Tax experts told Business Recorder here on Wednesday that the SRO No. 116 is not operative and FIRs cannot be registered in sales tax cases till restoration of the said SRO from the court. The LHC had set aside SRO No. 116 of the FBR relating to the powers and functions of Directorate General Intelligence and Investigation, Inland Revenue under Sales Tax Act 1990 and declared the SRO 116 as illegal.
According to a judgment of LHC in writ petition No. 37358 of 2016, SRO No. 116 is hereby set aside as being ultra vires the powers of the FBR and is declared without lawful authority and is of no legal effect. The FIRs registered and the criminal prosecution set in motion in pursuance of SRO No. 116 are also set aside and quashed.
The LHC judgment added that the federal government is directed to frame rules with regard to the transfer and posting under the Federal Board of Revenue Act, 2007 (Act, 2007) of officers and employees of the FBR. The FBR is directed to frame rules with regard to the directorates and their functioning. In particular, the FBR will enact rules for structuring the powers given in section 37A which is couched in a broad language and confers wide powers on officers of Inland Revenue.
Under SRO No. 116, the Federal Board of Revenue has appointed the officers of the Directorate General Intelligence and Investigation, Inland Revenue, to be the officers of Inland Revenue and exercise such powers and perform functions of officers of Inland Revenue as mentioned in Sales Tax Act. In its judgment, the LHC said that the judgment shall also decide connected constitutional petitions No. 29474 of 2015, WP No. 28698 of 2015, WP No. 16866 of 2015, WP No. 30331 of 2017 and WP No. 21988 of 2017. These petitions are woven into a unified fabric by the challenge in these petitions to SRO 116(I)/2015 issued by the Federal Board of Revenue (FBR) on 9.2.2015 (SRO 116) in exercise of the powers conferred by sections 30, 30A and 30E of the Sales Tax Act, 1990 ("the Act, 1990"). It is the case of the counsels for the petitioners that SRO 116 is out with the authority of FBR and must be struck down. As a consequence, the prayer is for the proceedings set in motion on the basis of SRO No. 116 to be quashed as being without lawful authority and of no legal effect.
To sum up, the Board has sufficient powers under the Act 2007 to appoint, by posting or transfer, officers of DG (I&I) and upon such appointment these officers shall perform functions which are peculiar to that directorate. The powers and functions shall be specified by the Board through a notification issued under Section 30E of the Act, 1990 and those powers and functions will have a close nexus with the purpose which DG (I&I) is designed to achieve. By appointment, once again, as officers of Inland Revenue (as has been done through SRO 116), the officers so appointed shall be deemed to have been transferred and thereby ceases to function as officers of DG (I&I). Appointment made under Section 30 is independent of an appointment made under Section 30A and must remain so. But the fundamental principle is that officers should be posted to the directorates independently with separate and distinct functions. The SRO No. 116 fails to meet these foundational requirements and is thus held to be without lawful authority and of no legal effect. The LHC held that that the pre-trial steps including arrest and detention cannot be given effect to unless the tax liability of the taxpayer is determined in accordance with section 11 of the Act.
Copyright Business Recorder, 2017