2025 PLP 2016 (SCMR)

MUHAMMAD SHAFI SIDDIQUI, J.

The respondent No.1 being aggrieved of a statutory compliance via letter under section 40B of the Sales Tax Act, 1990 (hereinafter referred to as "the Act"), filed a writ petition whereon the impugned judgment dated 17.06.2025 by the High Court was passed.

2. Aggrieved of such judgment, the petitioner filed this petition inter alia, on the propositions that the impugned judgment is an interference in the statutory powers and functions of the Federal Board of Revenue and that being a registered person, the respondent is under an obligation to make compliance and assist the officers concerned in reaching the object required under section 40B of the Act.

3. The notice was issued on 30.04.2025 to respondent No.1, who was appeared and supported the impugned judgment.

4. We have heard the learned counsel for the parties and perused the material available on record.

5. In terms of para 4 of the impugned judgment, respondent No.1, carry out his business activities as a distributor of Messrs Star Tobacco Company (Pvt) Ltd, which is also disclosed in para 1 of the Memo of the petition. There is no cavil that in terms of section 3 subsection (2)(a) of the Act, taxable supplies specified in the Third Schedule are charged to tax at the fixed rate provided in the Eighth Schedule of the retail price along with the amount of sales tax which is legibly, prominently printed and embossed on the manufactured goods and therefore the tax paid by the manufacturer to the distributor of the retail premises is not subjected to further sales tax in the supply chain.

6. The question, however, before the High Court, in a challenge made to the letter dated 24.05.2024 seeking compliance under section 40B of the Act is different and distinct. For the convenience we reproduce section 40B as it stood at the relevant time as under: 'Posting of Inland Revenue Officer.- Subject to such conditions and restrictions, as deemed fit to impose, the Board, may post Officer of Inland Revenue to the premises of registered person or class of such persons to monitor production, sale of taxable goods and the stock position.'

7. It required that the Board may post officer of Inland Revenue to the premises of registered person or class of such persons to monitor production, sales of taxable goods and the stock position. It is not just the production but the sale of taxable goods as well as the stock position which is to be determined through the machinery provided under the Act. Indeed, the application of section 40B is not limited to the production unit and/or the principal Messrs Star Tobacco Company alone. It applies to the premises of registered person or class of such persons to monitor production via sale of such taxable goods and the stock position. The respondent No.1, being a dealer/distributor of Messrs Star Tobacco Company, falls within the class and the purpose of section 40B is not just the production (as it is one of them) but it includes sale of taxable goods via dealers/distributors and the stock position.

8. Hence, we are of the view that the reasons extended in the impugned judgment are not reconciled with the frame of section 40B of the Act. Therefore, this petition is converted into appeal, the same is allowed and the impugned judgment is set aside. MQ/C-24/SC Appeal allowed.