Summary: (a) Sales Tax Act, 1990----Ss.7 & 8(1)(b)---“Stock-in-trade”---Term not defined in statute---Interpretation of undefined commercial and taxation expression---Where an expression used in taxation or commercial legislation was not statutorily defined, its meaning was to be determined contextually by reference to legal, commercial, accounting and taxation usage---Ordinary English dictionaries, particularly those containing general or figurative meanings, could not conclusively determine the legal character of an asset used in business---Court was required to consider nature of business, actual use of asset, statutory scheme and relevant commercial practice---Meaning of “stock-in-trade” depended upon function for which goods were held and could not be determined merely from their physical description. (b) Sales Tax Act, 1990----S.8(1)(b)---Stock-in-trade---Plant and machinery---Functional test---Stock-in-trade ordinarily meant inventory, raw material, work in progress, finished goods or other goods and services normally held or offered for sale by a business---Plant and machinery constituted apparatus kept for permanent employment in carrying on business and did not form part of stock-in-trade---Functional test was whether subject asset was itself dealt with and sold in ordinary course of business or was an apparatus employed for carrying on business---Generator installed and used to provide power for manufacturing taxable supplies was an adjunct to industrial operations and constituted plant and machinery, not stock-in-trade, unless business itself consisted of trading in generators. Cited Cases: • Yarmouth v. France [1887] 19 QBD 647 • Benson v. The Yard Arm Club Ltd. 53 TC 67 (c) Taxation---Stock-in-trade and capital asset---Circulating capital and fixed capital---Distinction---Stock-in-trade formed part of circulating capital from which businessman earned profit by selling or parting with it, whereas plant and machinery formed part of fixed capital retained and employed to produce income---Nature of trade and purpose for which asset was held constituted determining factors---Machinery used by manufacturer to produce articles for sale was fixed capital, while machinery purchased by a machinery dealer for resale was circulating capital---Industrial generator imported, installed and retained for generating energy in manufacturing process was a fixed capital asset and not stock-in-trade---Same generator would constitute stock-in-trade where imported or acquired for sale and supply in ordinary course of business. Cited Cases: • Golden Horse Shoe (New) Limited v. Thurgood [1934] 1 KB 548 • Assam Bengal Cement Co. Ltd. v. Commissioner of Income-Tax, West Bengal AIR 1955 SC 89 • John Smith v. Moore [1921] 12 TC 266 (d) Sales Tax Act, 1990----S.8(1)(b)---Plant and machinery treated as stock-in-trade---Attock Cement case---Reconsideration by Larger Bench---Conclusion in Attock Cement Pakistan Ltd. that plant and machinery could be construed as stock-in-trade was based upon over-extension of general dictionary meanings and erroneous conflation of industrial apparatus with circulating capital---Treating everything used within factory as stock-in-trade would neutralize statutory authority of Federal Government to restrict input tax adjustment and lead to an absurd result---Courts were required to distinguish between goods held for sale and apparatus used to manufacture goods---Rule laid down in Attock Cement, to extent that plant and machinery constituted stock-in-trade, was declared erroneous in law and on facts. Overruled to the extent stated: • Attock Cement Pakistan Ltd. v. Collector of Customs, Collectorate of Customs and Central Excise, Quetta and others 1999 PTD 1892 (e) Sales Tax Act, 1990----S.8(1)(b)---S.R.O. No.578(I)/98, dated 12.06.1998, Serial No.6, as substituted by S.R.O. No.677(I)/2000, dated 28.09.2000---Input tax on generators and generating sets---Federal Government was empowered to specify goods, acquired otherwise than as stock-in-trade, in respect of which input tax could not be claimed---Generators and generating sets were included among restricted goods, but generators of 250 KVA or above acquired by registered manufacturer for use in manufacture of taxable supplies were expressly excluded from such restriction---Generator of 1150 KVA imported, installed and used by respondent for manufacturing taxable supplies fell within said exception and was not included among goods in respect of which input tax adjustment was prohibited. (f) Sales Tax Act, 1990----Ss.7 & 8(1)(b)---Value Added Tax mechanism---Input tax adjustment---Right to adjust input tax against output tax constituted fundamental substantive mechanism of value-added taxation under Sales Tax Act, 1990---Notification restricting such right was to be construed according to statutory purpose and precise classification of goods---Industrial generator remained plant and machinery and fixed capital, but entitlement to input tax adjustment arose from specific exception created for generators of 250 KVA or above used in manufacture of taxable supplies, and not because such generator constituted stock-in-trade. (g) Sales Tax Act, 1990----S.8(1)(b)---S.R.O. No.677(I)/2000, dated 28.09.2000---Beneficial amendment---Curative and clarificatory notification---Retrospective operation---Amending notification distinguished industrial generators of 250 KVA or above, used in manufacture of taxable supplies, from ordinary generators and removed anomaly contained in earlier notification---Amendment conferred benefit upon importers of industrial generators and was curative and clarificatory in nature---Such notification was to operate retrospectively and its benefit extended to generator imported by respondent before issuance of amendment---Tax authorities and Appellate Tribunal erred in treating amendment as purely prospective. Disposition---Civil appeal partially allowed---Finding in Attock Cement Pakistan Ltd. that plant and machinery constituted stock-in-trade declared erroneous in law and on facts---Reliance placed by Peshawar High Court upon said precedent for treating industrial generator as stock-in-trade held misplaced and contrary to law---Orders of Tax Authorities and Customs, Excise and Sales Tax Appellate Tribunal, to extent they treated S.R.O. No.677(I)/2000 as prospective, disapproved---S.R.O. No.677(I)/2000 declared curative and clarificatory and given retrospective effect---Benefit thereof extended to import of 1150 KVA generator made by respondent. Commissioner Inland Revenue (Legal), LTU, Islamabad and another v. M/s Syntronics (Ltd.), Khyber Pakhtunkhwa, Civil Appeal No.1227 of 2014, Supreme Court of Pakistan (Larger Bench), heard on 20.02.2026, approved for reporting.

Summary: Anti-Money Laundering Act, 2010—Ss. 3, 4, 21(1)(a), 22, 2(xxvi), 2(xxviii) & Schedule-I, Entry XIIA—Income Tax Ordinance, 2001—Ss. 192, 192A & 199—Code of Criminal Procedure, 1898—Ss. 173 & 498—Constitution of Pakistan, 1973—Art. 185(3)—Pre-arrest bail—Money laundering prosecution founded on alleged tax evasion—Need for prior determination of tax liability—Predicate offence—The Supreme Court held that where an FIR under the Anti-Money Laundering Act, 2010 is founded on allegations of concealment of income, tax evasion, and non-reconciliation of wealth statement with bank entries, but no prior determination of tax liability has been made through the process of assessment or adjudication under the Income Tax Ordinance, 2001, initiation of criminal proceedings is prima facie illegal. The Court observed that, in the present case, the FIR alleged concealment of income during Tax Years 2017 and 2018 and tax sought to be evaded on that basis, yet the prosecution had proceeded straightaway under AMLA, 2010 without first establishing the tax liability through the legally prescribed fiscal process. It was further held that, unless the amount allegedly evaded is first determined and it is thereafter shown that any asset acquired therefrom constitutes “proceeds of crime” relatable to a predicate offence under the Schedule to AMLA, the ingredients necessary to attract Ss. 3 and 4 of AMLA, 2010 are not prima facie made out. The Court, therefore, found that the very basis of the FIR and initiation of criminal proceedings stood substantially impaired. Taxation and criminal liability—Assessment proceedings under tax law distinguished from criminal prosecution—Direct resort to criminal process deprecated—The Supreme Court held that matters pertaining to concealment of income and evasion of tax are, in the first instance, to be addressed through the assessment, adjudicatory, and recovery mechanisms provided under the tax laws and before the specialized forums constituted thereunder. Although a fiscal dispute may, in a proper case, also attract criminal liability where dishonest conduct and statutory ingredients are established, the criminal process cannot be invoked in disregard of the foundational requirement of prior determination of liability where the alleged money laundering claim itself depends upon tax evasion as the predicate offence. In the present case, the Court found that no such pre-trial legal exercise had been properly exhausted before resort was made to registration of the FIR under AMLA, 2010. Pre-arrest bail—Documentary prosecution case—Custodial interrogation unnecessary—Further inquiry—The Supreme Court held that where the prosecution case rests primarily on documentary material such as tax record, bank accounts, and bank statements, no useful purpose is ordinarily served by taking the accused into custody, particularly when there is no real likelihood of tampering with such evidence. The Court reiterated that criminal law should not be used as a tool of harassment or as a substitute for lawful recovery proceedings in matters essentially grounded in documentary fiscal disputes. In the circumstances of the case, the allegations required deeper examination, the case called for further inquiry, and the possibility of false implication and mala fide on the part of the prosecution could not be ruled out at the bail stage. The petitioner was, therefore, held entitled to the extraordinary relief of pre-arrest bail. Effect of subsequent tax adjudication—Foundation of prosecution shaken—Annulment by Appellate Tribunal Inland Revenue—The Supreme Court took note of the admitted position that, subsequent to registration of the FIR, the tax liability determined by the tax authorities against the petitioner had been annulled by the Appellate Tribunal Inland Revenue through order dated 30.06.2025. The Court held that where the criminal case is premised upon alleged tax liability, annulment of that liability by the competent fiscal forum materially weakens, at least for the time being, the foundation of the criminal proceedings. This circumstance constituted a strong consideration in favour of grant of pre-arrest bail. Investigation—Earlier placement in column No. 2—Subsequent change of stance by prosecution—Relevance at bail stage—The Supreme Court further noted that, after registration of the FIR, the first Investigating Officer had not found the petitioner guilty and had mentioned his name in column No. 2 of the report under S. 173, Cr.P.C., but in a subsequent investigation the petitioner had been found guilty on the same allegations. The Court treated this shift in investigative position as a relevant circumstance, which, when read with the documentary nature of the case and the unsettled state of the alleged tax liability, reinforced the conclusion that the matter called for further inquiry and that arrest of the petitioner was not warranted at that stage. Case references—The Court expressly referred to and relied upon Directorate of Intelligence & Investigation-FBR, through its Director and others v. Taj International (Pvt.) Ltd. & others (PLD 2025 SC 633), holding that in the absence of determination of tax liability through assessment or adjudication, registration of FIR or initiation of criminal proceedings is illegal; Muhammad Asif v. The State etc. (2016 PTD 2393), wherein pre-arrest bail was granted in a tax-related prosecution after the underlying fiscal determination had been set aside; Aqeel Ahmed Khan v. The State (2025 SCMR 1955); Ali Anwar Paracha v. The State (2024 SCMR 1596); Noman Khaliq v. The State (2023 SCMR 2122); and Abdul Rasheed v. The State and another (2023 SCMR 1948), all cited in support of the proposition that where a case is primarily based on documents and custodial interrogation serves no useful purpose, relief in bail jurisdiction may be justified. Petition converted into appeal and allowed—Impugned order set aside—Pre-arrest bail confirmed—The Supreme Court converted the criminal petition into an appeal, allowed the same, set aside the impugned order of the Lahore High Court refusing pre-arrest bail, and confirmed the ad-interim pre-arrest bail already granted to the petitioner, subject to furnishing fresh bail bonds in the sum of Rs.500,000/- with one surety in the like amount to the satisfaction of the learned Trial Court.

Summary: (a) Anti-Money Laundering Act (VII of 2010)- -Ss. 8 & 23-Provisional attachment order-Interim order-Appeal-Maintainability-Appellant was aggrieved of provisional attachment order passed by Trial Court, against which High Court did grant any interim relief-Plea raised by authorities was that appeal against provisional attachment order was not maintainable as order of High Court was an interim order-Validity-Order of attachment under Section 8 of Anti-Money Laundering Act, 2010 was otherwise final for the taxpayer whose all immovable and moveable properties, including bank accounts were attached without providing any opportunity of being heard, in consequence whereof, the entire business had come to an halt-No other remedy was provided under Anti-Money Laundering Act, 2010 except to challenge the same by filing appeal under Section 23 of Anti-Money Laundering Act, 2010-Matter fell within the exceptions to exercise discretion under Article 185(3) of the Constitution to obliviate miscarriage of justice-Supreme Court suspended operation of order of attachment of properties, passed by Trial Court, till final decision of appeal pending before High Court-Appeal was allowed. Directorate of Intelligence and Investigation-FBR, through its Director and others v. Taj International (Pvt) Ltd and others (PLD 2025 SC 633 rel. (b) Anti-Money Laundering Act (VII of 2010)- -S.23-Words-final-and-order of Court-Effect-Legislature has used word-final-with decision whereas such word has not been used with-order of the Court-There is no distinction of interim order or final order for the purposes of filing an appeal under Section 23 of Anti-Money Laundering Act, 2010. (c) Constitution of Pakistan- -Art.185(3)-Petition for leave to appeal-Interim order-Principle-In exceptional circumstances involving flagrant violation of law, wrongful exercise of jurisdiction or manifest grave injustice, an aggrieved party can approach Supreme Court in terms of Article 185(3) of the Constitution with the request to set aside even an interim order falling within the category of such exceptions. Khawaja Adnan Zafar v. Hina Bashir and others 2024 SCMR 1295; Attiq ur Rehman v. Sh. Tahir Mehmood and others 2023 SCMR 501; Federation of Pakistan through Secretary, Ministry of Energy (Power Division), Islamabad and others v. Shafiq ul Hassan and others 2020 SCMR 2119 and Islamic Republic of Pakistan through Secretary, Establishment Division, Islamabad and others v. Muhammad Zaman Khan and others 1997 SCMR 1508 rel. Assisted by: Ms. Zainab Bashir, Judicial Law Clerk, Supreme Court of Pakistan.

Summary: (Against the order dated 12.01.2026 passed by the High Court of Sindh at Karachi in Spl. Crl. A. No. 01 of 2026). (a) Anti-Money Laundering Act (VII of 2010)--- ----Ss. 8 & 23---Provisional attachment order---Interim order---Appeal---Maintainability---Appellant was aggrieved of provisional attachment order passed by Trial Court, against which High Court did grant any interim relief---Plea raised by authorities was that appeal against provisional attachment order was not maintainable as order of High Court was an interim order---Validity---Order of attachment under Section 8 of Anti-Money Laundering Act, 2010 was otherwise final for the taxpayer whose all immovable and moveable properties, including bank accounts were attached without providing any opportunity of being heard, in consequence whereof, the entire business had come to an halt---No other remedy was provided under Anti-Money Laundering Act, 2010 except to challenge the same by filing appeal under Section 23 of Anti-Money Laundering Act, 2010---Matter fell within the exceptions to exercise discretion under Article 185(3) of the Constitution to obliviate miscarriage of justice---Supreme Court suspended operation of order of attachment of properties, passed by Trial Court, till final decision of appeal pending before High Court---Appeal was allowed. Directorate of Intelligence and Investigation-FBR, through its Director and others v. Taj International (Pvt) Ltd and others (PLD 2025 SC 633 rel. (b) Anti-Money Laundering Act (VII of 2010)--- ----S.23---Words “final” and “order of Court”---Effect---Legislature has used word “final” with decision whereas such word has not been used with “order of the Court”---There is no distinction of interim order or final order for the purposes of filing an appeal under Section 23 of Anti-Money Laundering Act, 2010. (c) Constitution of Pakistan--- ----Art.185(3)---Petition for leave to appeal---Interim order---Principle---In exceptional circumstances involving flagrant violation of law, wrongful exercise of jurisdiction or manifest grave injustice, an aggrieved party can approach Supreme Court in terms of Article 185(3) of the Constitution with the request to set aside even an interim order falling within the category of such exceptions. Khawaja Adnan Zafar v. Hina Bashir and others 2024 SCMR 1295; Attiq ur Rehman v. Sh. Tahir Mehmood and others 2023 SCMR 501; Federation of Pakistan through Secretary, Ministry of Energy (Power Division), Islamabad and others v. Shafiq ul Hassan and others 2020 SCMR 2119 and Islamic Republic of Pakistan through Secretary, Establishment Division, Islamabad and others v. Muhammad Zaman Khan and others 1997 SCMR 1508 rel. Muhammad Ali Lakhani, Advocate Supreme Court for Petitioners. Raja Muhammad Shafqat Abbasi, DAG for Respondent No. 1. Umer Ijaz Gillani, Advocate Supreme Court for Respondent No. 2. Assisted by: Ms. Zainab Bashir, Judicial Law Clerk, Supreme Court of Pakistan. Date of hearing: 17th February, 2026.

Summary: (a) Anti-Money Laundering Act (VII of 2010)---- ----Ss. 3, 4, 8, 20, 21, 22 & 23---Attachment of property---Alleged tax fraud/evasion as predicate offence---Requirement of prior tax proceedings/adjudication---FIR was registered alleging that petitioners had evaded Sales Tax and Income Tax amounting to Rs.598.447 million during Tax Years 2022 to 2024, and on same basis properties, vehicles and bank accounts of petitioners were attached under S.8 of Anti-Money Laundering Act, 2010---Supreme Court held that neither any proceedings under Sales Tax Act, 1990 or Income Tax Ordinance, 2001 were pending against petitioners, nor any show-cause notice had been issued, nor any tax liability had been determined through assessment/adjudication---Initiation of criminal proceedings and attachment of properties on allegation of tax evasion, without prior determination of tax liability and without opportunity of hearing, was violative of Art.10A of Constitution and principles of natural justice. Cited Case: • Directorate of Intelligence & Investigation-FBR through Director and others v. Taj International (Pvt.) Ltd. and others PLD 2025 SC 633 (b) Tax law---- ----Tax fraud/evasion---Criminal proceedings before assessment/adjudication---Not permissible---Supreme Court reiterated that tax liability is ordinarily civil in nature and must first be determined through process of assessment or adjudication under relevant taxing statute---Before coercive or penal provisions are invoked, liability must be crystallized through lawful process---Registration of FIR, initiation of criminal proceedings and coercive measures on allegation of tax fraud/evasion without lawful determination of tax due amounts to pre-empting assessment and is without jurisdiction and lawful authority. (c) Constitution of Pakistan---- ----Art. 10A---Right to fair trial and due process---Ex parte attachment of properties and bank accounts---No opportunity of hearing---Petitioners’ immovable properties, vehicles and bank accounts were attached under S.8 of Anti-Money Laundering Act, 2010 without prior notice or hearing---Supreme Court held that such action, particularly where no tax liability had yet been adjudicated, violated constitutional guarantee of due process and principles of natural justice---Attachment of all business assets and accounts brought petitioners’ entire business activity to a halt and could not be sustained without lawful justification. (d) Anti-Money Laundering Act (VII of 2010)---- ----S. 8---“Provisional attachment”---Nature and effect---Appealability---Respondents argued that attachment under S.8 was merely provisional and, therefore, appeal before High Court under S.23 was not maintainable---Supreme Court rejected contention and held that words “provisionally attach” relate to duration of attachment, initially not exceeding 180 days and extendable by Court for further period---For affected person whose properties and bank accounts are attached, order is final in its operative effect unless set aside---Since Act provides no other remedy, such order can be challenged through appeal under S.23. (e) Anti-Money Laundering Act (VII of 2010)---- ----S. 23---Appeal to High Court---Final decision or order---Interim/final distinction---Supreme Court held that S.23 permits appeal by any person aggrieved by final decision or order of Court---Legislature used word “final” with “decision” but not with “order”; therefore, for purpose of appeal under S.23, distinction between interim order and final order cannot be imported in respect of “order”---Attachment order under S.8, being an operative order affecting rights and business, was appealable before High Court. (f) Constitution of Pakistan---- ----Art. 185(3)---Petition for leave to appeal against interim order---Maintainability in exceptional cases---Respondents objected that petition before Supreme Court was not maintainable because High Court had only passed an interim order issuing notice---Supreme Court held that in exceptional circumstances involving flagrant violation of law, wrongful exercise of jurisdiction or manifest grave injustice, an aggrieved party may invoke Art.185(3) even against an interim order---Unlike Art.185(2), clause (3) uses word “order” and not “final order”, and Supreme Court has discretion to grant leave depending on facts and circumstances. Cited Cases: • Khawaja Adnan Zafar v. Hina Bashir and others 2024 SCMR 1295 • Attiq ur Rehman v. Sh. Tahir Mehmood and others 2023 SCMR 501 • Federation of Pakistan through Secretary, Ministry of Energy (Power Division), Islamabad and others v. Shafiq ul Hassan and others 2020 SCMR 2119 • Islamic Republic of Pakistan through Secretary, Establishment Division, Islamabad and others v. Muhammad Zaman Khan and others 1997 SCMR 1508 (g) Criminal Procedure Code (V of 1898)---- ----S. 561-A---Inherent jurisdiction---Ad-interim relief---Duty to give reasons---Petitioners sought suspension of attachment order before High Court through application under S.561-A, Cr.P.C.---High Court merely issued notice to Special Prosecutor for a date after three weeks and did not pass any order on interim relief or record reasons for withholding it---Supreme Court held that exercise of discretion to grant or withhold ad-interim relief must be justified through cogent reasons to maintain equilibrium between litigant parties---Failure to consider interim relief left petitioners remediless and perpetuated an allegedly illegal attachment. (h) Anti-Money Laundering Act (VII of 2010)---- ----S. 8---Attachment founded solely on tax FIR---No independent AML material---Application for attachment referred only to allegations contained in FIR registered by tax authorities---No material was shown to establish that proceedings under AML Act had been invoked independently of alleged tax evasion---Supreme Court held that attachment of properties and bank accounts, in circumstances where tax liability had not been determined and no opportunity of hearing had been provided, amounted to miscarriage of justice requiring interference. Disposition: Criminal Petition was converted into appeal and allowed along with C.M.A.; operation of attachment order dated 24.12.2025 passed by Special Judge, Customs, Taxation and Anti-Smuggling-I, Karachi, attaching petitioners’ properties, vehicles and bank accounts under S.8 of Anti-Money Laundering Act, 2010, was suspended till final decision of Special Criminal Appeal No.01/2026 pending before learned Single Judge of High Court of Sindh at Karachi.

Summary: Constitution of Pakistan, 1973--- ----Art. 175E(5) & Federal Legislative List, Entry 49---Khyber Pakhtunkhwa Sales Tax on Services Act, 2022, Sch. 2, Serial No. 14---Provincial sales tax on services---Construction services---Challenge to vires---Tax on services vis-à-vis tax on goods---Scope of provincial taxing power after Eighteenth Amendment--- Petitioners challenged vires of Serial No. 14 of Schedule 2 to Khyber Pakhtunkhwa Sales Tax on Services Act, 2022 on ground that levy described as tax on “Construction Services” in substance included goods component of construction contracts, which, according to petitioners, could only be taxed by Federation under Entry 49 of Federal Legislative List---Federal Constitutional Court held that impugned provision, when read harmoniously with Entry 49, imposed tax only on services and not on goods---After Eighteenth Amendment, power to levy tax on services vested exclusively in Provinces, while Federation retained competence over taxes on sales and purchases of goods except sales tax on services---Impugned entry was confined to construction and allied services and was not inconsistent with Constitution---Even learned counsel for petitioners conceded that Serial No. 14 was confined to services and did not extend to goods---Accordingly, no ground was made out to strike down impugned law as ultra vires. Khyber Pakhtunkhwa Sales Tax on Services Act, 2022--- ----Levy on entire contractual consideration---Inclusion of goods component---Double taxation concern---Adjustment mechanism---Need for bifurcation--- Court, however, observed that grievance of petitioners substantially related not to vires of law but to manner of its implementation, as show-cause notices had demanded tax on entire contractual consideration for period from July 2021 to April 2022, including value of goods utilized in performance of contracts---Court noted that statute itself allowed claim of adjustments, including refunds, regarding tax paid under other laws on goods or taxable services used in provision of taxable services, and Memorandum of Understanding between FBR and KPRA also envisaged cross-adjustment to avoid double taxation---Matter was thus governed by existing law and administrative arrangement and did not warrant constitutional invalidation of impugned provision---Court nevertheless emphasized that KPRA should devise clearer mechanism, rules or Standard Operating Procedures requiring bifurcation of contractual consideration into service component and goods component so that only service portion is subjected to provincial sales tax and unnecessary hardship to taxpayers is avoided. Constitution of Pakistan, 1973--- ----Art. 175E(5)---Federal Constitutional Court---Jurisdiction---Tax reference involving vires of law--- Though tax references were not expressly enumerated within ordinary appellate jurisdiction of Federal Constitutional Court, challenge in present case involved substantial question of constitutional interpretation, namely vires of provincial law---Court held that Art. 175E(5) empowered it, on its own motion or otherwise, to call for record of “any case” from “any court” where substantial question of law as to interpretation of Constitution arose---Such power was unqualified and wide enough to include tax references and other proceedings even where express jurisdiction might not otherwise be specifically mentioned---Since vires of legislation inherently raised substantial constitutional question, Federal Constitutional Court was competent to adjudicate matter and, under present constitutional scheme, is sole apex forum for determining vires of legislation. (a) Provincial sales tax on services---Construction services---Constitutional validity--- After the Eighteenth Amendment, Provinces possess exclusive competence to levy tax on services, while Federation retains competence to tax goods under Entry 49 of Federal Legislative List, except sales tax on services---Serial No. 14 of Schedule 2 to Khyber Pakhtunkhwa Sales Tax on Services Act, 2022, being confined to “Construction Services” and allied services, was intra vires the Constitution. (b) Vires challenge---Harmonious construction of constitutional and statutory provisions--- Where constitutional entry and impugned statutory provision can be read harmoniously without contradiction, constitutional invalidation is not warranted---Impugned law did not trench upon federal taxing domain over goods merely because construction contracts may involve use of goods in course of service delivery. (c) Levy on whole contract amount---Goods and services mixed in construction contracts---Effect--- If tax is demanded on entire contractual consideration, inclusive of both service charges and cost of goods utilized in execution of contract, such grievance pertains to application and assessment mechanism rather than constitutional validity of charging provision itself---Province may tax service component only and not goods component. (d) Double taxation concern---Statutory adjustment and refund mechanism--- Where statute provides for adjustment or refund of tax paid under other laws on goods or taxable services used in provision of taxable service, and there exists inter-agency arrangement for cross-adjustment, apprehended double taxation is addressable within framework of law and does not by itself render charging provision unconstitutional. (e) Revenue administration---Need for bifurcation of contractual consideration--- Revenue authority should streamline process by first requiring taxpayer to identify and segregate portion of contractual consideration attributable to services and portion attributable to goods, so that provincial sales tax is levied strictly on services while goods component remains governed by federal sales tax regime---Formulation of rules or Standard Operating Procedures to this effect was recommended. (f) Federal Constitutional Court---Jurisdiction over tax reference involving vires of law--- Even though tax references are not expressly listed in ordinary heads of jurisdiction, Art. 175E(5) authorizes Federal Constitutional Court to call for and adjudicate “any case” from “any court” if it involves substantial question of law as to interpretation of Constitution---Challenge to vires of legislation inherently raises such question and therefore falls within jurisdiction of said Court. (g) Present constitutional scheme---Forum for striking down legislation--- Under present constitutional arrangement, authority to adjudicate upon vires of legislation and to strike down laws on constitutional grounds vests in Federal Constitutional Court, and not in Supreme Court, wherever substantial question of constitutional interpretation is involved. Leave refused; petitions dismissed; impugned judgment affirmed.

Summary: Punjab Sales Tax on Services Act (XLII of 2012)--- ----Ss. 3(3), 11, 24, 52 & 67-A---Reference---Taxable services---Territorial jurisdiction---Applicant / company was withholding agent and was aggrieved of show cause notice issued by Authorities for non-deducting of sale tax on the services---Plea raised by applicant / company was that taxable services were provided in other province and tax could not be charged only for the reason that head office was registered in the Province of Punjab---Validity---Mere residency of a company in Punjab or its classification as a prescribed withholding agent does not, by itself, create a substantive tax liability under Punjab Sales Tax on Services Act, 2012---Liability to sales tax under Ss. 11, 24 & 52 of Punjab Sales Tax on Services Act, 2012 was fastened exclusively upon a registered person providing taxable services---Punjab Revenue Authority was competent to initiate withholding tax proceedings on the basis of undisputed audited accounts showing composite amounts paid for services; final determination of withholding tax liability could not be made on aggregated figures alone---Each individual transaction was to be reconciled and examined to ascertain whether it had constituted a taxable service, the applicable rate of tax, and the obligation to deduct and deposit tax---Burden was upon the withholding agent to explain nature of transactions and justify non-deduction of tax---Once documentary evidence was produced before Appellate Tribunal, it was incumbent upon the Tribunal, as the final fact-finding authority, to scrutinize and reconcile each transaction and determine taxability accordingly---Appellate Tribunal’s failure to undertake such exercise amounted to non-application of judicial mind, warranting annulment of its order and remand of the matter for fresh decision in accordance with law---High Court declared that the show cause notice was issued without any legal foundation and Appellate Tribunal had erred in upholding initiation of proceedings under S. 52 of Punjab Sales Tax on Services Act, 2012 against applicant / company, despite absence of any statutory authority permitting such proceedings against a service recipient---Appellate Tribunal wrongly placed reliance on Withholding Rules, 2015, as subordinate legislation could not enlarge or create a substantive tax liability not contemplated by the parent statute---High Court set aside order passed by Appellate Tribunal as well as Order in-Original and show cause notice, as the Appellate Tribunal fell in error by sustaining proceedings and by affirming jurisdiction of Punjab Revenue Authority against applicant / company---Reference was allowed in circumstances. Nagina Silk Mill, Lyallpur v. The Income Tax Officer, Award Lyallpur and others PLD 1963 SC 322; Messrs Dewan Cement Ltd. v. Collector of Customs and Sales Tax and another 2009 SCMR 1126; Federation of Pakistan through Secretary, Finance, Islamabad and 4 others v. Messrs Ibrahim Textile Mills Ltd. and others 1992 SCMR 1898; Pak Gulf Constructions (Pvt.) Limited v. Government of Punjab and others 2025 PTD 255; Fauji Cement Company Limited v. Government of Punjab and others 2025 PTD 864; Additional Commissioner Inland Revenue, Audit Range, Zone-I and others v. Messrs Eden Builders Limited and others 2018 PTD 1474; Collector of Customs, Sales Tax (West), Karachi v. Messrs K&A Industries, Karachi 2006 PTD 537; M/s Khawaja Tanneries (Pvt.) Ltd. v. Commissioner Punjab Revenue Authority and others Tax Reference (PRA) No.03 of 2025; M/s Jawa Pharmaceuticals (Pvt.) Ltd. v. Commissioner Punjab Revenue Authority and others Tax Reference (PRA) No.60652 of 2021 and Rahat Café, Rawalpindi v. Government of Punjab through Secretary Finance and others 2024 PTD 898 ref. Barrister Saad M. Hashmi, Advocate Supreme Court, Yawar Mukhtar, Muhammad Abdul Sajjad and Shahid Razzaq for Appellant. Muaz ul Mulk with Ms. Nadia Murad, Legal Officer, Punjab Revenue Authority. Barrister Raja Hashim Javed, Assistant Advocate General. Khudayar Khan for Respondent. Date of hearing: 28th January, 2026.

Summary: Summary pending.

Summary: Summary pending

Summary: (a) Income Tax Ordinance (XLIX of 2001)--- ----S. 4B [as inserted by Finance Act 2015] & First Schedule, Part I, Division IIA---Constitution of Pakistan, Arts. 73(2)(a), 175F & Fourth Schedule, Part I, Entry 47---Federal Constitutional Court---Appellate jurisdiction---Super tax, vires of---Principle of intelligible differentia---Applicability---Fiscal matters, judicial interference in---Dispute pertained to insertion of Section 4B in Income Tax Ordinance, 2001 vide Finance Act, 2015 for raising revenue for internally displaced persons for tax year 2015---Validity---Provision of Section 4B of Income Tax Ordinance, 2001 is intra vires the Constitution and has to be applied as enacted for tax year 2015 and onwards at the rates prescribed in Division IIA, Part I, of First Schedule to Income Tax Ordinance, 2001---High Courts had expounded correct position in law by holding that Section 4B of Income Tax Ordinance, 2001 was validly enacted as a “tax”---Provisions of Section 4B of Income Tax Ordinance, 2001 are neither discriminatory nor they create any unreasonable or hostile classification among persons forming the same class upon whom the charge is imposed---Such classification introduced under Section 4B of Income Tax Ordinance, 2001 is income-based, rests on an intelligible differentia, and bears a rational nexus with the object sought to be achieved---Provision of section 4B of Income Tax Ordinance, 2001 does not suffer from any inherent lack of legislative competence, nor does it, on its face, transgress any fundamental right in a manner sufficient to warrant its invalidation---Any perceived inequities or hardships arising from the operation of Section 4B of Income Tax Ordinance, 2001 fall primarily within the Legislative domain and do not, by themselves, justify judicial interference in fiscal matters---Provision of Section 4B of Income Tax Ordinance, 2001 squarely falls within Entry 47, Part-I of Fourth Schedule, to the Constitution, namely, ‘taxes on income’---Legislature was fully competent to impose, abolish, remit, alter, or regulate such tax through a Finance Act, as part of a Money Bill under Article 73(2)(a) of the Constitution---Federal Constitutional Court declared Section 4B of Income Tax Ordinance, 2011 (as inserted by Finance Act, 2015) to be intra vires the Constitution---Matter was disposed of accordingly. (b) Constitution of Pakistan--- ----Art. 187 [as amended by Constitution (Twenty-seventh Amendment) Act (XXXII of 2025)]---Federal Constitutional Court---Inherent powers---Complete justice---Federal Constitutional Court has inherent power to transpose a party, should it be necessary for just and proper adjudication of a matter before it. (c) Income Tax Ordinance (XLIX of 2001)--- ----S. 4C [as inserted by Finance Act 2022] & First Schedule, Part I, Division IIB---Constitution of Pakistan, Arts. 25, 73(2)(a), 175F & Fourth Schedule, Part I, Entry 47---Federal Constitutional Court---Appellate jurisdiction---High Earning Persons---Super tax, imposing of---Legislative competence---Reading down, principle of---Principle of intelligible differentia---Applicability---Dispute pertained to insertion of Section 4C in Income Tax Ordinance, 2001 vide Finance Act, 2022 on High Earning Persons and income arising to oil exploration and petroleum companies---Validity---Provision of Section 4C of Income Tax Ordinance, 2001 is intra vires the Constitution and applies as enacted for tax year 2022 and onwards at the rates prescribed in Part-I of Division IIB, First Schedule to Income Tax Ordinance, 2001---Legislature has plenary power to enact laws with retrospective and prospective effect subject to such laws not effecting past and closed transactions---There was no provision in Income Tax Ordinance, 2001 whereby closing of accounts of a tax year qualified as an event which had precluded imposition of fresh charge where none existed before, particularly when returns of income for tax year 2022 were yet to be filed---Federal Constitutional Court set aside the judgments passed by Division Benches of three High Cou2rts to the extent they held Section 4C of Income Tax Ordinance, 2001 not to apply retroactively to tax year 2022---Rates in Part I of Division IIB, First Schedule to Income Tax Ordinance, 2001 amended through Finance Act, 2023 was to apply for tax year 2023---Federal Constitutional Court further set aside judgment of Islamabad High Court to the extent it held the rates in amended Part I of Division IIB, First Schedule to Income Tax Ordinance, 2001 not to apply retroactively to tax year 2023---Definition of “income” for purposes of Section 4C of Income Tax Ordinance, 2001 in so far as it includes income from all sources is validly enacted---Federal Constitutional Court also set aside judgments of Islamabad High Court to the extent they read down Section 4C of Income Tax Ordinance, 2001---Federal Constitutional Court further set aside the direction issued by Islamabad High Court, to Federal Board of Revenue to issue circular to implement judgment in question across Pakistan, as such direction was beyond its jurisdiction---Federal Constitutional Court declared that Classification of sectors through inclusion in First Proviso to Division IIB of Part I of First Schedule to Income Tax Ordinance, 2001 and taxable under Section 4C of Income Tax Ordinance, 2001 at the rate of 10% for the tax year 2022 was reasonable; the differentia was intelligible and was permissible under Article 25 of the Constitution---Federal Constitutional Court set aside the judgments of three High Courts to the extent they declared contents of the first proviso to be discriminatory---Matter was disposed of accordingly. The Attock Oil Company Limited v. Federation of Pakistan and others 2019 PTD 934; Pakistan Tobacco Company Limited v. Federation of Pakistan and others 2022 PTD 1730; D.G.Khan Cement Company Limited v. Federal Board of Revenue and others 2018 PTD 287; D.G.Khan Cement Company Limited v. Federation of Pakistan and others 2020 PTD 1186 and HBL Stock Fund and others v. Additional Commissioner Inland Revenue and others 2020 PTD 1742 rel. (d) Income Tax Ordinance (XLIX of 2001)--- ----Ss. 4, 4B, 4C, 37A & Eighth Schedule---Constitution of Pakistan, Art. 175F & Fourth Schedule, Part I, Entry 47---Federal Constitutional Court---Appellate jurisdiction---Super tax---Legislature, competence of---Super tax is a tax on income independent of tax levied under Section 4 of Income Tax Ordinance, 2001---Parliament is competent under Entry 47, of Part I of the Fourth Schedule tothe Constitution, to levy “taxes on income”---Insofar as levy of super tax is concerned, Section 4C of Income Tax Ordinance, 2001 is a self-contained provision and is a standalone tax on income---Provision of Section 4C of Income Tax Ordinance, 2001 as it applied to capital gains under Section 37A and Rules of the Eighth Schedule, Income Tax Ordinance, 2001 was held to be applicable thereto, as it was within the ambit of Section 4C(2)(i) and (iv) of Income Tax Ordinance 2001. (e) Income Tax Ordinance (XLIX of 2001)--- ----Ss. 4B, 4C, 53, Second Schedule & Fifth Schedule, Rr. 4AA & 4AB---Constitution of Pakistan, Arts. 73(2)(a), 175F & Fourth Schedule, Part I, Entry 47---Federal Constitutional Court---Appellate jurisdiction---High Earning Persons---Super tax, imposing of---Legislative competence---Dispute pertained to insertion of Sections 4B, 4C and Rules 4AA and 4AB into Fifth Schedule to Income Tax Ordinance, 2001 on income arising to oil exploration and petroleum companies---Validity---Provisions of Section 4B and Section 4C, by virtue of Rules 4AA and 4AB of Fifth Schedule to Income Tax Ordinance, 2001 would only apply to the income arising to oil exploration and petroleum (E&P) companies if it did not result in exceeding the aggregate rate of taxes provided in Fifth Schedule to Income Tax Ordinance, 2001 and their respective Petroleum Concession Agreements (PCAs)---Departmental determination / assessment of each PCA was to be undertaken by placing respective terms and conditions in juxtaposition with Regulation of Mines and Minerals (Government Control) Act, 1948 and applicable taxing law governing their respective PCAs, whether it was Income Tax Act, 1922, Income Tax Ordinance, 1979 or Income Tax Ordinance, 2001---Provision of Section 4C of Income Tax Ordinance, 2001was not to apply to E&P companies to the extent that its application would result in taxation exceeding the threshold stipulated in Rule 4 of Fifth Schedule to Income Tax Ordinance, 2001---Legislative intent underlying Rule 4 of Fifth Schedule to Income Tax Ordinance, 2001 was to provide a sector-specific framework recognizing the unique nature, risks, and investment requirements of petroleum and exploration industry---Imposing a super tax beyond prescribed threshold would effectively override such Legislative safeguard, impose excessive and disproportionate burden, and frustrate the purpose for which special provisions were enacted---In absence of clear and express intention of Legislature to abrogate or modify such sectoral thresholds, Section 4C of Income Tax Ordinance, 2001 could not be construed so as to operate in a manner inconsistent with Rule 4 of Fifth Schedule to Income Tax Ordinance, 2001---Matter was disposed of accordingly. (f) Income Tax Ordinance (XLIX of 2001)--- ----S.4C [as inserted by Finance Act, 2022]---Constitution of Pakistan, Art. 175F---Federal Constitutional Court---Appellate jurisdiction---Super tax, imposing of---Banking Companies---Scope---In case of banking companies, Section 4C of Income Tax Ordinance, 2001 would apply to them as enacted vide Finance Act, 2022 for tax year 2023 and onwards, at the rates applicable to tax year 2023 as amended by Finance Act, 2023---Matter was disposed of accordingly. (g) Income Tax Ordinance (XLIX of 2001)--- ----Ss. 4C, 53, Second Schedule & Ninth Schedule---Constitution of Pakistan, Arts. 73(2)(a), 175F & Fourth Schedule, Part I, Entry 47---Federal Constitutional Court---Appellate jurisdiction---Super tax, imposing of---Legislative competence---Benevolent and Provident Funds---Dispute pertained to insertion of Section 4C to Income Tax Ordinance, 2001 on income arising to Benevolent and Provident Funds---Validity---Provision of Section 4C of Income Tax Ordinance, 2001 would not apply to the income, particularly to the benevolent funds enjoying exemption from tax under Section 53, read with Second Schedule to Income Tax Ordinance, 2001---Such funds constituted a distinct class expressly exempted by the Legislature in furtherance of recognized charitable and welfare objectives---Subjecting such funds to a super tax would defeat the very purpose of statutory exemption and would be inconsistent with the legislative scheme of Income Tax Ordinance, 2001---In the absence of a clear and specific legislative intent to withdraw or curtail such exemption, Section 4C of Income Tax Ordinance, 2001 could not be construed so as to override the exemption granted to benevolent funds---Provident and benevolent funds whichheld valid exemption certificates under the Ninth Schedule read with the relevant entries in the Second Schedule to Income Tax Ordinance, 2001 were not liable to pay super tax under Section 4C of Income Tax Ordinance, 2001---Federal Constitutional Court directed such funds to furnish their exemption certificates issued for the relevant tax years to the concerned authorities of Inland Revenue,who would pass written orders absolving such funds of their liability to pay super tax under Section 4C of Income Tax Ordinance, 2001---Matter was disposed of accordingly. For the Taxpayers: Makhdoom Ali Khan, Senior Advocate Supreme Court [Assisted by: Haider Ali Khan, Hussain Ali Almani, Ms. Naila Irshad and Yawar Mukhtar, Advocates]. Salman Akram Raja, Advocate Supreme Court [Assisted by: Malik Ghulam Sabir; Asad Ladha and Moazin and Rashid, Advocates]. Khalid Javed Khan, Senior Advocate Supreme Court. Dr. Farogh Naseem, Advocate Supreme Court [Assisted by: Sardar Haseeb Iftikhar Ahmed, Advocate]. Sardar Ahmad Jamal Sukhera, Advocate Supreme Court [Assisted by: Sikandar Jamal Sukhera and Ms. Khadija Jamal Sukhera, Advocates]. Shehzad Ata Elahi, Advocate Supreme Court [Assisted by: Salman Sohail Khan, Advocate]. Sikandar Bashir Mohmand, Advocate Supreme Court [Assisted by: Ms. Shahkar Shahab, Khizer Hayat Khan, Hamza Azmat Khan and Abdullah Noor Advocates]. Ali Sibtain Fazli, Advocate Supreme Court. Malik Ahsan Mehmood, Advocate Supreme Court. Khurram Mumtaz Hashmi, Advocate Supreme Court. Umar Azad Malik, Advocate Supreme Court. Barrister Saad Hashmi, Advocate Supreme Court. Ch. Mumtaz-ul-Hassan, Advocate Supreme Court. Rashid Anwar, Advocate Supreme Court [Assisted by: Yousaf Khalid Anwar, Advocate High Court]. Abdul Aziz Nishtar, Advocate Supreme Court. Qazi Ghulam Dastagir, Advocate Supreme Court. Sajeel Shehryar Sawati, Advocate Supreme Court. Barrister Jahanzeb Awan, Advocate Supreme Court [Assisted by: Barrister Saif Mehmood Abbasi]. Mrs. Shireen Imran, Advocate Supreme Court. Umer Aslam Khan, Advocate Supreme Court. Umer Akram Sahi, Advocate Supreme Court [Assisted by: Khalil Khan Sahibzada, Advocate]. Shehryar Kasuri, Advocate Supreme Court. Waseem Ahmad Malik, Advocate Supreme Court. Rana Mohammad Afzal, Advocate Supreme Court. Barrister Haroon Dugal, Advocate Supreme Court. Ajmal Ghaffar Toor, Advocate Supreme Court. Ms. Samia Faiz Durrani, Advocate Supreme Court. Abid Hussain Shaban, Advocate Supreme Court. Rai Azhar Iqbal Kharral, Advocate Supreme Court. Ajmal Khan, Advocate Supreme Court. Barrister Yousuf Kausar, Advocate Supreme Court. Adnan Haider, Advocate Supreme Court [Assisted by: Muhammad Zulqarnain Hashmi, Advocate]. Taimoor Aslam Malik, Advocate Supreme Court. Ijaz Ahmed Zahid, Advocate Supreme Court. Omer Asad Malik, Advocate Supreme Court. Hafiz Munawar Iqbal, Advocate Supreme Court. Dr. Ikram-ul-Haq, Advocate Supreme Court. Mohsin Mumtaz, Advocate Supreme Court. Hassan Kamran Bashir, Advocate Supreme Court. Mirza Mehmood Ahmad, Advocate Supreme Court [Assisted by: Ms. Zaria Adnan, Saadullah Tahir and Javaid Chohan, Advocates]. Nouman A. Farooqui, Advocate Supreme Court. Mirza Mehmood Ahmad, Advocate Supreme Court. Syed Ovais Ali Shah, Advocate Supreme Court. Qazi Umair Ali, Advocate Supreme Court. Naeem Suleman, Advocate Supreme Court. Syed Shahab Qutub, Advocate Supreme Court. Abdul Sattar Pirzada, Advocate Supreme Court. Qazi Umair Ali, Advocate Supreme Court. Muhammad Shoaib Rashid, Advocate Supreme Court [Assisted by: Zeeshan Shaukat, Advocate]. Isaac Ali Qazi, Advocate Supreme Court. Syed Rifaqat Hussain Shah, Advocate-on-Record. Tariq Aziz, Advocate-on-Record. Anis Muhammad Shahzad, Advocate-on-Record. Syeda B.H. Shah, Advocate-on-Record. Sheikh Mehmood Ahmed, Advocate-on-Record. Qazi Shehryar Iqbal, Advocate-on-Record. Naeem Ul Haq, Advocate High Court. Syed Jaffer Hussain, Advocate High Court. Shah Rukh Sheikh, Advocate High Court. Sardar Haseeb, Advocate High Court. Asad Zaman Tarar, Advocate High Court. Zeeshan Hashmi, Advocate High Court. Sheikh Aqeel Ahmad, Advocate High Court. Rana Usman Habib, Advocate High Court. Qaiser Amir [Legal Head, Frontier Foundry]. Ms. Rida Zahra [Legal Officer, Mari Petroleum]. Bilal Farrid Rana, [Head Legal, UBL]. Hafiz Bilal Bin Akbar [DD (L), DRAP]. For the Federation: Ch. Aamir Rehman, Addl. AGP [Assisted by: Miss Maryam Rashid, Advocate]. For the FBR: Mian Raza Rabbani, Advocate Supreme Court. Ms. Asma Hamid, Advocate Supreme Court [Assisted by: Mustafa Khalid, Faisal Khalid, Ms. Rabia Khan, Ms. Navail Haider and Ms. Zarwa Jamal, Advocates]. Dr. Shah Nawaz, Advocate Supreme Court [Assisted by: Ms. Sameena Mumtaz, Advocate]. Saalim Salaam Ansari, Advocate Supreme Court. Zeeshan Abdullah, Advocate Supreme Court. Muhammad Nasir Khan, Advocate Supreme Court. Malik Itaat Hussain Awan, Advocate Supreme Court. Muhammad Faisal Khalid, Advocate Supreme Court. Hafiz Ahsaan Ahmad Khokhar, Advocate Supreme Court. Ashtar Ausaf Ali, Senior Advocate Supreme Court. Dr. Farhat Zafar, Advocate Supreme Court. Ghulam Shoaib Jally, Advocate Supreme Court. Babar Bilal, Advocate Supreme Court. Riaz Azam Bhopera, Advocate Supreme Court/Advocate-on-Record. Ch. Zafar Iqbal, Advocate Supreme Court. Ibrar Ahmed, Advocate Supreme Court. Shehzad Ahmed Cheema, Advocate Supreme Court [Assisted by: Malik Abdullah Raza, Advocate]. Muhammad Yahya Johar, Advocate Supreme Court. Munawar Ali Memon, Advocate Supreme Court. Ch. Imtiaz Ahmad, Advocate Supreme Court. Dr. Abrar Ahmad, Advocate Supreme Court. Ms. Humaira Bashir, Advocate Supreme Court. Mrs. Misbah Gulnar Sharif, Advocate Supreme Court. Dr. Raana Khan, Advocate Supreme Court/Advocate-on-Record. Mrs. Kausar Iqbal Bhatti, Advocate-on-Record. Muhammad Amir Malik, Advocate-on-Record. Ms. Ruqiya Samee, Advocate-on-Record. Jawaid Masood Tahir Bhatti, Advocate-on-Record. Mir Badshah Khan Wazir, Member Legal. Dr. Ishtiaq Ahmed Khan, D.G. Law. Yousaf Khan, S.O I.R (Legal). Dates of hearing: 5th, 6th, 7th, 8th, 9th, 12th, 13th, 14th, 15th, 16th, 19th, 20th, 21st, 22nd, 23rd, 26th and 27th January, 2026. SHORT ORDER