Judicial Endorsement of ADR for Tax Dispute Resolution

In the Lahore High Court's decision on Writ Petition No. 3973 of 2023, the Strategic Plans Division (SPD) and the National Command Authority (NCA) challenged the show cause notices issued by the Punjab Revenue Authority (PRA) under the Punjab Sales Tax on Services Act, 2012. These notices imposed provincial sales tax on services provided by SPD, which petitioners argued was unlawful.

Key Areas:

Maintainability of Writ Petitions: The court addressed whether writ petitions against show cause notices are maintainable. Generally, such notices are not considered adverse orders unless issued without jurisdiction or in bad faith. This principle was supported by precedents like “Muslim Commercial Bank Limited vs Deputy Commissioner of Income-Tax” (2004 PTD 1901) and “Reliance Commodities (Private) Ltd. vs Federation of Pakistan” (PLD 2020 Lahore 632).

Principles of Natural Justice: The court emphasized that show cause notices must adhere to the principles of natural justice, allowing recipients to respond adequately to allegations. This is in line with constitutional guarantees under Articles 4 and 10-A, ensuring due process and fair trial.

Alternate Dispute Resolution (ADR): The court highlighted the importance of ADR in resolving tax disputes efficiently and amicably. The concept, first introduced in tax matters by the Supreme Court in the “Attock Petroleum case” (2007 SCMR 1095), was reinforced in “RYK Mills case” (2023 SCMR 1856) and “Haroon Construction Company case” (2024 SCMR 947). The court encouraged mediation, recognizing its benefits in terms of cost, time, and preserving relationships.

Case Precedents: Attock Petroleum Case (2007 SCMR 1095): Introduced ADR in tax disputes. RYK Mills Case (2023 SCMR 1856): Supported viewing show cause notices as pre-litigation ADR tools. Haroon Construction Company Case (2024 SCMR 947): Encouraged courts to promote mediation and settlement biases.

Conclusion: The court disposed of the petitions, directing the parties to pursue mediation under the PRA’s ADR framework, ensuring no coercive measures are taken during the process.

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