BABAR SATTAR, J.---Through this judgment the afore-titled Writ Petition as well as Writ Petitions listed in Annexure-A to this judgment will be decided as they involve the common question of what legal prerequisites must be abided by the State before initiating criminal proceedings in exercise of authority under Section 37A of the Sales Tax Act, 1990 ("Sales Tax Act").

1. In the afore-titled petition, the petitioner (M/s. Pakistan Accumulators (Pvt.) Ltd.) seeks a declaration that the raid carried out by the office of the Directorate General of Intelligence and Investigation ("DG I&I") on 21.11.2024 at the petitioner's corporate office in Islamabad was illegal and without jurisdiction. The petitioner seeks a direction to be issued to the respondents to return the documents, computers and personal belongings forcefully take away by respondent No.6 during such raid and further that an inquiry into abuse of authority by respondents No.5 and 6 be initiated. The petitioner further seeks quashment of any FIR and proceedings initiated against the petitioner, its directors and employees together with a declaration that no criminal proceedings ought to be initiated against the petitioner in respect of receipt of supplies from any person or entity who, at the time of making such supplies, was on the Active Taxpayer List ("ATL") maintained by the Federal Board of Revenue ("FBR").
2. The learned counsel for the petitioner submitted that the petitioner was a registered taxpayer and purchased raw material for manufacturing electric accumulators (storage batteries) from registered taxpayers, who were on FBR's ATL at the relevant time. The DG I&I raided the petitioner's premises on 21.11.2024 and took away documents, computers and personal belongings of the petitioner's employees without prior notice to the petitioner, in breach of the requirements of Sections 38 and 40 of the Sales Tax Act. He submitted that it had been held by the

Lahore High Court in Taj International (Pvt.) Ltd. and others v. Federal Board of Revenue and others (2014 PTD 1807) ("Taj International-1") that criminal proceedings could not be initiated under provisions of the Sales Tax Act unless the tax liability of a taxpayer had first been determined in accordance with requirements of Section 11 of the Sales Tax Act. The judgment of the Lahore High Court was then upheld by the Supreme Court in Civil Appeals Nos.350 and 268 of 2016 by judgment dated 04.12.2024, reported as Directorate of Intelligence and Investigation-FBR v. Taj International (Pvt.) Ltd. and others (2025 PTD 1270) ("Taj International-2"). He submitted that without first undertaking an assessment of any outstanding tax liability, the Tax Department could not adopt coercive means against the petitioner by raiding its premises, registering FIRs and threatening the arrest of Directors and officers of the petitioner's Company as a means to blackmail the petitioner to cough up imaginary tax demand not yet assessed through adjudicatory proceedings envisaged by Section 11 of the Sales Tax Act.

1. The learned counsel for the petitioner further submitted that DG I&I carried out a raid and exercised excessive force, humiliated the staff of the Company and handcuffed them after beating some of the staff members. He submitted that the Tax Department subsequently took the position that it was seeking the arrest of the Chief Financial Officer ("CFO") of the petitioner company in relation to an FIR that had been registered against certain suppliers. The allegation against the petitioner was that it was colluding with suppliers that were dummy companies. He submitted that any FIR registered as such did not name the petitioner. The Tax Department had developed a pernicious practice of registering FIRs without naming any accused and subsequently adding names of taxpayers who were to be coerced. And in such fashion, through some supplementary statement or entry in a 'zimni', the petitioner was embroiled in the criminal inquiry. He submitted that there existed no outstanding tax demand against the petitioner. The petitioner had procured supplies from various suppliers, who were on the ATL of FBR at the time when such supplies were made. FBR, through a subsequent SRO, declared that to the extent that a supplier had not filed its own tax return, no input tax adjustment could be made in relation to supplies procured from such supplier. He submitted that the petitioner had not claimed any input in relation to supplies from a supplier who had not filed a tax return, and in one instance when such supplies were received, they were returned to the supplier due to its failure to file a sales tax return. He submitted that the raid was a consequence of personal enmity on part of the DG I&I. It was carried out for purposes of confiscating the documents available at the premises of the petitioner's head office and to harass the petitioner's employees in breach of Sections 38 and 40 of the Sales Tax Act and the argument that the raid was carried out to effect the arrest of the petitioner's CFO in exercise of authority under Section 37A of the Sales Tax Act was an afterthought and a fabricated excuse given that the raid was illegal. It was held by the Supreme Court in Collector of Sales Tax v. Mega Tech (2005 SCMR 1166) that it was mandatory for the Tax Department to obtain a search warrant from the Magistrate before carrying out a raid. It was also held in Agha Steel Industries Ltd. v. Directorate of Intelligence and Investigation (2019 PTD 2119) that it was imperative to serve a prior notice on a taxpayer before carrying out a raid. He submitted that prior to carrying out a raid, the petitioner was never informed that FIR No.07 of 2024 dated 18.11.2024 had been lodged, which recorded a complaint against Kinesis Energy and Power Innovation (Pvt.) Limited ("Kinesis") for having committed tax fraud, but the petitioner and its employees had not been nominated in the said FIR as accused persons. He then submitted that in the report and para-wise comments filed by respondent No.6, it had been alleged that Kinesis and M/s Yazman Traders (Pvt.) Limited ("Yazman") were dummy companies and not real suppliers of the raw material to the petitioner. He submitted that as it had been held in Taj International1 that without first determining any outstanding tax liability due to be discharged by the petitioner, no criminal proceedings could be initiated against it. The purchases made by the petitioner were undertaken through banking channels in compliance with Section 73 of the Sales Tax Act. And in view of S.R.O. 350(I)/2024, dated 07.03.2024, the petitioner could only claim input tax if the supplier had already filed its sales tax return, discharging its sales tax liability. In the entire story concocted by the Tax Department, there was no clear theory or finding as to how the petitioner had understated or underpaid its tax liability or overstated its entitlement to input tax credit, without which no case of tax fraud could be made out in terms of Section 2(37) of the Sales Tax Act. He submitted that both Kinesis and Yazman had deposited significant amounts of tax with the exchequer and it was only to the extent of the tax deposited by such suppliers that input had been claimed by the petitioner. He submitted that there were different opinions taken by different High Courts with regard to whether simultaneously initiation of adjudicatory and criminal proceedings was permissible under provisions of the Sales Tax Act. A Division Bench of the Sindh High Court in Waseem Ahmed v. Federation of Pakistan (2014 PTD 1733) ruled that criminal prosecution could be lodged without first determining a civil liability of the taxpayer. A Division Bench of the Lahore High Court in Taj International-1 held to the contrary that a civil tax liability was to be determined in the first instance, failing which no criminal prosecution or proceedings could be initiated under provisions of the Sales Tax Act. And the view of Lahore High Court in Taj International-1 was endorsed and upheld by the Supreme Court in Taj International2, in view of which the legal question that arises in the present case stands settled.

He submitted that the Tax Department was relying on amendments made to the Sales Tax Act pursuant to the Finance Act, 2024, to argue that by virtue of changes to Section 33 of the Sales Tax Act, the law laid down in Taj International-1 and Taj International-2 was distinguishable as the underlying provision of law interpreted by the Supreme Court and the Lahore High Court in the said judgments stood amended. He submitted that the arguments was misconceived as it had been held in Taj International-1 that initiation of criminal proceedings without prior assessment of a civil liability would amount to not reading Sections 2(37), 3, 11, 33 and 37A of the Sales Tax Act harmoniously, would result in vesting unbridled powers in the functionaries of the Tax Department, and would be in breach of principles of fairness and due process guaranteed by Article 10A of the Constitution. The replacement of the words "tax involved" with the words "tax evaded or sought to be evaded" did not rectify the defect pointed out by the Supreme Court in Taj International-2 with regard to the Tax Department's reading of Sections 33 and 37A of the Sales Tax Act.

1. The learned counsel for the Tax Department submitted that no raid was carried out in terms of Section 38 or Section 40 of the Sales Tax Act to recover documents from the head office of the petitioner. Instead, the Tax Department sought to arrest the CFO of the petitioner in relation to FIR No.07 of 2024. While the petitioner and its directors/officers were not named in the FIR, subsequent investigation reflected that the petitioner's CFO had a collusive role in the tax fraud being investigated. He submitted that Section 37A(4) of the Sales Tax Act had been amended and in the event that the taxpayer sought to evade tax and did not actually evade tax, such taxpayer could be arrested and prosecuted. He submitted that by virtue of an amendment in the Sales Tax Act brought through the Finance Act, 2024, the judgments of the Lahore High Court and the Supreme Court in the matter of Taj International were now distinguishable. The Lahore High Court and the Supreme Court had interpreted the use of words "tax involved" in the penalty provision for the offence mentioned at Serial No. 11 of Section 33 of the Sales Tax Act. The said words had been replaced with the words "tax evaded or sought to be evaded". And a conforming change had been introduced to Section 37A(4) of the Sales Tax Act, where the compounding provisions also reflected the words "tax evaded or sought to be evaded". The intent of the legislature in introducing such change was to criminalize an attempt to undertake tax fraud. In such cases no prior tax assessment could be undertaken, as in case of an unsuccessful attempt there would be no actual evasion of tax. The intent of the legislature was to be given effect and redundancy could not be attributed to the explicit language introduced into Sections 33 and 37A(4) of the Sales Tax Act. In the event that it was held that assessment proceedings for purposes of Section 11E of the Sales Tax Act were a prerequisite to initiate criminal proceedings under Section 37A of the Sales Tax Act, the words "sought to be evaded" in relation to the Sales Tax Act within the penalty prescribed for an offence under Serial No.13 of Section 33 of the Sales Tax Act and the use of this phrase in Section 37A(4) of the Sales Tax Act would become redundant. He submitted that the effect of amendments introduced through the Finance Act, 2024, was that the law laid down in Taj International was no longer applicable for the adjudication of the instant petition. And the legality of FIR No.07 of 2024 dated 1811-2024, which was registered after the enactment of the Finance Act, 2024, was to be treated in light of the law as amended. And as legislature is vested with authority to nullify a judgment of the Court by amending the law, as held by the Supreme Court in Molasses Trading and Export (Pvt.) Limited v. Federation of Pakistan and others (1993 SCMR 1905) Taj International no longer laid down a principle of law that was binding in the facts and circumstances of the present case. He submitted that there was no malice on the part of the Tax Department in initiating criminal proceedings against the petitioner and its suppliers. The Tax Department after a diligent inquiry had determined that Kinesis and Yazman were dummy companies that had been established by the petitioner for purposes of tax evasion. Kinesis was not a real supplier of raw material and its bank accounts were funded by the petitioner to feign compliance with Section 73 of the Sales Tax Act and create a trail of banking transactions. The money was then moved from Kinesis to Yazman, which was another dummy company controlled by the petitioner, back into the accounts of the petitioner. Such flow of funds reflected that Kinesis and Yazman were dummy companies established by the petitioner solely for purposes of tax evasion and tax fraud. And it was for purposes of investigating such tax fraud pursuant to FIR No.07 of 2024 that tax officials visited the office of the petitioner to seek the arrest of the petitioner's CFO, who was instrumental in setting up the dummy companies and conducting financial transactions between them.
2. The learned Assistant Attorney-General submitted on behalf of the Finance Division that the Finance Division had no concern with the matter as the subjectmatter fell within the domain of the Revenue Division. With regard to the merits of the case, he adopted the arguments of the learned counsel for the Tax Department.
3. On the last date of hearing, the Court brought to the attention of the learned counsel for the parties a notification dated 11.08.2025 issued by the Islamabad High Court providing that, "henceforth all constitutional petitions pertaining to tax and Financial matters shall be heard and decided by the Division Bench instead of Single Bench of this Court. The Court sought the assistance of the learned counsel for the parties as to whether it was vested with jurisdiction to decide the matter.
4. The learned counsel for the petitioner submitted that it was a settled proposition of law that notifications were to be given prospective effect and could not be applied retrospectively. It was submitted that the instant petitions were pending adjudication and constituted part-heard cases. The notification dated 11.08.2025 would therefore apply to cases, which were filed subsequent to the issuance of the said notification or in which no substantive proceedings had taken place. He relied on Zikar v. Government of State of MP (AIR 1951 Nagpur 11), Chundra Gupta v. Secretary (AIR 1995 SC 44), Crown v. Abdul Aziz (PLD 1952 Sindh 1), Abdul Aziz v. PIA (PLD 1995 Karachi 566) Human Rights case s (PLD 2019 SC 183) and M. Imtiyaz v. M. Naeem (PLD 2023 SC 306) for the proposition that a part-heard case could not be transferred or withdrawn from the Judge who was seized of the lis.
5. The learned counsel for the Tax Department also submitted that the matter had been pending before this Court and had been heard over various sittings and notices had also been issued to the office of the Attorney General for Pakistan and the office of the Advocate General, Islamabad, under Order XXVII-A of the Code of Civil Procedure, 1908, by order dated 18.04.2025. Now that the arguments had almost concluded in the part-heard matter, it would cause undue prejudice to the parties if the adjudication of the matter was delayed by virtue of its transfer to another Bench, which would result in it being heard all over again. It was submitted that this Court was vested with jurisdiction to hear the matter and decide the same.
6. This Court agrees with the arguments of the learned counsel for the parties that as a general rule notifications apply prospectively. The issue of retrospective application of procedural law came before the Supreme Court in Adnan Afzal v. Capt. Sher Afzal (PLD 1969 SC 187). The question before the Supreme Court was whether a matter of maintenance pending before the City Magistrate was to be transferred to the Family Court in view of provisions of the West Pakistan Family Courts Act, 1964. The Supreme Court answered the question in the affirmative, but also held that, "if the new procedural statute is of such a character that its retroactive application will tend to promote justice without any consequential embarrassment or detriment to any of the parties concerned, the Courts would favorably incline towards giving effect to such procedural statutes retroactively."
7. In a part-heard matter, where the parties have been heard at length, the transfer of the case of another Bench would require hearing the matter afresh and delay its adjudication, thus causing detriment to the parties. The contrary course of hearing and deciding the matter would cause no detriment to any party. Further, transferring a part-heard matter pending before a Single Bench to a Division Bench would also have the effect of taking away the remedy available to an aggrieved party of filing an appeal before a Division Bench against the judgment of the Single Bench. The notification dated 11.08.2025 can therefore not be treated as a procedural change in law that ought to be applied retrospectively for causing no detriment to the interests of parties in a part-heard matter.
8. This Court also agrees with the contention of the learned counsel for the petitioner that there is no authority vested in the High Court or the office of the Chief Justice to transfer a part-heard matter from one Bench to another in exercise of administrative powers. The contrary proposition would be in breach of the principle of judicial independence. It was held by the Supreme Court as far back as in 1966 in M.H. Khondkar v. The State (PLD 1966 SC 140) that, "an application for transfer of a case does not lie where the matter is pending before a Judge of the High Court." This is now a settled proposition both in India and in Pakistan in view of M.H. Khondkar as well as the following precedents: Islamic Republic of Pakistan v. Abdul Wali Khan (PLD 1976 SC 57), Noor Fatima v. Federation of Pakistan (Writ Petition No.2667 of 2024) Muhammad Azam Khan Swati v. The State (2023 PCr.LJ 350), Anil Kumar Verma v. U.P. State Industrial Development (Writ-A No.5822 of 2014), Rajkot Cancer Society v. Municipal Corporation, Rajkot (AIR 1988 Gujrat 63), Neetu Singh v. Rajeev Saumitra (TR.P.(C) 55/2015), Suo Motu Case No.4 of 2022 (PLD 2023 Supreme Court 387), Muhammad Imtiyaz v. Ch. Muhammad Naeem and others (PLD 2023 Supreme Court 306), Human Rights Case No. 14959-K of 2018, (PLD 2019 Supreme Court 183) and Raja Amer Khan

v. Federation of Pakistan (PLD 2025 SC 869). This Court is accordingly satisfied that it is vested with jurisdiction to decide these petitions.

1. The primary question that arises in the present petitions is whether penal provisions contained in Section 33 (Serial Nos.11 and 13) of the Sales Tax Act, and consequent action under Section 37A of the Sales Tax Act in pursuit of such penal provisions, can be initiated without first assessing and adjudicating sales tax liability of the taxpayer in accordance with Section 11 of the Sales Tax Act. The petitioner's initial argument was that the tax department had carried out a raid at its head office to confiscate business records and documents of the petitioner in breach of requirements of Sections 38 and 40 of the Sales Tax Act. The Tax Department in response argued that no raid was carried out for purposes of confiscating the record and documents of the petitioner, but the tax officials visited the petitioner's head office to effect the arrest of the CFO of the petitioner in exercise of authority under Section 37A of the Sales Tax Act.
2. Notwithstanding this factual controversy, the paramount legal question before us is whether pre-trial steps, including the arrest and detention of a person pursuant to the registration of an FIR on charges of tax fraud, can be effected without first undertaking adjudicatory proceedings and generating a tax demand in terms of Section 11 of the Sales Tax Act. The majority of the arguments of the learned counsel for the parties with regard to how the adjudicatory scheme for purposes of determining the civil liability of a taxpayer and the penal provisions for affixing criminal liability of a taxpayer fit together in view of the scheme of the Sales Tax Act have been considered and settled by the Supreme Court in Taj International-2. We will first examine the law laid down by the Supreme Court in Taj International-2. We will then consider the argument of the Tax Department that amendments introduced to Section 33 of the Sales Tax Act render the law laid down by the Supreme Court in Taj International-2 distinguishable.
3. In Taj International-2 the Tax Department submitted before the Supreme Court that the assessment and collection mechanism provided under the Sales Tax Act to recover the tax liability due and payable by a taxpayer as a civil matter had not proven effective over time. And consequently, reliance on penal provisions and the criminal justice system as a means to affect recovery had become the more attractive option in cases where there was material evidence that non-discharge of tax liability may also qualify as tax fraud. After considering the manner in which offences and penalties have been prescribed by Section 33 of the Sales Tax Act, the Supreme Court noted that, "criminal penalties are linked with the 'tax loss' or 'amount of tax involved and tax due" and that, "the measure of sentence is linked with the amount or loss of tax involved and tax due and prima facie cannot be imposed unless there is some determination or duly assessed tax liability of sales tax due through the process of assessment for adjudication as per law. In fact, the above linkage, uses the tool of imposition of penalty as a mode of recovery of tax.

Hence, criminalization under the Act goes beyond the pale of retribution and deterrence and appears to be principally focused on recovery of tax.

1. While holding that no penal proceedings could be initiated against a taxpayer sans prior assessment of tax liability, the Supreme Court in Taj International-2 held the following:

"13...primarily tax liability is a civil liability to be determined through process of assessment or adjudication as per law, whereas, in case of willful default, miscalculation, concealment or fraud penal provisions can be invoked to ensure tax compliance, recovery of tax and payment of additional amount of tax and/or penalty. It, therefore, appears that criminalization under the act while invoking the provisions of Section 37A, without recourse to the assessment proceedings, is being treated differently as compared with other tax laws, which is not only against the scope and application of taxing provisions of the Act but also, violates the settled principles of fairness and fair trial as guaranteed under Article 10-A of the Constitution of the Islamic Republic of Pakistan, 1973. Imposition of additional tax, default surcharge, penalty or fine etc. depends upon peculiar facts of each case whereas, such penal provisions are only attracted once the revenue authorities can establish that the default in payment of tax was willful and there was element of mens rea on the part of taxpayer, while not making payment of such amount of tax due."
"15...In essence tax fraud is falsifying a tax invoice with the intention to understate the tax liability, or to underpay the tax liability or overstate the entitlement to tax credit or tax refund to cause loss of tax. Even if we assume that the Special Judge convicts the taxpayer, he cannot award the sentence, as 'fine' is dependent on the 'amount or loss of tax involved' and it is not within the competence or jurisdiction of the Special Judge to assess tax or determine the 'amount or loss of tax involved' which is not part of the offence but of the sentence. Further, the facility of compoundability under Section 37(A)(4) is not available to the taxpayer, unless the amount or tax due and penalties as determined under the Act"
16 The two prerequisites for invoking the previsions of Sections 33 and 37A are: dependence of fine on the 'amount or loss of tax involved' and the window of compoundability which is available to the taxpayer, who can pay the 'amount of tax due along with such default surcharge and penalty as determined under the provisions of this Act.' If the purpose was simple retribution and deterrence, there was no need to make the fine dependent with the amount or loss of tax involved. However, if the fine under criminal prosecution is to be dependent with the amount or loss of tax, such a criminal construct must be prefaced with the mandatory requirement of assessment of tax through civil adjudication provided under Section 11 of the Act. This precondition in our view, is the minimum constitutional requirement to ensure fair trial and due process under Articles 4 and 10-A of the Constitution."
"18. Perusal of Section 37A shows that if such provisions are allowed to be invoked independently without any reference to other provisions of the Sales Tax Act, including Section 2(37) 'tax fraud', Section 3 scope of tax , Section 11 'assessment of tax' and Section 33 offenses and penalties , the same will be in violation of the substantial provisions relating to charge of sales tax and assessment of sales tax, as it will give unbridled powers to officials of sales tax to initiate criminal prosecution against a registered person or any person within the supply chain, including registration of FIR and arrest, even without creating a lawful demand under the law. If such an interpretation is made in respect of provisions of Section 37A the same will make the aforesaid provisions of the Act as redundant, whereas, redundancy cannot be attributed to legislation ... Moreover, under the Sales Tax Act there is no provision of law which authorizes the tax officials to presume any tax liability in the absence of assessment proceedings, and to proceed against a registered person or any person within the supply chain
"19...Perusal of the provisions of Section 37A of the Act shows that unless these provisions are read in harmony with other corresponding provisions of the Act, and invoked as per, scheme of the law after assessment/adjudication of the amount of sales tax due, it can be abused by initiating criminal proceedings, including arrest of a registered person, on the mere allegation of tax fraud and default in payment of presumed tax liability which is yet to be determined through process of assessment or adjudication. Such interpretation of the provisions of Section 37A, would bring uncertainty of taxation, which is against the very spirit and purpose of imposition of any tax."
"20...recourse to initiation of criminal proceedings on the allegation of tax fraud, including registration of FIR and arrest of a registered person or any person within the supply chain, amounts to, pre-empting the assessment of tax liability, whereas, in the absence of lawful demand of sales tax pursuant to assessment of tax due, the penal provisions including Section 33 read with sections 37A and 37B cannot be invoked. Therefore, the penal provisions, including registration of FIR and arrest of any person on the above allegations is without jurisdiction and lawful authority. It is settled principle of interpretation of taxing statute that any provision of statute cannot be read in isolation, particularly, when it is dependent upon or complimentary to other provisions of the law. In case of any ambiguity or overlapping of the provisions of law, harmonious construction is to be made, so that such provision of law may not render the other provisions as redundant or nugatory".
"22...[W]e have no hesitation to conclude that without investigative audit or issuance of show-cause notice or providing opportunity to explain the matters, registration of FIR, initiation of criminal proceeding and arrest of registered person is without jurisdiction and lawful authority. We further hold that criminal prosecution follows adjudication and assessment of tax under Section 11 of the Act, therefore, pretrial steps including arrest and detention cannot be given effect to unless the tax liability of the taxpayer is determined in accordance with law..."

1. The purpose of reproducing the dicta of the Supreme Court at length is to reiterate that the Supreme Court has appreciated and enumerated the manner in which provisions of the Sales Tax Act are to be harmoniously interpreted, keeping in view the demands of the Constitution mandating equal protection of law, fair trial and due process. The Tax Department has argued that both the Lahore High Court and the Supreme Court in the matter of Taj International took into account the words used in the penalty provision for the offence described in serial 13 of Section 33 of the Sales Tax Act, which referred to "amount of tax involved". However, pursuant to the Finance Act, 2024, the language of the penalty has been amended so it now reads "the amount of tax evaded or sought to be evaded". Further, that the definition of tax fraud has been substituted by the Finance Act, 2024, which, when read together with the amendments introduced into the penalty provision of the offence at serial 13 of Section 33 of the Sales Tax Act, now provides that the "attempt" to undertake tax fraud can be prosecuted independently. This change requires that prosecution and criminal proceedings on the charge of tax fraud not be treated as a step subsequent to the ascertainment of tax liability pursuant to assessment proceedings under Section 11 of the Sales Tax Act. The Tax Department has argued that if the law laid down by the Supreme Court in Taj International-2 is not distinguished after the enactment of Finance Act, 2024, and the amendments introduced by it to Section 33 of the Sales Tax Act, the words "sought to be evaded" in relation to sales tax liability would become redundant and redundancy cannot be attributed to the legislation. It was submitted that in view of the law laid down by the Lahore High Court in Taj International-1 an appropriate amendment had been introduced to Section 33 of the Sales Tax Act and the legislative scheme as understood, and enumerated by the Lahore High Court in Taj International-1, was no longer applicable the altered provisions of the Sales Tax Act. For this proposition, reliance was placed on Molasses Trading, wherein it was held that, "when a legislature intends to validate a tax declared by a court to be illegally collected under an invalid law, the cause for ineffectiveness or invalidity must be removed before the validation can be said to take place effectively. It will not be sufficient merely to pronounce in the statute by means of a non obstante clause that the decision of the court shall not bind the authorities, because that will amount to reversing a judicial decision rendered in exercise of the judicial power, which is not within the domain of the legislature. It is therefore necessary that the conditions on which the decision of the court intended to be avoided is based, must be altered so fundamentally, that the decision would not any longer be applicable to the altered circumstances."
2. In the facts and circumstances before us, the test for validation prescribed by Molasses Trading, pursuant to which a legislative act has the effect of rendering a judicial decision inapplicable, does not stand satisfied. The Supreme Court in Taj International-2 did not root its interpretation of the scheme of the Sales Tax Act in the words used to define the penalty for the offence listed at serial 13 of Section 33 of the Sales Tax Act. The Supreme Court held that provisions of the Sales Tax Act, including Section 2(37), Section 11, Section 33 and Section 37A were to be interpreted harmoniously. Such harmonious interpretation required that sales tax liability of a taxpayer be assessed through the adjudicatory process provided under section 11 of the Sales Tax Act prior to initiation of criminal proceedings, as criminal proceedings within the scheme of the Sales Tax Act were linked to assessment proceedings in terms of determining the quantum of penalty to be imposed on a person liable for an offence under Section 33 of the Sales Tax Act. Such linkage established that penal provisions and the penalties prescribed for offences under Section 33 were conceived as a method for enforcing payment of tax. In other words, as the penalty was meant to be proportionate to the tax liability found to be due and un-discharged, the question of imposing a penalty could not arise without prior determination of tax due and payable. The Supreme Court also noted that the Special Judge empowered to take cognizance of offences under provisions of the Sales Tax Act was not vested with any authority to ascertain and quantify the tax liability due to be discharged by a taxpayer and would have no means to ascertain the penalty to be imposed, which penalty could not be based on a mere estimate of the tax demand projected by the Tax Department without reliance on assessment proceedings in terms of Section 11 of the Sales Tax Act. The Supreme Court also noted that the offences prescribed by the Sales Tax Act were compoundable, which further established that the penal provisions prescribed by the Sales Tax Act were essentially a mechanism adopted by the legislature to collect revenue as opposed to simply punishing a wrongdoer by incarcerating him. The option of compounding the offence as provided under Section 37A(4) of the Sales Tax Act would become redundant where there was no prior ascertainment of the tax liability pursuant to assessment proceedings in terms of section 11 of the Sales Tax Act. It was in this large context that the Supreme Court then held that affording the Tax Department a free hand and discretionary authority to simultaneously initiate assessment proceedings and criminal proceedings against a taxpayer for recovery of tax would breach the requirement of equal protection of law in terms Article 4 of the Constitution. And further, initiation of criminal proceedings and ordering the arrest and detention of a taxpayer without first determining his civil liability to pay tax would be in breach of the guarantee of Article 10A of the Constitution, which provides that, for the determination of his civil rights and obligations or in any criminal charge against him a person shall be entitled to a fair trial and due process."
3. Let us first consider the matter from a constitutional law and criminal law perspective, to be followed by how provisions of the Sales Tax Act, as amended by the Finance Act, 2024, are to be construed. Article 4 of the Constitution requires the State to ensure that a citizen enjoys the protection of law and that, "no action detrimental to the life, liberty, body, reputation or property of any person" is taken except in accordance with law. Where a statute affords the State the power to initiate assessment proceedings for determination of civil liabilities in a tax matter or to initiate of criminal proceedings to prosecute the taxpayer on the same set of facts, without prescribing how such discretionary authority is to be exercised, the arbitrary exercise of such discretionary authority to pick and choose between pursuit of civil or criminal law remedies from one case to another could itself fall foul of the right to equality guaranteed by Article 25 of the Constitution. The legality of provisions of the Foreign Exchange Regulation (Amendment) Act, 1956, came before the Supreme Court in Waris Mean v. The State (PLD 1957 SC (Pak.) 157). The Supreme Court found the relevant provisions, to be ex-facie discretionary for being in breach of the guarantee of equality and equal protection of law afforded by the constitution in the following terms:

"The mischief of the Act is, however, not susceptible of so simple a cure. It confers discretion of a very wide character upon stated authorities, to act in relation to subjects falling within the same class in three different modes varying greatly in severity. By furnishing no guidance whatsoever in regard to the exercise of this discretion, the Act, on the one hand, leaves the subject, falling within its provisions, at the mercy of the arbitrary will of such authority, and, on the other, prevents him from invoking his fundamental right to equality of treatment under the Constitution?
This broader principle was reiterated more recently by the Supreme Court in Syed Mushahid Shah v. Federal Investigation Agency (2017 SCMR 1218).

1. Where the enjoyment of a fundamental right is subject to any restrictions imposed by law, such restrictions are to be reasonable and proportionate to the legitimate state purpose sought to be realized by imposition of such restrictions. The Supreme Court considered what would constitute a reasonable restriction in relation to fundamental rights in M/s East and West Steamship Company v. Pakistan (PLD 1958 SC (Pak.) 41) as follows:

"A 'reasonable restriction' in the sense of Article 11 is one which is imposed with due regard to the public requirement which it is designed to meet. Anything which is arbitrary or excessive will of course be outside the bounds of reasons in the relevant regard, but in considering the disadvantage imposed upon the subject in relation to the advantage which the public derives, it is necessary that the court should have a clear appreciation of the public need which is to be met and where the statute prescribes a restraint upon the individual, the court, should consider whether it is a reasonable restraint, in the sense of not bearing excessively on the subject and at the same time being the minimum that is required to preserve the public interest.

1. While considering whether the State is empowered to initiate assessment proceedings for ascertainment of civil liabilities and criminal proceedings to prosecute a taxpayer for an offence under provisions of the Sales Tax Act, at stake is the right of the citizen to liberty guaranteed by Article 9 of the Constitution. Also at stake is the right of the citizen to dignity guaranteed by Article 14 of the Constitution in case the state seeks the arrest of an individual. Where a matter involves the curtailment of a taxpayer's right to liberty and dignity, together with his right to equality guaranteed by Article 25, Article 10A of the Constitution mandates the state to afford him due process and fair trial. And it is in this context that the Supreme Court held in Taj International-2 that the guarantee of Article 10A of the Constitution would mean little if criminal proceedings can be initiated and the arrest and detention of a taxpayer can be ordered without first determining the civil liability of the taxpayer, where, in the ultimate resort, the criminal liability is contingent upon and linked to the taxpayer's civil liability for payment of tax.
2. It is in view of a citizen's right to liberty and dignity guaranteed by the Constitution, and the lack of restitutionary measures in case of unjust abuse or such rights, that it was held by the Supreme Court in the oft-quoted case of Manzoor v. The State (PLD 1972 SC 81) that:

There is no legal or moral compulsion to keep people in jail merely on the allegation that they have committed offences punishable with death or transportation, unless reasonable ground appear to exist to disclose their complicity. The ultimate conviction and incarceration of a guilty person can repair the wrong caused by a mistaken relief of interim bail granted to him, but no satisfactory reparation can be offered to an innocent man for his unjustified incarceration at any stage of the case albeit his acquittal in the long run."
In Mst. Sughran Bibi v. The State (PLD 2018 SC 595) a larger bench of the Supreme Court endorsed the law laid down by the Lahore High Court in Khizar Hayat and others v. Inspector General of Police (Punjab), Lahore and others (PLD 2005 Lahore 470) on the manner in which power to arrest is to be used; while reiterating that merely because a complaint has been filed and an FIR has been registered does not mean that the power to arrest a citizen must automatically be employed for purposes of investigation.

1. In Saad Sumair v. National Accountability Bureau (PLD 2022 Islamabad 371) a Division Bench of this Court considered the manner in which the power to arrest could be used by an investigation agency in relation to a white-collar crime. It was held that, "post Sughran Bibi it is settled that the State must not exercise its police powers to arrest a citizen merely because a report or complaint has been filed against him which is under investigation." It reiterated dicta from Amjad Mustafa Malik v. Director General, National Accountability Bureau (PLD 2021 Islamabad 266) in which it was held that, "if the investigator of a white-collar crime is unable to conduct effective inquiry and investigation without arresting an accused then it raises series questions regarding competence and professionalism." While enumerating the law in relation to grant of pre-arrest bail, it was further held in Saad Sumair that, while courts afford wider berth to state authorities investigating violent crimes in view of the requirements of investigation in such cases while applying the principles of proportionality, the court would exercise stricter scrutiny in relation to white-collar crimes involving documentary evidence, and the executive needs to establish that exercise of arrest powers does constitute the least restrictive means if a balance is struck between the fundamental rights of the individual being investigated and the collective public interest in effective investigation of an alleged offence."
2. The principles for regulating the power of arrest and detention in relation to offences in general and offences involving white-collar crimes more particularly are applicable when it comes to construing the provisions of the Sales Tax Act and understanding how the assessment proceedings for ascertainment of civil liability fit together with the penal provisions for prosecuting and punishing offenders.
3. The preamble to the Sales Tax Act provides that it has been enacted, "to consolidate and amend the law relating to the levy of a tax on the sale, importation, exportation, production, manufacture or consumption of goods." The object of the Sales Tax Act is the levy, assessment and collection of sales tax. And the penalties prescribed under provisions of the Sales Tax Act are to be understood accordingly. The reliance on criminal law machinery is a measure of last resort in a context where the sales tax liability due and payable by a taxpayer has not been discharged and the delinquency of the taxpayer rises to a level where it qualifies as an offence for purposes of Section 33 of the Sales Tax Act. It is in this context that the Supreme Court held in Taj International-2 that the penalty prescribed for an offence at Serial No.13 of Section 33 of the Sales Tax Act was contingent upon and linked to the amount of tax found to be due and payable in accordance with assessment proceedings under Section 11 of the Sales Tax Act. And the prescription of penalty in such fashion together with the provision of compounding of the offence established that the penalty provisions were conceived by the Legislature as a method to enforce the payment of tax.
4. As a matter of statutory interpretation, the provisions of fiscal statutes are to be understood and interpreted to give effect to the object and purpose of such statutes. The object and purpose of taxing statutes is to collect tax and ensure voluntary tax compliance. In this context it must be understood that penalizing tax evaders or slapping jail terms on delinquent taxpayers are not stand-alone objects of the Sales Tax Act. Consequently, seeking activation of criminal justice machinery against delinquent taxpayers in a trigger-happy manner as an initial measure cannot be the object of any rational tax administration (See for example Carlos A. Silvani, Improving Tax Compliance (International Monetary Fund, Fiscal Affairs Department, Technical Notes and Manuals No. 13/09, 2013)). The amendment introduced to provisions of the Sales Tax Act by the Finance Act, 2024, has not altered the object and purpose of the Sales Tax Act and has not had the effect of informing the enforcement of provisions of the Sales Tax Act within the larger constitutional framework that has been discussed above.
5. As a Matter of general law, it was held in Muhammad Akhter v. The State (PLD 1968 SC 281) that, "normally it is true, that criminal proceedings should not be postponed pending the disposal of civil litigation connected with the same subject-matter. But where it is clear that the criminal liability is dependent upon the result of the civil litigation or is so intimately connected with it that there is a danger of grave injustice being done in the case if there be a conflict of decision between the Civil Court and the Criminal Court, in such event it is equally clear that the Criminal Court has not only the right to but should also stay its hands until the civil litigation is disposed of, for, it is not desirable that when the title to the property itself is in dispute, the Criminal Courts should give a finding in respect of the same question...There is now consensus of opinion that there is no invariable rule that a criminal proceeding should be stayed pending the decision of the Civil Suit, but the matter is one of discretion entirely. In exercising this discretion, the guiding principle should be to see as to whether the accused is likely to be prejudiced if the criminal proceeding is not stayed. In cases of disputed title, where it is difficult draw a line between a bona fide claim and the criminal action alleged, a stay can be made in the proper exercise of that discretion."
6. It was held by this Court in Doctor Nauman Hamid Niaz v. Federation of Pakistan (PLD 2025 Islamabad 24) that, [I]t is settled law that criminal proceedings can be quashed or stayed by the High Court, if, in view of the facts of the case, it comes; to the conclusion that such proceedings are rooted in male fide or that they suffer from a jurisdictional defect. Further, in cases of simultaneous civil and criminal proceedings relating to the same subject-matter, it is also settled that such proceedings can continue simultaneously except where the determination of criminal liability is contingent on the prior determination of civil rights and obligations arising in question. In such a case, the correct course of action is to stay the criminal proceedings till the civil rights and obligations of the contested parties have been, finally determined by the Court of competent jurisdiction."
7. In the matter before us, the determination of criminal liability is contingent upon prior determination of civil rights and obligations of the taxpayer, as held by the Supreme Court in Taj International-2. It is thus imperative that the State first determine the civil tax liability of a taxpayer through assessment proceedings undertaken pursuant to Section 11 of the Sales Tax Act. Once such liability is ascertained and quantified on a balance of probabilities, only then can the State then initiate criminal proceedings for purposes of Section 33 of the Sales Tax Act to seek to establish beyond reasonable doubt that the taxpayer is liable for an offence under the said provision and the penalty that follows.
8. The Tax Department argued that the definition of 'tax fraud' had been amended by the Finance Act, 2024. 'Tax fraud' is defined by Section 2(37) of the Sales Tax Act, as follows:

(37) "tax fraud" means intentionally understating or underpaying the tax liability or overstating the entitlement to tax credit or tax refund in contravention of duties or obligations imposed under this Act by way of submission of false return statements or false documents or withholding of correct information or documents to cause loss of tax and includes--

1. suppression of supplies that are chargeable to tax under this Act;
2. false claim of input tax credit;
3. making taxable supplies of goods without issuing any tax invoice, in violation of the provisions of this Act or the rules made thereunder;
4. issuance of any tax invoice without supply of goods leading to inadmissibleclaim of input tax credit or refund;
5. evasion of tax by availing undue input tax credit or obtaining inadmissiblerefund by any means or methods other than that covered under clauses (a) to (d);
6. collection of any amount as tax but failing to deposit the same in the prescribed manner beyond a period of three months from due date of payment of tax;
7. falsification or causing falsification of invoice or substitution of financial records or production of fake accounts or documents or furnishing of any false information through human, mechanical or electronic means with an intention to evade tax due or claim inadmissible refund;
8. It is evident from a plain reading of the definition of 'tax fraud' that the actus reus is defined as "intentionally understating or underpaying the tax liability or overstating the entitlement to tax credit or tax refund in contravention of duties and obligations imposed under this Act." The definition then goes on to identify the various means through which such act of tax fraud can be undertaken. To put it another way, the basic ingredient of tax fraud is understatement or underpayment of tax liability or overstatement of the entitlement to tax credit or tax refund. Where there is neither any understatement or underpayment of tax liability nor any overstatement of the entitlement to tax credit or tax refund, the mechanisms prescribed within the definition of 'tax fraud' to cause loss of tax etc. are of no relevance. It is thus that the allegation of tax fraud cannot stand in a set of circumstances where, after assessment proceedings, it is concluded by the relevant adjudicatory forums that a taxpayer is not liable for understatement or underpayment of tax or has not made a claim for tax credit or tax refund that overstates its entitlement. This is why the criminal liability for tax fraud is contingent on prior determination of a taxpayer's civil liability.
9. The argument of the learned counsel for the Tax Department that the amendments introduced to the language of the penalty at Serial No.13 of Section 33 of the Sales Tax Act brings about a fundamental change in the scheme of how criminal prosecution is to be undertaken is without merit. With regard to the words used in the penalty provision at Serial No.13 of Section 33 of the Sales Tax Act, were "tax involved" has been replaced by "tax evaded or sought to be evaded", the first point to note is that within the statutory scheme of the Sales Tax Act, as explained by the Supreme Court in Taj International-2, "tax evaded or sought to be evaded" would still require assessment and quantification, which can only be undertaken through assessment proceedings pursuant to Section 11 of the Sales Tax Act. Just as "tax involved" could not be based on the estimation of the Tax Department, tax evaded or sought to be evaded cannot be a product of projections made by the Tax Department, especially where a consequence of such assessment and quantification acquires the shape of a penalty to be imposed on the taxpayer. Despite the change of language, the penalty remains linked to prior assessment of tax liability and the provision of a section 37A(4) of the Sales Tax Act remains in place, which affords the option of compounding the offence in terms of payment of the amount of "tax evaded or sought to be evaded".
10. The next point to note in this context is that the change in language and the replacement of the words tax involved with the words "tax evaded or sought to be evaded" was meant by the Legislature to add precision to the nature of penalty to be imposed on a delinquent taxpayer where tax fraud stands established. The words "tax involved" were susceptible to more than one meaning. It could mean a penalty to be imposed on the total amount of tax payable by a taxpayer and not just the amount of tax underpaid or, under stated. Such interpretation would not be in consonance with the principle of proportionality, linking the penalty to the extent of wrongdoing on part of the taxpayer. The penalty provisions in a tax statute, where the penalty is linked to the "tax involved", are to be interpreted keeping in view the principle of proportionality (see for example CIR v. General Tyre Ltd. (2013 PTD 387), Kite Maker v. ITO (2021) 483 I.T.R 353 (Karela)). By replacing the words "tax involved" with the words "tax evaded or sought to be evaded" the Legislature has merely done away with the ambiguity in the erstwhile articulation of the penalty for the offences prescribed under Section 33 of the Sales Tax Act and building within the language of provisions of the Sales Tax Act the principle of proportionality discussed above.
11. The learned counsel for the Tax Department also argued that in the event that the Court came to the conclusion that the law laid down by the Supreme Court in Taj International-2 was still applicable to the manner in which civil liabilities and criminal liabilities are to be ascertained, including the sequence of such ascertainment under provisions of the Sales Tax Act, the words "sought to be evaded" as introduced within the penalty provision of Section 33 of the Sales Tax Act would become redundant. This argument is also without merit, even on a narrow textual basis, as the words "sought to be evaded" have not necessarily been used in the context of penalizing an attempt to undertake tax fraud. As has been discussed above, the actus reus of tax fraud has been defined as including understatement or underpayment of tax liability or overstatement of the entitlement to tax credit or tax refund. In case of understatement or underpayment of tax liability, a consequence of assessment proceedings would result in quantification of the tax evaded. On the other hand, in a case of overstatement of the entitlement to input tax refund, for example, the consequence, of assessment proceedings would be the quantification of the tax sought to be evaded. Such interpretation of the words "tax evaded or sought to be evaded" would result in a harmonious interpretation of provisions of Sections 2(37), 11, 33 and 37A of the Sales Tax Act as enumerated by the Supreme Court in Taj International-2.
12. The argument of the learned counsel for the Tax Department that the language of Section 33 of the Sales Tax Act, as amended by the Finance Act, 2024, is intended to enable prosecution of an "attempt" to undertake tax evasion is misconceived, as any attempt to undertake tax fraud on a standalone basis would still require the establishment of an actus reus on the part of the Tax Department. The manner in which the conduct element in relation to an offense of "attempt" is to be appreciated was elucidated by this Court in Collector of Customs, MCC Islamabad and others v. Israr and others (2021 PTD 501) as follows:

"31. With regard to the conduct element in relation to 'attempt' offences there exist two approaches: a fault-centered approach and an act-centered approach. From the stand point of fault-centered approach, an individual is guilty if he possesses a guilty mind and when he takes steps in pursuance of such criminal intent, he is liable to be punished. From the standpoint of actcentered approach, law should require an unambiguous act close to the commission of the crime to attract penalty, in order to protect individual liberty and agency and to give the individual the benefit of doubt if he recedes prior to the penultimate act and resiles from the criminal intent.
32. The test laid out by the august Supreme Court in Khan Mohammad's case follows the act-centered approach and calls for imposition of penalty only once the accused crosses a stage in pursuit of the crime where the intent to commit such crime is manifest and the penultimate Step leading to its happening is imminent..."

1. Even where the case against a taxpayer is that he has attempted tax fraud, there would be a requirement to establish that the acts attempted were meant to understate or underpay tax liability or overstate entitlement to tax credit or tax refund in terms of Section 2(37) of the Sales Tax Act. No case of an attempt offence would be made out in circumstances where as a consequence of assessment proceedings undertaken pursuant to section 11 of the Sales Tax Act, the adjudicatory authorities come to the conclusion that no case of understatement/underpayment of tax liability or overstatement of entitlement to tax credit/tax refund is made out against a taxpayer. In this context too, the law laid down by the Supreme Court in Taj International-2 remains fully applicable. Even otherwise, the case against the petitioners in the present petitions is not that they have merely attempted to undertake tax fraud. The Tax Department's case against them is that they have undertaken tax fraud by setting up dummy companies etc. In the event that as a consequence of assessment proceedings, taxpayers are found culpable for understating or underpaying tax liability or overstating entitlement to tax credit or tax refund in terms of section 2(37) of the Sales Tax Act, the Tax Department would be at liberty to initiate penal action under provisions of Section 33 of the Sales Tax Act, if the Commissioner so determines.
2. In view of the above, this Court finds that the law as laid down by the Supreme Court in Taj International-2 remains fully applicable notwithstanding the amendments introduced to provisions of the Sales Tax Act by virtue of the Finance Act, 2024. Further, the provisions and the scheme of the Sales Tax Act have been explained by the Supreme Court in a larger context of the guarantees afforded by the Constitution to citizens under Articles 4, 9, 10A, 14 and 25 of the Constitution. Consequently, such interpretation of the provisions and scheme of the Sales Tax Act as to the sequence of determination of civil liability and criminal liability cannot be altered in view of the validity test laid down in Molasses Trading, without the object and purpose of the Sales Tax Act undergoing a foundational transformation, which is certainly not the case before us.
3. In view of the above, this Court finds that any action taken by the Tax Department in exercise of authority under Section 37A of the Sales Tax Act pursuant to registration of FIR No.07 of 2024 dated 18.11.2024 was illegal and was tantamount to colorable exercise of authority. In view of the law laid down in Taj International, the Tax Department ought to have been aware that it could neither register any FIR nor exercise the police powers of the state under Section 37A of the Sales Tax Act pursuant to an FIR, without first undertaking assessment proceedings in terms of Section 11 of the Sales Tax Act and determining of tax liability of the taxpayer. The exercise of authority under Section 37A of the Sales Tax Act against the petitioners or their officers or directors for a purported offence under Section 33 of the Sales Tax Act was therefore devoid of legal authority and of no legal effect. Accordingly, FIR No.07 of 2024 dated 18.11.2024 shall stand quashed and the Tax Department shall not prosecute the petitioners for offenses or take other coercive action, in the form of pre-trial steps such as arrest etc., without first ascertaining their tax liability pursuant to assessment proceedings under section 11 of the Sales Tax Act. The Tax Department shall also return any record or documents retrieved from the office of the petitioner, while undertaking a raid purported exercise of authority under Section 37A of the Sales Tax Act.
4. During the proceedings of this mater, this Court has noted with dismay that the Tax Department was not candid in explaining the nature of the raid carried out at the head office of the petitioner, which has been claimed by the petitioner to be a raid in terms of Section 40 of the Sales Tax Act, and was explained by the Tax Department as an attempt to seek the arrest of the CFO of the petitioner in terms of Section 37A of the Sales Tax Act. While this Court has viewed the footage of the actual raid in which officials of the Tax Department carrying heavy weapons can be seen breaking and entering record rooms and carrying records and computer drives out of the office of the petitioner, this Court cannot render a definitive factual determination in this regard in its constitutional jurisdiction.
5. The petitioner has urged that officials of the Tax Department be prosecuted for falsifying facts related to the raid carried out. Likewise, the Tax Department has also filed an application seeking that the petitioner be prosecuted for perjury for fabricating transportation receipts. This Court is not minded to proceed against the Tax Department or the Petitioner on grounds of perjury, as expression of an opinion in such regard could prejudice the interest of the parties in tax assessment proceedings that are pending. The basic question of law before the Court has been adjudicated and that is where this matter will rest in the present proceedings.
6. These petitions are allowed in the above terms.