KARACHI: A two-member bench of the Sindh High Court (SHC) restrained customs officials from taking any adverse action on a constitutional petition filed by M/s Atlas Honda against issuance of a show cause notice as why customs duty, sales tax, and income tax may not be recovered on account of non-inclusion of royalty allegedly related to the parts imported by the petitioner during the financial year 2019.
On 4 February 2021, the court also issued notices to the customs officials and directed them to file their respective para wise comments on the next date of hearing.
Earlier, counsel for the petitioner stated that on Jan 01, 1994, the petitioner entered into a license and technical assistance agreement with M/s Honda Motor Co, Ltd Japan to license manufacture, and sell motorcycles, through the LTA Agreement, the petitioner agreed to pay a royalty as consideration for the indivisible and non-transferable exclusive right to Honda Japan’s Intellectual Property and for the technical information and know-how regarding the production of the motorcycles.
He further argued that the LTA Agreement allows the petitioner to request Honda Japan to supply parts at a reasonable price, these parts are then used along with local parts in the production of motorcycles, these parts are imported by the petitioner from Honda Japan to Karachi.
Counsel stated that through this petition, the petitioner challenges the show cause notice on December 30, 2020 issued by the Collector of Customs Adjudication-II, through the impugned notice, the respondent has directed the petitioner to show cause as why customs duty, sales tax, and income tax may not be recovered on account of non-inclusion of royalty allegedly related to the parts imported by the petitioner during the financial year 2-19.
He further argued that the impugned notice is illegal as the respondent does not have any jurisdiction to assess income tax or sales tax, the impugned notice is further illegal it is in direct violation of the judgments of the Lahore and Karachi benches of the custom’s appellate tribunal.
Citing Chairman FBR, Member Inland Revenue FBR, Chief CIR Large Taxpayers, Collector of Customs Adjudication-II, Ministry of Finance Sindh and Sindh Revenue Board as respondents, petitioner pleaded the court may declare that impugned notice dated Dec 30, 2019 and the actions of the respondents are without lawful authority and are of no legal effect and pending disposal of this petition, suspend the impugned notice.
