KARACHI: The Sindh High Court (SHC) has directed the de-sealing of retail outlets belonging to the Western clothing brand Sowears. The court’s order temporarily suspends the Federal Board of Revenue’s (FBR) earlier action of sealing the premises based on an alleged sales tax shortfall of Rs200 million.
The FBR had moved to seal Sowears’ head office and five prominent retail locations across Karachi, including outlets in Lucky One Mall, Dolmen Mall, Ocean Mall, Hyderi Market, and Saima Mall.
This action followed a tax evasion probe conducted by the revenue body. The FBR alleged that Sowears had failed to integrate its Point of Sale (PoS) system with the FBR network, which it claimed allowed the company to conceal taxable income and evade tax payments.
Further investigations, according to the FBR, also uncovered undeclared international business transactions conducted in the UAE and USA via courier services, which had not been reported in the company’s income tax filings in Pakistan.
Sowears challenges FBR’s procedure
Sowears’ legal representative, Mirza Moiz Baig, argued before the SHC that the sealing of business premises is only legally permissible after a formal and final determination of a taxpayer’s liability has been made. He highlighted significant procedural irregularities in the FBR’s actions, contending that the sealing orders were issued without the mandatory prior issuance of showcause notices to the company. Additionally, he pointed out that the sealing orders were issued by a commissioner, whereas the law requires such orders to be issued by a chief commissioner.
Baig further asserted that sealing is unwarranted if a taxpayer has fulfilled their tax obligations. He argued that since the FBR had not yet completed the adjudication process to definitively determine Sowears’ tax dues, the act of sealing the outlets was premature and constituted a violation of due process.
Court suspends sealing orders
Drawing parallels with a similar legal challenge involving another clothing brand, Nomi Ansari, Mirza Moiz Baig presented these arguments. The Sindh High Court, upon hearing the submissions, decided to suspend the FBR’s sealing orders against Sowears.
The court has allowed Sowears to resume its business operations under the condition that the company deposits an amount of Rs500,000 as security with the court’s Nazir. This security will be held until the final disposal of the petition filed by Sowears challenging the FBR’s actions.
The Sindh High Court has scheduled the next hearing for this case on May 20th, when further arguments and proceedings are expected to take place.
