ISLAMABAD, PAKISTAN: In a significant ruling, the Supreme Court has upheld the authority of Customs to recover sales tax and advance income tax at the import stage, even if exemptions were wrongly granted at the time of clearance. The decision marks a turning point in the interpretation of Customs’ powers and their role in tax collection.
The three-member bench, headed by Chief Justice Yahya Afridi, reinstated show-cause notices against several leading companies, including Nestle Pakistan, Pakistan State Oil, Hascol Petroleum, and Attock Petroleum, whose imports were cleared under exemption claims. The Court stressed that taxes not collected due to misapplied exemptions can still be recovered, as the liability does not disappear once goods are cleared.
The judgment drew attention to legislative changes made in recent years, particularly the amendments to Section 32 of the Customs Act and Section 6(1) of the Sales Tax Act, which broadened the recovery jurisdiction of Customs. The bench observed that customs duty, sales tax, and advance income tax are imposed together at the import stage, and any exemption errors must not shield importers from their lawful obligations.
While Chief Justice Afridi emphasized the binding nature of these provisions, Justice Muhammad Shafi Siddiqui dissented and is expected to issue his detailed note separately. Nevertheless, the ruling sends a strong signal to both importers and authorities, reinforcing Customs’ right to pursue unpaid taxes and ensuring greater accountability in trade and revenue matters.
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