FTO probes seizure of non-duty-paid vehicles

The Federal Tax Ombudsman (FTO) has said that provincial excise and taxation (E&T) authorities as well as the police are detaining, confiscating and auctioning non-customs-duty-paid (NCP) vehicles under provincial laws instead of the Federal Customs Act, 1969.

To protect federal revenues and uphold the constitutional jurisdiction of the Pakistan Customs, the FTO has initiated an investigation on the basis of a suo motu notice under Section 9(1) of the Federal Tax Ombudsman Ordinance, 2000, said a statement issued on Wednesday.

According to the notice, a large number of NCP and tampered vehicles have been seized by the provincial authorities, resulting in non-payment of customs duty and other taxes to the national exchequer. These actions are being carried out under provincial rules such as the Balochistan Road Checking, Seizure and Disposal of Motor Vehicles Rules 2025 and the Khyber-Pakhtunkhwa Road Checking, Seizure and Disposal of Motor Vehicles Rules 2015, which are in conflict with Article 143 of the Constitution of Pakistan, 1973 and the Customs Act, 1969.

The investigation revealed that the Customs Act, 1969 grants Pakistan Customs the exclusive authority to detain, seize and auction smuggled or non-duty-paid vehicles. Under Section 170, when the police seize a non-customs-duty-paid vehicle, they must immediately inform and hand it over to the nearest Customs House. Any deviation from this procedure constitutes a punishable offence under Section 156(1)(83) of the Act.

Despite constitutional and judicial rulings, including the Supreme Court of Pakistan's Case No 802 of 2015 and the Peshawar High Court's Writ No 1428-P/2013, certain provincial institutions continue to act beyond their legal authority, said the FTO. "Handing over NCP vehicles to the police under Section 550 of the Criminal Procedure Code, 1898 is contrary to the Customs Act, 1969 and results in heavy losses to the national treasury."

The FTO observed that Customs Collectorates across the country have repeatedly contacted provincial authorities for the transfer of seized vehicles, but compliance remains minimal. The investigation also found a lack of cooperation and communication between the FBR and provincial departments.

Under Article 143 of the Constitution, if a provincial law conflicts with a federal law, the federal law prevails. The FTO report stated that customs duties fall under the exclusive legislative authority of parliament as per Item 43 of the Fourth Schedule of the Constitution of Pakistan, 1973, making any provincial legislation or rules in this regard ineffective and void. To restore federal jurisdiction and ensure implementation of the law, the FTO directed the Revenue Division secretary to instruct member customs (operations) of the FBR to approach the federal law secretary.