In response to the case of Shahzad Textile Mills vs. the Federation of Pakistan, the LHC has directed the Federal Board of Revenue (FBR) to accept taxpayers’ sales tax returns.
The court order reveals that the petitioners’ counsel argued that the contested notification, S.R.O. 350(1)/2024, should not have been issued under section 50 of the Sales Tax Act, 1990. This provision only allows the Board to make rules via notifications in the official Gazette to facilitate the Act’s implementation. However, the disputed amendment alters rule 18 of the Sales Tax Rules, 2006, removing the petitioners’ rights under section 7 of the Sales Tax Act to adjust input tax for determining a registered person’s tax liability.
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The amendment further stipulates that the filing of returns and the deduction of input tax are dependent on the seller’s return for the same tax period. The petitioners’ counsel contends that this amendment infringes upon their rights to legal due process and the constitutional rights guaranteed under Article 18.
The petition, highlighting significant legal issues, has been accepted for regular hearings. Notices have been accepted by the Deputy Attorney General (D.A.G.), present in court, who will inform the respondents to submit their written statements and prepare their legal arguments for the next hearing. The Attorney General for Pakistan will also be notified, as accepted by the D.A.G.
Until the next hearing, the LHC has directed the FBR to accept the petitioners’ returns for May and June 2024, as well as any subsequent returns, without obstruction. This directive is provisional and will be reassessed at the next hearing.
