ISLAMABAD: Jurisdiction infighting between the Directorate General Intelligence and Investigation (DGI&I)-FBR and Directorate of Intelligence & Investigation (DI&I) Inland Revenue (IR) Karachi, has marred investigation into the mega fake sales tax fraud involving Rs47.110 billion.
As per details, the role of DG I&I-FBR was challenged in the mega scam in the Sindh High Court (SHC) in 2011. The petitioners had questioned that DG I&I-FBR working in this case was beyond its jurisdiction and raised questions regarding the interpretation and application of various provisions of the Sales Tax Act, 1990, especially in the context of tax fraud as a criminal offence. The issues raised by the petitioners were about the intersection of principles of tax law and the criminal law.
The petitioners challenged three FIRs that were registered by DG I&I-FBR in this case. In respect of all the FIRs interim challans have been submitted, as well as many supplementary challans thereafter. The three FIRs are: (a) Case No 481- DCI/7-5/FEST/INQ/10 registered on 19.01.2011 (“FIR 481”); (b) Case No 678/DCI/STFE/Jinnah Impex/2011 registered on 09.05.2011 (“FIR 678”); and (c) Case No 693-DCI/S.Tax/Fake Input/2011 registered on 12.05.2011 (“FIR 693”). All these FIRs were registered under the Sales Tax Act as it stood prior to the amendments made therein by the Finance Act, 2011.
The Finance Act, 2005 also added sections 3A and 3E to the Customs Act, 1969 in exactly the same terms as sections 30A and 30E. In 2007, section 3A of the Customs Act was substituted such that it now referred to a Directorate General (Intelligence and Investigation) Federal Board of Revenue (“FBR”). At the same time, section 30A was amended such that the words “Customs and Excise” were replaced with “CBR”. (The CBR of course gave way to the FBR when the Federal Board of Revenue Act, 2007 came into force.) Finally, in 2011, the words “CBR” which were up till then appearing in section 30A were replaced with the words “Inland Revenue”.
From 2005 to 2007, there was only one Directorate General of Intelligence and Investigation, which was identified by the appellation “Customs and Excise”. In 2007, this Directorate General was renamed as being that of “Federal Board of Revenue” (in the Customs Act) and “CBR” in the Sales Tax Act. However, the Directorate General still remained the same. The change in 2011 in the Sales Tax Act, from “CBR” to “Inland Revenue” in section 30A however, was not merely formal but of substantial effect. This was so because as a result of this change, there were two separate and distinct Directorates General of Intelligence and Investigation from July 1 2011 onwards.
One was identified by the appellation “Federal Board of Revenue” and the other by the appellation “Inland Revenue”. As presently relevant, the first had jurisdiction only for and in relation to the Customs Act, whereas the latter alone had jurisdiction for the Sales Tax Act 1990. Therefore, CP requested to declare all three FIRs as invalid.
The SHC in response to the petitions took jurisdictional objection first and paid heed to three notifications (SRO 56(I)/2010 dated 02.02.2010, SRO 775(I)/2011 dated 19.08.2011 and SRO 776(I)/2011 dated 19.08.2011 ) issued under the Sales Tax Act 1990.
The SHC in its verdict said that “Since SRO 775/2011 is ultra vires the Sales Tax Act 1990, the officers of the DG (I&I)-FBR can’t now proceed further with this case. Any further investigation or inquiry and any other Act in the proceedings pending before the Special Judge must now be done by the officers of the DG (I&I)-IR.
Meanwhile, sources said that DGI&I-FBR had planned to file ‘review petition’ in Supreme Court against the SHC decision, adding that the department, which had already intimated about review petition to its head office, was presently waiting for a go-ahead.
