wilful non-compliance left the under signed with no other alternative but to decide the case ex-parte on the basis of available record on file. 1, therefore, order to establish an amount of Rs. 662,500/- as Federal Excise duty under section 14 of the Federal Excise Act, 2005 along with default surcharge under section 8 (will be calculated at the time of payment). I also imposed penalty of 500% of Rs. 3,312,500/- of the amount of duty involved under Sections 19(1), 19(2), (3) (a), (b), (c), (e), 19(8), (10) (11) for violation of Sections 3,4,10,11,12,14,14A,17,18 Federal Excise Act, 2005 read with the Rule 62 of the Federal Excise Rules 2005 & SRO 217(1)/2010 dated 31/03/2010. I, further

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established Sales tax liability amounting to Rs. 193,715/- under Section 11(2) & (3) of the Sales Tax Act, 1990 along with default surcharge (to be calculated at the time of payment) under Section 34 of the Sales Tax Act, 190 and imposed penalty 100% at Rs. 193,715/- of the tax involved under Section 33(7), Section 33(1), Section 33(2), Section 33(5), Section 33(8), Section 33(13), 33(17) and Section 33(18) of the Sales Tax Act, 1990, for violation of Sections 2(16), 2(17), 2(20), 2(25), 2(33), 2(35), 2(37), 2(39), 2(40) & 2(41), 6,7,8,8A,22,23,26 & 37 of Sales Tax Act, 1990 read with the Sales Tax Rules, 2006 and the Sales Tax Special Procedure Rules, 2007. I ordered for the recovery of above amount duties and taxes from M/s Maneri Tobacco International (Pvt) Ltd. The same goods so seized are also hereby confiscated in terms of section 27 of the Federal Excise Act, 2005 read with Rule 29 of the Federal Excise Rules, 2005". The first appellate forum has confirmed the judgment of the Assessing Officer through judgment dated 28.05.2019. Judgment of the Appellate Tribunal 6. The Appellate Tribunal was swa yed by the non compliance of mandatory requirement of search i.e. search warrant was not obtained from the competent forum/Magistrate etc before entering the premises of respondent and thus has annulled/set aside the assessment order. Sales Tax Reference No. 08-P/2020 Department/Applicant's case as provided in the show cause notice dated 13.11.2018 "Whereas, it has been reported by the duly authorized Squad by the RTO, Peshawar vide recovery memo/seizure/contravention report communicated dated 02.11.2018, that consequent upon information/routine surveillance that a Suzuki vehicle bearing registration No. W-9060 was carrying non-duty paid Cigarettes with brand name "HITLER" 53 Packrities loaded from Ring Road, Mardan and was illegally moving to Charsadda. On questioning the driver stated that he loaded 53 packrities cigarettes of "Hitler" brands. On demand, the driver produced no billy no invoice of M/s Maneri Tobacco International. Keeping in view the invalid tax documents the said vehicle along with above mentioned non-duty paid goods was seized in terms of section 26,19 (11) of the Federal Excise Act, 2005 read with Rule 29 of the Federal Excise Rule, 2005". Order of the Assessing Officer "Despite the fact that ample opportunities of being heard was given to the taxpayer & the wilful non-compliance left the undersigned with no other alternative but to decide the case exparte on the basis of available record at file. Moreover, the R/p is habitual non filers of monthly Sales Tax Return also & not fulfilling statutory obligation. Therefore, stand established an amount of Rs. 2,128,000/- as Federal Excise duly under section 14 of the Federal Excise Act, 2005 along with default surcharge under section 8 (will be calculated at the time of payment). I also imposed penalty of Rs. 10,640,000/- of the amount of duty involved under section 19(3), (a) (b) (c) (d) (e)( & 19 (1) (2) (3) (4) (5) (6) (7) (8) (9) & (10) (11) (12) (13) of the Federal Excise Act, 2005 for violation of sections 4,10, 12,14,14A,17,I 8,19,26,27 rad with Rule 62 & 63 of the Federal Excise Act, 2005 read with SRO 217(1)/2010 dated 31.03.2010 and vide notified SRO. 534(1)/2005 dated 06.06.2005 of the Federal Excise Act, 2005. The seized consignment goods are also hereby confiscated under section 27(2) read with Rules 30 of the Federal Excise Act, 2005. I further established Sales tax liability amounting to Rs. 1,064,000/- under Section 11(2) & (3) of the Sales Tax Act, 1990 along with default surcharge (to be calculated at the time of payment) under Section 34 of the Sales Tax Act, 1990 and imposed penalty at Rs. 1,064,000/- of the tax involved under Section 33 of the Sales Tax Act, 1990, for violation of section 3,6,7,8,8A,22,23,26 & 37 read with 2(16), 2 (17), 2(20), 2(25), 2(33), 2(35), 2(37), 2(39), 2(40) & 2(41) of the Sales Tax Act, 1990 read with the Sales Tax Rules, 2006 and the Sales Tax Special Procedure Rules, 2007".

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The first appellate forum has confirmed the judgment of the Assessing Officer through judgment dated 28.05.2019. Judgment of the Appellate Tribunal 7. Since the respondent-company itself appeared before the Appellate Tribunal denying the ownership of the cigarettes/goods being counterfeited/manufactured by someone else and requested for destruction of the same; therefore, in view of which, the appeal was allowed and the DCIR was directed for its destruction in accordance with law. 8. The learned counsel appearing on behalf of the petitioner has argued that since it was a case of hot pursuit, therefore, there was no occasion for the raiding officer to have obtained search warrant from the Magistrate under the enabling provisions of the Code of Criminal Procedure, 1898 ("Cr.P.C"); thus, on the same ground the entire recovery proceedings cannot be vitiated when admittedly, the respondent was not maintaining proper record and was involved in tax evasion. 9. On the other hand, the learned counsel appearing on behalf of the respondent has strongly contested the contentions of the learned counsel for the petitioner and argued that by now it is settled law that unless a search warrant is obtained from a Judicial Magistrate, no raid can be conducted on the premises. In support of his arguments, he has relied upon the judgments in the cases of Collector of Customs, Model Customs Collectorate, Peshawar vs. Noor Sher Ali and another (2021 PTD 822), Messrs Islam Soap Industries (Pvt) Ltd, Sialkot vs. The CIR, LTU, Lahore (2020 PTD 1520), Pakistan Chipboard (Pvt) Ltd through Chief Executive Officer vs. Federation of Pakistan through Revenue Division and 5 others (2015 PTD 1520), Chairman, Central Board of Revenue and others vs. Messrs Haq Cotton Mills wt) Ltd, Burewala (2007 SCMR 1039), Collector of Sales Tax and others vs. Messrs Food Consults (Pvt) Ltd and another (2007 PTD 2356), Collector of Sales Tax and Central Excise (Enforcement) and another vs. Messrs Mega Tech (Pvt) Ltd (2005 SCMR 1166) and Federation of Pakistan through Secretary, Ministry of Finance, Federal Secretariat, Islamabad and 4 others vs. Messrs Master Enterprises (Pvt) Ltd through Managing Director (2003 PTD 1034). 10. We have given anxious consideration to the submissions of learned counsels for the parties and have perused the record. 11. The department/applicant has filed these references under section 47 of the Act wherein good number of questions of law have been raised, however, relevant to the present controversy is the question as to "whether under the facts and circumstances of the case there was any occasion with the raiding officer to first obtain a search warrant from a Judicial Magistrate before entering the premises of the respondent, if he had no opportunity to obtain search warrant from a Magistrate and conducted raid without obtaining search warrant, what would be the effect of the said raid on the subsequent proceedings of adjudication?". 12. In order to effectively answer the query, we would like to reproduce the relevant provisions of law relating to search, arrest and seizure. Federal Excise Act, 2005 25. Searches and arrests how to be made.- All searches or arrests made under this Act or any rules made thereunder and all arrests made under this Act shall be carried out in accordance with the relevant provisions of the Code of Criminal Procedure, 1898 (V of 1898). Chapter-XIII of Federal Excise Rules 2005 62. Authorised officer to have free access to premises, equipment, stocks and accounts relating to excisable goods and excisable services.- Any officer authorised in writing by the Collector in this behalf shall have free access at all times to any premises and to any place where excisable goods are processed, stored, sold or manufactured, or where excisable services are provided or rendered, and may inspect the building, the plant, the machinery, and the stocks, and the accounts, and may at any time check the records of the goods stocked in, or removed from the

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factory, or place, or their transfer within a factory, to that part of the premises, if any, in which they are to be used for the manufacture of any other commodity, or the record being maintained where excisable services are provided or rendered, whether for the purpose of testing the accuracy of any return or statement submitted under the Act or these rules, or of informing himself as to any particulars regarding which information is required for the purposes of the Act or these rules. 63. Powers of the authorised officer.- (1) Any officer duly empowered by the Collector may stop and search any vessel, cart or other means of conveyance for excisable goods, and may seize and remove or detain any goods in respect of which it appears to him that duty should have been, but has not been levied, or that any contravention of the provisions of the Act or these rules has occurred subject to Chapter IV of the Act. (2) Every officer of Customs duly empowered by the Collector shall have, use, and exercise all such and the like powers and authority for the search, examination, seizure, detention, removal and prosecution of any vessel, cart, or other means of conveyance, or any horse or other animal, or any goods liable to confiscation under the Act or these rules, as are, or may be, conferred on the like officer of Federal excise. Explanation: For the purpose of this rule, excisable goods means cigarettes and beverages. 64. Power to enter and search. -- (1) The Central Board of Revenue may empower any officer of any department under its control to enter and search at any time by day or by night any land, building, enclosed place, premises, or other place upon or in which he has reason to believe that excisable goods are being processed, sorted, stored, manufactured or excisable services are provided or rendered in contravention of the provisions of the Act or these rules subject to Chapter IV of the Act. Relevant Provisions of Code of Criminal Procedure, 1898 98. Search of house suspected to contain stolen property, forged documents, etc. (1) If a District Magistrate, Sub-Divisional Magistrate, or Magistrate of the first class, upon information and after such inquiry as he thinks necessary, has reason to believe that any place is used for the deposit or sale of stolen property, or for the deposit or sale or manufacture of forged documents, false seals or counterfeit stamps, bank notes, currency notes or coins, or instruments or materials for counterfeiting coins stamps, bank notes or currency notes or for forging. or that any forged documents, false seals or counterfeit stamps [bank note currency notes or coins or instruments or materials used for counterfeiting coins, stamps, bank notes or currency notes] or for forging, are kept or deposited in any place. or for the deposit, sale, manufacture or production of any obscene object such as is referred to in section 292 of the Pakistan Penal Code or that any such obscene objects are kept or deposited in any place; he may by his warrant authorize any police-officer above the rank of a constable (a) to enter, with such assistance as may be required, such place, and (b) to search the same in manner specified in the warrant, and (c) to take possession of any property, documents, seals, stamps, I7(bank notes, currency notes] or coins therein found which he reasonably suspects to be stolen, unlawfully obtained, forged, false or counterfeit, and also of any such instruments and materials or of any such obscene objects as aforesaid, and (d) to convey such property, documents, seals, stamps, [bank notes, currency notes], coins, instruments, or materials or such obscene objects before a Magistrate, or to guard the same on the spot until the offender is taken before a Magistrate, or otherwise to dispose thereof in some place of safety, and (e) to take into custody and carry before a Magistrate every person found in such place who appears to have been privy to the deposit, sale or manufacture or keeping of any such property,

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documents seals, or stamps, (bank notes, currency] notes coins, instruments or materials or such obscene objects knowing of having reasonable cause to suspect the said property to have been stolen or otherwise unlawfully obtained, or the said documents, seals, stamps, bank notes, currency notes, coin, instruments or materials, to have been forged, falsified or counterfeited, or the said instruments or materials have been or to be intended to be used for counterfeiting coin, stamps, bank notes, or currency notes or for forging 2o[or the said obscene objects to have been or to be'intended to be sold, let to hire, distributed, publicly exhibited, circulated, imported or exported]. (2) The provisions of this section with respect to: (a) counterfeit coin, (b) coin suspected to be counterfeit, and (c) instruments or materials for counterfeiting coin. shall, so far as they can be made applicable, apply respectively to: (a) pieces of metal made in contravention of the Metal Tokens Act, 1889, or brought into Pakistan in contravention of any notification for the time being in force under 21 [section 16 of the Customs Act, 1969]. (b) pieces or metal suspected to have been so made or to have been so brought…

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