ISLAMABAD - The Islamabad High Court (IHC) has issued its detailed judgement on a petition challenging government's amnesty scheme introduced by the previous government for smuggled vehicles, calling it illegal.

Justice Shaukat Aziz Siddiqui of the IHC declared the SRO issued by the government on March 5, 2013 null and void and directed the Federal Board of Revenue (FBR) to impound the smuggled vehicles cleared under the scheme.

The petition was moved by Khawaja Saad Saleem – the president of Defence of Human Rights of Public Services Trust -- through his attorneys Syed Javed Akbar and Muhammad Imran Amir.

In his petition, he contended that the federal government issued SRO on March 5, 2013 whereby an amnesty scheme for smuggled and seized vehicles was introduced allowing release of vehicles on payment of redemption fine along with duty and taxes.

In a 19-page verdict, Justice Siddiqui observed: “As a matter of fact, persons who have violated the laws of the country by smuggling vehicles of their choice and not paying taxes/duties have been incentivized to smuggle even more vehicles during the subsistence of the amnesty scheme not only without any imposition of allowable age restriction applying on them but also allowing a more relaxed registration scheme compared to the normal scheme in vogue.

"The amnesty scheme has also seriously affected the local car market and automobile manufacturers by disrupting the competitive market and creating a parallel black or grey market for vehicles. This whole amnesty thing has put the future prospects of local automobile industry in jeopardy.

“Although the Amnesty Scheme may have been intended for regularisation of vehicles already smuggled into Pakistan, it has created, in its present form, a far worse situation by encouraging and incentivizing further smuggling of cars in connivance with customs and other government officials.

"Such state of affairs has resulted in a colossal loss to the national exchequer in the form of loss of revenue expected from vehicles imported under the Baggage Scheme. Regularisation of smuggled cars with full tax impact and also those from the import of brand new cars, due to market saturation during the coming years," the verdict reads.

It adds that the direct loss of this scheme could be determined or estimated from that fact that the price of a confiscated vehicle in auction is normally Rs1 million. “The luxury cars fetch more value whereas the rest are sold for less but the average price is around Rs1 million. Thus, for 51,901 smuggled vehicles, the auction return would have been Rs51 billion whereas under the amnesty scheme only Rs15.8 billion has been collected. The scheme resulted in a direct loss of Rs35 billion to the national exchequer, in addition to the environmental hazards and rising import bill for fuel and spare parts.”

The court noted: “It is beyond understanding why the Amnesty Scheme was been made applicable to vehicles -- already confiscated by the custom authorities -- which could have fetched far more revenue through open auction. Perhaps the government officials wanted to get their share of the cake from this scheme.”

The Scheme has also accommodated import of vehicles which were stuck at ports or in transit after age limit reduction from 5 years to 3 years.

The court declares: “It is imperative that the tax dodgers should be punished, not pampered with pardons, considering the fact that Pakistan's tax to GDP ratio is abysmal, such unwarranted, capricious and senseless scheme will only further encourage the rampant culture of tax evasion.

“These schemes encourage illegality in the financial sphere, by promising to turn 'black' money into 'white'. According to a report compiled by Federal Tax Ombudsman Shoaib Suddle, the scheme has caused billions of rupees' loss to the national exchequer and 1,405 vehicles were cleared on only 61 ID cards while on some ID cards, 50 vehicles each were cleared. Such amnesty schemes have also subsisted between 1998 and 2007 when some 17,381 vehicles were cleared under six similar schemes.”

Justice Siddiqui observes that the scheme is not only a slap on the face of honest taxpayers but also aimed at decriminalising the crime of tax evasion and plundering of national wealth. It is rightly termed by some as a 'financial NRO' because the government exempted the beneficiaries from questioning by National Accountability Bureau and the Federal Investigation Agency.

He declared that amnesty scheme should be struck down as void ab initio and all cars registered under it must be ceased and re-registered under normal scheme or reverted back to pre-SRO position. This will be a lesson for all proponents of amnesty schemes to refrain from such malicious and capricious SROs in the future.

Justice Siddiqui said that corrupt government officials must be dismissed and legal action should be taken against them.

He maintained that amnesty schemes should be abolished permanently “as they are used by politicians to pursue political objectives at the cost of law”.

At the end of the verdict, the judge instructed the authorities to ensure tighter border controls to prevent the smuggling.