ISLAMABAD: The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has filed human rights application with the Supreme Court of Pakistan for separation of tax judicial system from tax executive/collection machinery in what it says “conformance” with the constitution of Pakistan.
In 2001-2002, the Finance Bill vowed to revamp the tax adjudication system on the principle of the separation as per constitution of Pakistan. The human rights application states that the first two tiers of appellate tax authorities are working under the Federal Board of Revenue and Ministry of Law, respectively, “in utter violation of Article 175(3) of the Constitution and judgments by SC that are binding under Article 189.”
FPCCI contends that separation of tax appellate system should be free from the Executive in the true sense and substance as held by SC in Government of Baluchistan v Azizullah Memon PLD 1993 SC 341 holding that “separation of judiciary from executive is the cornerstone of independence of judiciary”.
The apex commerce and trade body has argued that it is a matter of record that none of the governments in Pakistan, either military or civilian, ever followed directions of apex court in making tax appellate system independent and separate from Executive. Tax codes of Pakistan — the Income Tax Ordinance, 2001, the Sales Tax Act, 1990, the Federal Excise Act, 2005 and the Customs Act, 1969 — provide aggrieved taxpayers remedy to appeal against the orders of tax officials from the appellate authorities appointed by the by Federal Board of Revenue (FBR). It negates the command of Article 175(3) of the Constitution: “The Judiciary shall be separated progressively from the Executive within fourteen years from the commencing day”. “The appellate officers appointed as Commissioners of Appeal or Collectors of Adjudication also go back to executive posts and their promotion also depends on the reports they get from the higher authorities—so-called Judicial Members of Inland Revenue Service (IRS) and Customs whose final counter reporting authority for their performance reports is Chairperson of FBR, responsible for meeting assigned targets and this hampers independence of judicial powers exercised by Commissioners of Appeals and Collectors of Adjudication. “The appellate mechanism under the tax codes provides right to appeal before the Commissioner of Appeals /Collector Adjudication in case a taxpayer is aggrieved by orders passed by the revenue authorities. In case the taxpayer or even the Commissioner/ Collector is aggrieved by the decision of the Commissioner (Appeals)/Collector (Adjudication), the aggrieved party can carry the matter further in appeal before the Appellate Tribunal Inland Revenue (ATIR)/ Customs Appellate Tribunal, respectively. The second tier of tax appellate system is ATIR and Customs Tribunal, both are under the Federal Government [Ministry of Law] which is against the principle of independence of judiciary, highlighted in Para 6, page 8 of National Judicial Policy of 2009 [NJP 2009]: “All special courts/tribunals under the administrative control of Executive must be placed under the control and supervision of the judiciary, their appointments/postings should be made on the recommendation of the Chief Justice of concerned High Court”. FPPCI maintains that “instead of following the command of Constitution and binding decisions under Article 189 and NJP 2009, cited above, for making the tax tribunals independent, the Executive, through the Tax Laws (Second Amendment) Ordinance, 2019, promulgated on December 26, 2019, made it subservient to the Prime Minister [highest executive office of Federation] depriving it from making its own rules for regulating its affairs. This is a blatant administrative encroachment of Executive on the independence of a quasi-juridical organ.”
"Giving powers to Prime Minister to regulate the affairs of ATIR and Customs Tribunal were in utter violation of the principle laid down by the SC," FPCCI added.
After explaining the background of the case, FPCCI has prayed that the matter may kindly be taken as Human Rights case and notices be issued to all the relevant authorities (Federation of Pakistan through Ministry of Law, Federal Board of Revenue (Revenue Division of Ministry of Finance), the Attorney General for Pakistan and or any other organ/institution related with the matter:
The federal government may be directed to present a Bill in the Parliament to merge existing Tax Tribunals of IRS and Customs. After their merger into National Tax Tribunal, it should work under direct supervision of High Courts in which they function or under SC under Article 212 of the Constitution by including in its scope tax tribunals—presently it is confined to administrative tribunals. This will lead to a truly independent tax appellate tribunal with selection of competent people as members by the Court ensuring independence of quasi-judicial forum, quality of work and speedy decisions.
According to human rights application, if a 2-tier tax appellate system as suggested is implemented, the following benefits and advantages will merge for the entire nation and the country: (i) appeal Commissioners and Collectors of Adjudication will be relieved of passing judgments' and worrying about the future of their careers being subordinate to FBR, focusing on collecting taxes as collectors that is their duty and working as adjudicators is against Article 175(3) of the Constitution; (ii) high courts would be relieved of the continuously rising number of tax cases that remain undecided for many years because of the huge backlog of other civil/criminal cases and non-availability of judges specialising in tax matters and secondly, to avoid contradictory orders on identical questions of all and finally taking long time for settlement of the issue by the Court; and (iii) very few tax cases would go to the apex court where leave to appeal is granted only in matters involving substantial question(s) of law.
Copyright Business Recorder, 2021