KARACHI: An F.I.R registered after 11 years of default against Lace Fashions for alleged in-admissible sale tax refund claim was quashed by a custom appellate bench of High Court of Sindh.
The petitioner impunged the F.I.R for declaring the FIR bearing No.03/2021 dated 09.06.2021 to be unlawful, unconstitutional, without jurisdiction and void ab-initio and to quash the same and not to take any coercive measure in respect of the said FIR.
The main ground was that said FIR has been lodged after 11 years of the alleged tax default. According to details the petitioner No.2 is a private limited company engaged in manufacturing and exporting textile products who claimed tax benefit with regard to sales tax under SRO 1125(1)/2011 and filed its sales tax returns accordingly.
The Department, however, gathered some information that petitioner No.2 has misused the tax benefit, as provided under the said SRO, of which they were not entitled to, and thus have committed tax fraud by claiming bogus tax refunds which were recoverable from them under Section 3, 3(1A) of the Sales Tax Act, 1990. As per the Department the petitioners were involved in a tax fraud amounting to Rs.18,10,7000/- pertaining to the tax periods February and March, 2010, by claiming inadmissible input / refunds. It is in this background that when the Department has gathered certain evidences against the petitioners that the above referred FIR was lodged, which FIR has been challenged in the instant petition.
Owais Ali Shah and Umer Ilyas Khan, Advocates appearing on behalf of the petitioners stated that the FIR is liable to be quashsed as the same was based on incorrect allegations leveled upon the petitioners and are baseless hence it would be a futile exercise to file an application under Section 265-K Cr.P.C. before the trial court or to appear before the said Court in view of the facts obtaining in the instant matter. They stated that the refund claimed by the petitioners was duly approved by the department, which pertained to the periods February and March 2010, and therefore the information given by the Directorate of Intelligence and Investigation i.e. respondent No.4 was legally and factually incorrect. The learned counsel stated that a Show Cause Notice dated 02.07.2012 was issued to the petitioner with regard to claim of alleged illegal refund claimed by the petitioner which was duly replied by the petitioner. The learned counsel stated that thereafter vide Order in-Original No.01/2012, dated 06.07.2012 the petitioner was required to pay the disputed amount along with default surcharge. Being aggrieved with the said order appeal was preferred before the concerned Collector (Appeals), who set-aside the Order-in-Original passed by the Additional Collector vide order dated 18.07.2012.
As per the learned counsel, an appeal against the said order, bearing STA No.165/KB/2012, was preferred by the department before the Tribunal, which appeal also, vide order dated 03.04.2015, was decided against the department. The learned counsel stated that they are not aware whether any reference application, against the order of the Tribunal, was preferred by the department before this Court. The learned counsel further stated that again a SCN dated June 18, 2016 was issued to the petitioner which was duly replied and then vide letter dated June 28, 2016 the said SCN was also withdrawn unconditionally by the department. As per the learned counsel then on the third time, on 20.12.2019, proceedings against the petitioner were initiated, which were replied and thereafter the present FIR was lodged, against which the present petition has been filed. As per the learned counsel not only the proceedings with regard to previous SCN issued to the petitioners were finalized in their favour but even in respect of the second SCN 4 also proceedings were culminated in favour of the petitioners.
The learned counsel for petitioner further stated that whatever amount of refund was claimed by the petitioners was in accordance with law and the criminal case lodged against the petitioners is illegal, as even if for arguments’ sake it is assumed that the petitioners have claimed illegal refunds, the same is a civil liability and has to be dealt with in accordance with civil laws and the procedures
Shahid Ali Qureshi, Advocate appearing for the Department stated that the instant petition is not maintainable as the petitioners were involved in committing tax fraud of a huge amount of Rs.18,10,7000/-. He stated that the petitioner is duly appearing before the Trial Court and has even obtained bail in the instant matter, hence petitioners may be required to join the proceedings before the Trial Court and if they are found innocent by the Trial Court they would be acquitted in accordance with law. The learned counsel stated that interim challan in the instant matter has already been filed by the I.O, which is under consideration. He stated that the instant petition is premature and is liable to be dismissed and the petitioner may be directed to join the trial.
He further contended that petitioner has alternative remedy of filing application under Section 265-K Cr.P.C which was not availed. According to him since petitioner has committed tax fraud and has rendered substantial loss to the exchequer, therefore, petitioners are not entitled for any relief, hence petition is not maintainable and is liable to be dismissed on this score also.
The learned counsel further stated that though under Section 561-A Cr.P.C this Court has ample powers to quash the FIR but in exceptional circumstances only, however in the present case those circumstances are not available hence in his view the request of the learned counsel for the petitioner for quashment of the FIR is misplaced and not entertainable.
The bench after hearing the sides in detail and perusing the case papers held that petitioner has been put to multiple proceedings. The bench further held that it is now a settled proposition of law that in exceptional circumstances this Court has the jurisdiction to quash the proceedings emanated from a FIR, in order to save a person from the agony of facing trial and thereafter getting acquitted on the charges leveled against the person being groundless / baseless and that there is no probability of conviction of the said person. If all the facts of the present case are examined in juxta position, it would reveal that this was the third time when the Department has proposed to initiate civil / criminal proceedings against the petitioner, which twice have been culminated / drooped and finalized in favour of the petitioner. Therefore, on the face of it without, indulging into other factors, it seems that the proceedings initiated by the Department are not in accordance with the law. It is also a matter of record that the FIR has been lodged after 11 years of the alleged tax default, if any. This in our view speaks volume about the veracity or otherwise of the FIR. The record also reveals that a person is required to maintain accounts, under Section 24 of the Sales Tax Act, for a period of six years only whereas in the instant matter the Department has requisitioned from the petitioner to produce the records which is more than 11 years old. Hence on this aspect also, we are of the view that the Department has no jurisdiction to require from the petitioner to produce the record beyond this mandatory time period. The bench further noted that during the course of the arguments, when the counsel appearing for the Department was confronted with the facts emanating in the present matter he candidly conceded that this Court under Article 199 of the Constitution of Islamic Republic of Pakistan read with Section 561-A Cr.P.C has the jurisdiction to quash the proceedings of a FIR in case of exceptional 16 circumstances. The learned counsel also could not controvert the fact that this is the third time on the same set of facts when the proceedings civil & criminal have been initiated by the Department against the petitioner. Learned counsel appearing for the Department also conceded that the Department has no jurisdiction to require from a person to maintain/keep or produce the record after the expiry of the mandatory period, as provided under Section 24 of the Act, however his contention had remained the same that since the petitioner has the remedy to file application under Section 265-K Cr.P.C before the Trial Court, therefore the instant petition is not maintainable and the petitioner may be required and directed to appear before the concerned Trial Court for redressed of his grievance. We however, disagree with the contention of the learned counsel appearing for the Department. No doubt, when a criminal matter is pending before a Trial Court and interim challan has been submitted, under normal course an application under Section 265-K Cr.P.C is to be filed before the concerned Court in case the accused is of the opinion that the charge is either groundless or there is no probability of conviction. In the present case as noted above, it is evident that the present case do fall within those exceptional circumstances and the petitioner is entitled that the FIR lodged against him be quashed. The petition thus stands allowed; FIR lodged against the petitioner is quashed and all the criminal aspects emanating from the said FIR are declared null and void and of no legal effect. The Department however would be at liberty to proceed against the petitioner in respect of its civil tax liability, if any, subject to limitation the bench observed while allowing the petition stand allowed.