Customs Can Recover Taxes Even After Goods Are Cleared: Supreme Court

The Supreme Court of Pakistan has declared that the Customs authorities do retain jurisdiction to recover import-stage sales tax and advance income tax, even where short-levy is discovered after clearance of goods.

The SC judgment would decide all listed petitions, as a common question of law concerning the jurisdictional contours of the Pakistan Customs (“Customs”) authorities is involved therein.

According to a judgement of the SC circulated by the FBR on Thursday, the SC is satisfied that under the statutory framework comprising the Customs Act, the Sales Tax Act, and the Income Tax Ordinance, as read in light of the various Finance Act amendments discussed above, the Customs authorities do retain jurisdiction to recover import-stage sales tax and advance income tax, even where short-levy is discovered after clearance of goods.

It bears emphasis that customs duty, sales tax, and advance income tax at the import stage are all charged and collected, as part of the same transactional event. Where, owing to a misapplied exemption or other lapse, the full liability is not realized at that stage, it is consistent with both logic and statutory design that the Customs authorities should be empowered to address and recover the deficiency. To hold otherwise would fracture the statutory scheme, dispersing jurisdiction between different authorities in respect of levies that are assessed and collected together at the border, thereby defeating the coherence that the Parliament sought to ensure through the scheme of cross-reference and the amendments already noted.

For the reasons recorded above, it is declared that the Customs authorities have jurisdiction, within the statutory limitation, to recover import-stage sales tax and advance income tax that was not levied owing to a wrongly granted exemption, even if such short-levy is discovered after clearance of goods. The show-cause notices issued to the respondents are Civil Petitions No. 70-K to 72-K of 2023, etc., accordingly restored for adjudication on their merits, in accordance with law.

Accordingly, all these petitions are converted into appeals and allowed in the above terms, and the impugned judgments passed by the High Court are set aside.