AWAIS ENTERPRISES through Proprietor vs COLLECTOR OF SALES TAX AND CENTRAL EXCISE and another
This writ petition challenges the action of the Revenue department in placing the petitioner's business entity on a list of 'suspected/fake units' without prior notice or legal justification. The core legal question was whether the Revenue possessed the statutory authority to blacklist a registered person in this manner and whether such action could be taken without due process. The Court held that the action was illegal and void. It reasoned that at the time the action was taken, there was no statutory provision empowering the Revenue to maintain or act upon such a list; the relevant amendment to the Sales Tax Act, 1990, was only introduced later, on July 1, 2003. Furthermore, the Court emphasized that even under the amended law, the Collector is required to form an opinion based on material evidence before taking such adverse action. The failure to issue a show-cause notice or provide an opportunity for the petitioner to be heard violated fundamental principles of fairness and due process, effectively depriving the petitioner of their right to conduct business.
- Did the Revenue have the statutory authority to place a registered person in a list of suspected or fake units prior to the amendment of Section 21(4) of the Sales Tax Act, 1990?
- Is the Revenue department required to issue a show-cause notice before blacklisting a registered person as a suspected unit?
- Does the Collector have an obligation to form an opinion based on material evidence before taking action to blacklist a taxpayer?
- Section 21(4), Sales Tax Act 1990
ORDER
' The petitioner is a registered person under the Sales Tax Act, 1990. It is alleged that the respondent/Revenue has pm its name in the list of suspicious/suspected/fake units without any show-cause notice or the basis having brought home. For the various other submissions, following prayer has been made.
"It is most respectfully prayed that the writ petition may kindly be accepted and the action of the respondents of inclusion the name of the petitioner organization in the list of suspected/ suspended units may be declared to be illegal, void and without lawful authority and the same may be annulled.
' It is further prayed that in the meanwhile the operation of the list in question to the extent of petitioner may be suspended in the interest of justice."
2. For the revenue it is inter alia claimed that audit of the petitioner Company was started on 2-8- 2002. However, despite a number of letters written and the reminders given it failed to provide the requisite record. Further that on scrutiny it was found that the petitioner showed a very small capital but abnormally high turnover. Therefore, its name was recommended to C.B.R. For blacklisting on 24-1-2003.
3. After hearing the learned counsel for the parties I will readily agree with the learned counsel for the petitioner that the impugned direction of the Revenue placing the petitioner-company in suspected units is not legal. My reasons for holding so are following:-- ' firstly, there was no provision in the statute at the relevant time to empower the Revenue to place a registered person in the list of suspected/fake units. The proviso to subsection (4) of section 21 was added with effect from 1-7-2003 and, therefore,. Taking of any such action before that date was without jurisdiction; and ' secondly, admittedly no notice whatsoever was served upon the
4. Petitioner before placing it in the said list. Even the amended provision, as noted above, obliges the Collector to form an opinion before taking such action. In the present case no material has been brought on record if the Collector actually formed any opinion and the basis thereof that the petitioner engaged himself in any illegal activity or tax fraud.
5.
6. In the present case no notice has been given even after placing the name of the petitioner in the negative list which means throwing him out of business without allowing him a chance to reply the allegations. The ease with which the Revenue has taken the action is spectacular. Even a semblance of fairness was not considered necessary.
7. Therefore, this petition is allowed and the action of the respondent/Revenue of placing the name of the petitioner in the list of suspected/suspicious units is declared to be illegal and unlawful.
8. Petition disposed of.
Cited by 3 cases
- Messrs EM EM ENTERPRISES, KARACHI vs COLLECTOR, COLLECTORATE OF CUSTOMS, SALES TAX AND FEDERAL EXCISE (APPEALS), KARACHI 2011 PTD (Trib.) 1883
- M/S. Em Em Enterprises, Karachi vs Collectorate Of Customs, Sales Tax And 2011 P.C.T.L.R. 1032
- M/S. Em Em Enterprises, Karachi vs The Collector, Collectorate Of Customs, 2012 P.C.T.L.R. 55