ISLAMABAD: The Supreme Court of Pakistan (SCP) has declared tax orders issued by the Federal Board of Revenue (FBR) after the expiry of the legally prescribed time limit as unlawful, emphasizing that under the Sales Tax Act 1990, an order must be passed within 120 days after the issuance of a show-cause notice.
Any action taken beyond this period, the court ruled, cannot be sustained in law.
According to the detailed written judgment, a three-member bench comprising Justice Mian Gul Hasan Aurangzeb, Justice Naeem Akhtar Afghan, and Justice Muhammad Shafi Siddiqui dismissed FBR’s petition in Civil Petition for Leave to Appeal (C.P.L.A) No. 1990/2025. The petition had been filed by the Assistant Commissioner Inland Revenue, Rawalpindi, challenging the Lahore High Court Rawalpindi Bench’s decision dated March 10, 2025.
The court noted that the Regional Tax Office Rawalpindi had issued a show-cause notice on November 15, 2023, to respondent Umar Tariq Khan, alleging recovery of over four million rupees in inadmissible input tax. However, the Order-in-Original was issued on March 20, 2024—beyond the statutory 120-day period from the date of the show-cause notice.
The Supreme Court observed that the legal position on this matter has already been settled in multiple precedents, including Collector Sales Tax vs. Super Asia, WAK Limited, and Abbasi Enterprises. These rulings clearly establish that failure to pass an order within the prescribed time renders the tax proceedings automatically ineffective.
The court further stated that under Article 189 of the Constitution, such judgments are binding on all state institutions, including the FBR. It expressed concern over the FBR’s repeated attempts to challenge already settled legal principles, calling the practice regrettable.
Criticizing the trend of filing unjustified appeals by government departments, the court remarked that such conduct places an unnecessary burden on the judiciary and wastes public resources. It stressed that the state should act as a responsible litigant rather than filing appeals in every matter without due consideration.
The Supreme Court indicated that in future similar cases, courts may dismiss appeals at an initial stage and, where necessary, impose costs and determine responsibility of concerned officials.
The court also advised the Chairman FBR to establish independent and empowered review committees—comprising retired judges, senior tax experts, and experienced officers—before filing appeals, in order to avoid unnecessary litigation on already settled legal issues.
Ultimately, the Supreme Court refused to grant leave to appeal and dismissed FBR’s petition.
