The Islamabad High Court (IHC) has restrained the Federal Board of Revenue (FBR) from taking further action against a restaurant in Islamabad, which was sealed over allegations of failing to issue verified sales tax invoices as a Tier-I retailer. The court summoned the Chief Commissioner and Commissioner of the Regional Tax Office (RTO) Islamabad to explain why the restaurant was classified as a Tier-I retailer.
The petitioner, M/s The Lost Tribe, a well-known restaurant in Sector F-11, argued that it is a service provider and does not fall under the definition of a Tier-I retailer as per Section 2(43)(a) of the Sales Tax Act, 1990. The restaurant’s counsel contended that the sealing of the premises was carried out without due process and in violation of the petitioner’s constitutional rights under Article 10-A, which guarantees the right to natural justice.
On January 27, 2025, the FBR conducted a raid on The Lost Tribe restaurant and sealed the premises. The sealing order cited three debit/credit card receipts issued by the restaurant that were allegedly unverified and not compliant with rule 150ZEO of the Sales Tax Rules, 2006. Under this rule, a Tier-I retailer’s premises can be sealed if three unverified receipts are issued in a single day.
The petitioner argued that even if it were considered a Tier-I retailer, the sealing action could only have been taken after the Commissioner Inland Revenue confirmed the invoices were unverified, as required by rule 150ZEO(3). However, no such confirmation was sought, and the restaurant was not given an opportunity to be heard before the action was taken.
Following the sealing, the restaurant sought de-sealing of its premises, which was allowed on the condition of paying Rs. 500,000 and Rs. 2.5 million. The petitioner claimed these payments were made under protest, as no formal order was issued to justify the demand, and the instructions were verbally communicated while the business was suffering losses.
The IHC, in its order, noted that the petitioner is a registered taxpayer and operates a reputable restaurant in Islamabad. The court has directed the respondents to file detailed reports and para-wise comments by February 4, 2025. Additionally, the Chief Commissioner and Commissioner RTO have been ordered to appear in person to justify the actions taken against the restaurant and ensure that the authority exercised was not “colorable.”
The court further instructed the petitioner to deposit the requisite fee for issuing notices and barred the FBR from taking any coercive action against the restaurant until the next hearing.
