LAHORE – The Lahore High Court on Wednesday set aside the suo moto powersof Federal Board of Revenue (FBR) to collect sales tax from the businesscommunity without registering them under Sale Tax Act 1990 and Sale TaxRules 2006.
A two-member bench, comprising Justice Sajid Mahmood Seithi and JusticeMuzammal Akhtar Shabir, announced the verdict by upholding the judgment oftax tribunal of LHC on the petitions moved by SK Steels mills and others.
The court has held that the FBR could not collect the sales tax from anybusiness person without registering them. The FBR will register thebusiness community as taxpersons and then will proceed for collection ofsale tax under section 3 of Sale Tax Act 1990.
Representing the petitions, Ajmal Khan advocate argued that the businesscommunity of the country is fighting for the justice against this suo motopowers of the FBR for the last nine years. In order to achieve taxcollection targets, the FBR was collecting the sales tax from the businesscommunity without registering them and without giving any notice ofrecovery to them, Ajmal Khan advocate said, adding that this practice ofthe FBR is tantamount to harass the business sector which is already payinghuge taxes and duties to the government.
He further argued that the FBR proceeded against the business communityunder Section 3 (charging section), 7 (determination of the tax liability)and under other sections Sales Tax Act 1990 without registering them underthe act.
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The FBR counsel argued that the department had the power to collect thesales tax from any business person where it feels necessary and there is nobar under the act which restrains the FBR from doing so. The FBR has powersto collect the sales tax from the registered persons and liable to beregistered persons, he added.
Replying to the arguments of the FBR counsel, however, Khan pointed outthat there was Section 19 in the Act that empowers the FBR for compulsoryregistration but this section was omitted and was inserted again in theSales Tax Rules 2006. Under rule 6 sub rule 4 of the STR 2006, the FBR isbound firstly to register a businessman compulsory and then it will proceedfurther under section 3 and 7 by granting the registered person anopportunity of raising objections on the FBR demand notices.
The lawyer pointed out that registered persons and liable to be registeredpersons are two different things.
