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KARACHI: Sindh High Court (SHC) has ruled that Sales Tax Act, 1990 does not deal with the issue of mis-declaration as under Customs Act, 1969, Section 79 onwards which is a procedure to regulate the import through filing of goods declaration along with necessary documents including examination of imported goods and clearance thereof.

A division bench of SHC gave this ruling in special sales tax reference application, filed by Commissioner Inland Revenue against the decision of Appellate Tribunal Inland Revenue allowing against an importer of mobile phones in recovery of sales tax.

The written court order stated that a show-cause notice was issued under Section 33(5) read with Section 34 of the Sales Tax Act, 1990 on the assertion that importer imported smart cellular phones and paid Rs.250 for each mobile set as sales tax instead of Rs.500 for each mobile set as required under SRO 460(I)/2013.

The Order-in-Original directing the respondent to pay sales tax under section 11(3)/(4) along with penalty of 5% of the amount avoided under section 33(5) and default surcharge under section 34 of the Sales Tax Act, 1990.

Steel products: Mis-declaration causes massive revenue loss: report

Appeal under section 45B of Sales Tax Act, 1990 then was preferred by the importer before Commissioner Appeals Inland Revenue, which concurred with the conclusion drawn in Order-in-Original. Consequently, the Appellate Tribunal Inland Revenue was approached by importer and vide order dated 07.05.2017 the appeal was allowed and the orders impugned therein were declared to be null and void.

Court observed that Under Customs Act, 1969, Section 79 onwards is a procedure which regulates the import through filing of Goods Declaration along with necessary documents including examination of imported goods and clearance thereof. Such mechanism was adopted and exhausted by the customs when goods declaration was dealt with.

The purported allegation of mis-declaration was in fact within the domain and jurisdiction of Collectorate of Customs, which, in case of any controversy, could have retained the consignment/goods for further inquiry or chemical test and determine the duty provisionally till disposal of the inquiry or reassessment, the order stated and added that this has not happened in the instant case as had it been a mis-declaration of the goods, the officers concerned may have taken cognizance and could have objected to the assessment in terms of Section 193 and 195 of Customs Act, 1969 read with Section 32 of the said Act.

Bench ruled that Sales Tax Act, 1990 does not deal with issue of mis-declaration as being dealt with by the customs officials under Customs Act, 1969. Therefore, unless a mis-declaration is established by the customs officials such recourse of recovery of short levy of sales tax could not have been triggered.

It maintained that the dispute of classification was never raised at customs level. On the strength of above facts, it appears that exercise undertaken by the sales tax department is a futile attempt in the absence of any concrete resolution of a mis-declaration, which exercise in any event could not have been undertaken by the sales tax department.

Bench declared that appellate tribunal was justified in allowing the appeal of the importer and that the action of recovery of sales tax was a flawed process and dismissed special sales tax reference application.

Copyright Business Recorder, 2021

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