‘Released’ consignments: Customs Adjudication can’t recover short levy, tax: SHC

ISLAMABAD: The Sindh High Court (SHC), Tuesday, declared that the officers of the Collectorate of Customs (Adjudication) have no jurisdiction to recover or adjudicate any short levy/ recovery of sales tax and income tax on the imported consignments released/ cleared from Customs Department.

In this connection, the SHC has issued an order here on Tuesday in the case of a multinational company versus the Federal Board of Revenue (FBR).

The petitioners have impugned respective notices/ constituents thereof, issued by the officers of the Collectorate of Customs (Adjudication) on the ground that after release/ clearance of their import consignments, Adjudication had no jurisdiction to assess, recover or adjudicate any alleged short levy of income tax and sales tax; and the jurisdiction, if any, in this regard vests with the Inland Revenue department.

Briefly stated, the petitioners had imported consignments, which had been assessed, cleared and released by the Customs department. Post accrual of a significant period of time thereafter, the Collectorate of Customs (Adjudication) issued notices alleging short recovery of income tax/ sales tax and sought to adjudicate and recover the same.

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It was the petitioners’ case that post clearance, the assessment, adjudication and recovery of any discrepancy in income tax/ sales tax falls within the domain of Inland Revenue, and Adjudication is devoid of any jurisdiction in such regard; hence, these petitions.

The petitioners pleaded that there is separate provenance of customs, income tax, sales tax, and excise in the Constitution and the said segments operate in different fields. It was argued that chargeability, assessment and recovery are individual and distinct functions conferred by statute; while Customs has been bestowed the power to collect taxes at the import stage, such power does not include any power to assess, adjudicate and recover income tax and sales tax post clearance of the consignments.

It was concluded that in the manifest presence of specific statutory provisions for assessment, adjudication and recovery of income tax/ sales tax in the respective parent statutes, no interference by adjudication was merited in respect of cleared past consignments.

To the extent of collection, payment, and enforcement including recovery at the time of imports, the Sales Tax Act, 1990 confers parallel jurisdiction upon the Customs department; however, no case has been established before us to consider any jurisdiction of the Adjudication to assess, adjudicate and/ or recover any short levy of sales tax once the import/ consignment has been assessed and released per sections 79-80 of the Customs Act 1969.

The SHC’s order added that for reasons to be recorded later on, these petitions are allowed to the extent that the officers of the Collectorate of Customs (Adjudication) have no jurisdiction to recover or adjudicate any short levy/ recovery of sales tax and income tax once the imported consignments have been assessed to duty and taxes in terms of section 80 of the Customs Act, 1969 and are released/ cleared from Customs.

The impugned show-cause notices, only to this extent are held to be issued without lawful authority and jurisdiction and are hereby set-aside; however, the proceedings, if any, in respect of short levied sales tax and income tax can be initiated by the Officers of Inland Revenue Department, strictly in accordance with the law, the SHC added.

Copyright Business Recorder, 2022