Summary: Maintainability of suit to challenge an action taken without issuing the prescribed show-cause notice. Rate of Federal Excise Duty applicable to insurance services under section 10 of the Federal Excise Act, 2005 and the effect of Rule 40 of the Federal Excise Rules, 2005.

Summary: The case involves a dispute over the filing of a reference by the Deputy Collector of Customs against an order of the Customs Central Excise & Sales Tax Appellate Tribunal, Islamabad Bench-II. The main issue in the case is whether the Deputy Collector had the authority to file the reference under Section 47 of the Act. The learned counsel for the respondents raised a preliminary objection, arguing that only the Additional Collector, authorized by the Collector, could file a reference under Section 47, and any reference filed by an officer below that rank is incompetent. The learned counsel for the Revenue Department argued that the reference was signed by a learned counsel authorized by the competent authority and any irregularity in the signing is not fatal to the filing of the reference. The court considered the relevant legislative history of Section 47 and its wording, which stated that the reference could be filed by "any officer of the Sales Tax not below the rank of Additional Collector, authorized by the Collector." The reference was deemed incompetently filed and dismissed.

Summary: Background:The petitioner, Government of KPK through Secretary Excise & Taxation Department, Civil Secretariat, Peshawar, challenged the judgment dated 14.11.2019, of the Peshawar High Court, in W.P.362-P/2019. The High Court had set aside the orders of the authorities seizing a vehicle, leading to this appeal.---Issues:Legality of the seizure of the subject vehicle.Compliance with legal requirements for alteration of vehicle particulars.Ownership rights of the respondent vis-a-vis alteration made to the vehicle.---Holding/Reasoning/Outcome:The High Court's decision was overturned as it failed to consider the legality of the seizure properly.Section 33 of the Provincial Motor Vehicles Ordinance, 1965 mandates reporting of any alterations in a vehicle's particulars within fourteen days. Failure to comply renders the alteration unlawful.The respondent's claim of innocence regarding the alterations made to the vehicle was insufficient to establish bona fide purchase status.The responsibility for alterations lies with the person effecting them, and the respondent cannot claim ignorance of the law.The appeal was allowed, and the impugned judgment was set aside.---Citations/Precedents:Sultan Muhammad v. Collector Customs and another (2015 PTD 570)

Summary: (a) Customs Act, 1969 ---- Section 179(3) ---- Time Limitation for Adjudication: The issue of the statutory period for passing an Order-in-Original under Section 179(3) of the Customs Act, 1969, was examined. The petitioner contended that the Order-in-Original, issued 229 days after the show cause notice, was void as it was passed beyond the prescribed 120-day period. The petitioner argued that no extension had been granted, and the delay was not attributable to them. The Court held that the Order-in-Original was passed in contravention of Section 179(3) of the Customs Act, as it was issued beyond the statutory period. Cited Case: Messrs Mujahid Soap and Chemical Industries (Pvt.) Ltd. v. Customs Appellate Tribunal (2019 SCMR 1735). (b) Adjudicatory Decision ---- Communication of Order: The Court addressed the issue of the date of passing the Order-in-Original, emphasizing that a decision must be communicated to the parties to be considered legally effective. Despite the Order-in-Original being signed on 15.01.2016, it was not made available to the petitioner until 16.05.2016. The Court ruled that the date on which the order was communicated to the petitioner (16.05.2016) would be considered the effective date, and the Order-in-Original was thus deemed invalid for failing to comply with the time limitation under Section 179(3) of the Customs Act. Cited Case: Messrs Mujahid Soap and Chemical Industries (Pvt.) Ltd. v. Customs Appellate Tribunal (2019 SCMR 1735). (c) Delay in Adjudication ---- Responsibility of Department: The Court examined the delay in adjudication, noting that the delay was not caused by the petitioner but by the Department's failure to file parawise comments in a timely manner. The Court highlighted that the Additional Collector had directed the Department to expedite filing the comments, and the hearing was delayed due to the Department’s non-compliance. Therefore, the delay in passing the Order-in-Original was attributable to the Department. ----Disposition: The reference was answered in the positive, declaring the Order-in-Original invalid for being passed beyond the statutory period set by Section 179(3) of the Customs Act, 1969.

Summary: Background:Civil Petition No. 3317 & 3318 of 2018 were filed against the judgment dated 21.5.2018 of the Islamabad High Court, Islamabad in FERA No. 11 and 13 of 2015.The petitioner, Commissioner Inland Revenue (Legal), Islamabad, challenged the decision regarding the levy of Federal Excise Duty (FED) on voice content transmitted through the internet by M/s Wi-Tribe Pakistan Ltd.---Issues:Whether the transmission of voice content through the internet would attract the levy of FED, similar to telecommunication services.Whether internet services are exempted from FED according to the Federal Excise Act, 2005.---Holding/Reasoning/Outcome:The Supreme Court examined the relevant provisions of the Federal Excise Act, 2005, particularly section 3 exempting internet services from FED.The Court noted that internet services, including transmission of voice content, are exempted from FED according to item No.2 of Table-II in the 3rd Schedule of the Act.The petitioner argued that since voice content transmitted through the internet falls under telecommunication services, it should attract FED. However, the Court disagreed, emphasizing that the exemption applies to all telecommunication facilities availed through the internet, irrespective of their nature.The Court highlighted that no mechanism exists to segregate internet usage for different purposes, and no charges are levied specifically for voice transmission.The Court concluded that internet services are wholly exempted from FED, and any ambiguity regarding exemptions should be resolved in favor of the taxpayer.Therefore, the Court dismissed the petitions, upholding the judgment of the Islamabad High Court.---Citations/Precedents:Federal Excise Act, 2005

Summary: Background:The respondents, engaged in the manufacturing and sale of cement, imported refractory bricks declared under PCT headings 6902.1090 and 6902.2090, subject to a 10% ad-valorem customs duty. However, the Customs Department classified them under PCT heading 6902.1010, attracting a 30% customs duty rate. Dispute arose regarding the correct classification, leading to appeals before the Customs, Central Excise, and Sales Tax Appellate Tribunal.---Issues:Whether the imported refractory bricks should be classified under PCT heading 6902.1010 or 6902.1090/6902.2090?What is the relevance of expert opinions obtained by the Customs Department in determining the classification of the imported goods?Is the Customs hierarchy bound by the Central Board of Revenue's endorsement regarding classification disputes?---Holding/Reasoning/Outcome:The Tribunal upheld the respondents' classification under PCT headings 6902.1090 and 6902.2090, subject to 10% duty, based on the bricks' ability to withstand temperatures above 1600?C. Expert opinions obtained by the Customs Department were considered but deemed insufficient to overturn the respondents' classification. The Supreme Court affirmed the Tribunal's decision, ruling that the Customs hierarchy's discretion in classification matters is not bound by the Central Board of Revenue's endorsements. The Court emphasized that classification disputes involve mixed questions of law and fact, falling within the Customs hierarchy's quasi-judicial functions.---Citations/Precedents:Central Insurance Co. and others v. The Central Board of Revenue (1993 SCMR 1232)Customs Act, 1969Qanun-e-Shahadat Order, 1984

Summary: (a) Customs Act, 1969 ----Section 179(1)—Pecuniary jurisdiction of Deputy Director—Challenge to jurisdiction—Applicant contended that the Deputy Director, Directorate General of Customs Valuation & PCA, lacked jurisdiction to pass the order-in-original dated 13.09.2006, as the amount of custom duties exceeded Rs.4,00,000/-—The applicant argued that under the amendment to Section 179(1) of the Customs Act, 1969, the Deputy Director could not adjudicate matters involving amounts over Rs.4,00,000/-—Held, that the Finance Act, 2006, amended Section 179 of the Customs Act, raising the pecuniary jurisdiction of the Deputy Collector to Rs.5,00,000/-—As the amount in question was below the enhanced threshold, the Deputy Director was found to have the requisite jurisdiction to pass the order-in-original. -----Cited Cases: • Finance Ordinance, 2002, Finance Act, 2006 • S.R.O. 917(I)/2004 (b) Customs Proceedings ----Jurisdiction of Customs Officials—Legality of orders passed by Customs Authorities—Applicant’s appeal against the jurisdiction of the Deputy Director, Directorate General of Customs Valuation & PCA was dismissed—The Court upheld the jurisdiction of the Deputy Director following the enactment of the Finance Act, 2006, which conferred the authority to adjudicate matters up to Rs.5,00,000/-—Held, that the Deputy Director’s actions were lawful under the revised provisions. ----Disposition: The question of law raised by the applicant was answered in the negative, affirming the legality of the Deputy Director’s order-in-original dated 13.09.2006. The customs reference was dismissed.

Summary: Background:The petitioner's vehicle, a Toyota Land Cruiser Jeep with Registration No. 5799-Peshawar, was intercepted by customs officials on 14.11.2015. Upon inspection, foreign origin medicines were found in the vehicle, and the driver failed to provide any documentation regarding their legal import or possession. Further investigation revealed additional contraband goods, and forensic analysis by the Forensic Science Laboratory (FSL) confirmed that the vehicle was non-duty paid and its chassis had been tampered with. Consequently, both the contraband goods and the vehicle were confiscated. The petitioner challenged the confiscation order before various customs authorities, including the Deputy Collector, the Collector of Customs (Appeals), and the Customs Appellate Tribunal, but failed to succeed. Subsequently, the petitioner filed a Customs Reference before the Peshawar High Court, which was dismissed on grounds of being time-barred.---Issues:Whether the petitioner is entitled to a more favorable treatment due to contradictory reports from the Forensic Science Laboratory.Whether the delay in filing the Customs Reference can be condoned.Whether there are sufficient grounds to grant leave to appeal against the dismissal of the Customs Reference.---Holding/Reasoning/Outcome:After considering the arguments presented by the petitioner's counsel and examining the record, the court found that the petitioner had failed to rebut the FSL report regarding the tampering of the vehicle's chassis. Additionally, the court noted that the issue of contradictory reports was raised belatedly and had not been addressed in the lower courts. Regarding the delay in filing the Customs Reference, the court observed that the petitioner waited for eleven months after the dismissal of their appeal before the Tribunal, which was deemed as a hopeless delay. Despite the petitioner's explanation that their Special Attorney was unwell, the court found the explanation neither convincing nor plausible. Consequently, the court dismissed the petition and refused leave to appeal.

Summary: Background:The Department received secret information alleging evasion of sales tax and central excise duty by the respondent company through clandestine removal of goods in 2004.A raid and search were conducted under section 40A of the Sales Tax Act, 1990, to seize relevant records believed to be concealed outside the licensed area.Incriminating material was recovered, leading to legal proceedings against the respondent.---Issues:Whether the raid and search conducted under section 40A were lawfully invoked.Whether the seized records justified the action taken by the Department.---Holding/Reasoning/Outcome:The court found that the raid and search under section 40A were lawfully invoked, as the requirements of the provision were substantially complied with.Despite the respondent's denial of any connection with the seized premises, the urgency and location of the records justified the Department's action.The court disagreed with the lower court's reliance on the precedent of Mega Tech, stating that the facts of the present case were different.As a result, one appeal was allowed, and the other was dismissed.---Citations/Precedents:Collector of Sales Tax and Central Excise and another v. Mega Tech (Pvt) Ltd. 2005 SCMR 1166, 2005 PTD 1933Sales Tax Act, 1990

Summary: (a) Federal Excise Act, 2005 – S. 3 & S. 12(2) – Table-II of Third Schedule – Exemption from Federal Excise Duty (FED) – Internet services – Scope – Transmission of voice content over internet – Whether liable to FED The Supreme Court held that internet services, including transmission of voice content through applications like WhatsApp, Skype, Facetime, or IMO, remain exempt from FED under Item No. 2 of Table-II of the Third Schedule to the Federal Excise Act, 2005. The law does not create any distinction based on the nature or use of internet services, whether for browsing, data, or voice. As long as the ISP provides internet connectivity only, and does not charge separately for voice applications, no FED is chargeable. Exemption under the Act is unqualified, encompassing all services rendered via internet, and cannot be narrowed by administrative interpretation or intent. (b) Tax Law – Interpretation – Exemption clauses – Strict construction – No imposition by implication The Court reiterated the settled principle that tax liabilities cannot be imposed by implication, and in cases of ambiguity, benefit must go to the taxpayer. The exemption in favour of internet services must be liberally construed, and nothing extraneous may be read into the exemption clause to restrict its benefit. Cited principle: Fiscal statutes must be interpreted in favour of the taxpayer when ambiguity exists. (c) Internet-based services – ISP charges – Segregation of usage – Absence of mechanism – No liability to FED Since ISPs charge users for internet data packages or usage, and do not charge separately for the use of voice applications, there exists no mechanism to segregate or quantify data usage for voice versus non-voice internet activities. Furthermore, the FBR has not prescribed any rules, formulae, or policy to create such differentiation. Thus, the imposition of FED on voice content usage over internet is without lawful basis. In the absence of a defined statutory mechanism, no levy can be imposed. (d) Telecommunication Services vs. Internet Services – Classification under the Federal Excise Act The Court clarified that although telecommunication services generally attract FED under S. No. 6, Table-II of the First Schedule, internet services, being a subset of telecommunication services, are expressly exempt under S. No. 2, Table-II of the Third Schedule. The statutory exemption thus prevails over general chargeability. ----Disposition: Petitions dismissed. Impugned judgment of Islamabad High Court upholding exemption from FED on internet voice content confirmed as being in consonance with law.