KARACHI: Sindh High Court (SHC) declared a detailed judgment on as many as 485 petitions filed in mega sales tax fraud and declared SRO 775(I)/2011 as ultra vires to the Sales Tax Act, 1990. All 485 petitions raised a common question regarding interpretation and application of various provisions of Sales Tax Act 1990, particularly in the context of the criminal offence.
As per details, the verdict clearly fines the legal status of SRO 56(I)/2010 (powers and jurisdiction of Directorate General of Intelligence and Investigation-FBR); SRO 775(I)/2011 (powers of Directorate General of Intelligence and Investigation-FBR to exercise provisions of Sales Tax Act); SRO 776(I)/2011 (powers of Directorate General of Intelligence and Investigation Inland Revenue).
The SHC verdict, on a jurisdictional point, declared SRO 48/2008 as validly issued and effective accordingly. SRO 56/2010 is declared to be invalid but its invalidity merely meant that SRO 48/2008 continued to effectively hold the field. SRO 775/2011 is declared to be ultra vires the Sales Tax Act. SRO 776/2011 is declared to be invalid, but its invalidity merely meant that, as before, SRO 48/2008 continued to effectively hold the field. Notwithstanding the changes in sections 30 and 30A, SRO 48/2008 continued to remain effective for all purposes.
The verdict reads that it will be appropriate if FBR issues a fresh notification under sections 30 and 30E that complies with both the required conditions, i.e, declares the officers of the DG (I&I)-IR “to be” officers of Inland Revenue (section 30) and establishes their jurisdiction, etc in relation to specified provisions (section 30E).
On the issue of registration of FIRs, submissions of challans and notices under section 37 in relation to the criminal cases, the judgment said the FIRs, and the challans submitted and notices issued on or before June 30, 2011 and any investigation carried out by or before that date were validly issued and undertaken by the officers of the DG (I&I)-FBR and within jurisdiction.
The challans submitted and notices issued on or after July 1, 2011 by officers of the DG (I&I)-FBR were irregular as this Directorate General had ceased to be of relevance for the Sales Tax Act on and after that date, but for reasons stated such irregularity does not vitiate their validity nor invalidate any investigation or inquiry nor render defective or invalid any proceedings taken before the Special Judge by such officers.
The judgment said that all acts and proceedings with regard to criminal cases (including by way of any further investigation) can now be done and/or continued only by officers of the DG(I&I)-IR, duly authorized and empowered under SRO 48/2008 or any subsequent validly issued notification.
Regarding proceedings before the Special Judge, the judgment said the Special Judge has jurisdiction only in relation to those clauses of section 33 as create criminal offences. Once the supply chains have been established (or as each supply is so established, as the Special Judge may deem appropriate) the prosecution shall in respect of each such chain satisfy the Special Judge, “link” by “link”, “block by “block” in a manner as to the alleged culpability of each person appearing on the supply chain and every other person (if any) alleged to be an abettor, conniver or otherwise involved in the tax fraud or any other criminal offence under the clauses of section 33.
The person whose matter is being so considered by the Special Judge shall be entitled to be present or represented at such consideration. If the Special Judge is satisfied that, on applying the law, inter alia, in terms as stated and explained in this judgment, there is no probability of the person under consideration being convicted of the criminal offence of tax fraud or any other criminal offence under any clause of section 33, such person shall be discharged forthwith, whether by way of acquittal or otherwise as appropriate.
As to proceedings in respect of section 37 notices issued in relation to tax fraud or any other act by way of departmental proceedings (i.e, not for a criminal offence), judgment added that these proceedings may be continued in accordance with law. However, if such proceedings terminate (either at the show cause or any appellate or” subsequent stage) in favour of the person against whom they were initiated, and such person is also nominated in terms as herein before stated and proceedings against him are continuing before the Special Judge, the relevant order may be placed before the latter and he shall, after giving a notice to the prosecution, and treating the matter before him as being under section 265-K, the judgment added.