IN THE SUPREME COURT OF PAKISTAN 
 
       (Original Jurisdiction) 
 
 
 
 
PRESENT: 
MR. JUSTICE IFTIKHAR MUHAMMAD CHAUDHRY, CJ 
MR. JUSTICE GULZAR AHMED 
MR. JUSTICE SH. AZMAT SAEED 
 
 
CMA NO.2243 & 3683 OF 2012 IN SMC NO.16-2010 
 
 
On Court notice: 
 
 
For FBR: 
Dr. Rana Muhammad Shamim, ASC 
 
Date of hearing: 
4.3.2013 
 
 
 
 
 
ORDER 
  
 
The report (CMA No.1112 of 2013) has been submitted on 
behalf of the Federal Board of Revenue, which has been examined with 
the assistance of the learned counsel for the FBR.  
2. 
 
The proceedings in the instant Suo Moto Case pertaining to 
the ISAF Container Scam commenced in the year 2010. During the 
course of the proceedings, allegations surfaced, which prima facie, 
constituted “mal-administration”, as defined by Section 2(3) of the 
Establishment of the Office of Federal Tax Ombudsman Ordinance, 
2000, (hereinafter referred to as “the Ordinance”).  Consequently, vide 
order dated 30.9.2010, a Reference in terms of Section 9 of the 
Ordinance, sent to the Federal Tax Ombudsman. In the said order, 14 
specific questions were framed.  
CMA No.2243-2010 
- 2 - 
3. 
 
The Federal Tax Ombudsman submitted its report, giving 
the following Findings and following making Recommendations:- 
FINDINGS: 
(i) 
The quality of data held by PRAL was found to be 
highly unreliable. The available cross-checks within 
FBR were also found to be highly vulnerable to fraud 
and corrupt practices of various actors involved in 
Afghan transit trade.  
 
(ii) 
It was soon realized that the abuse was massive, 
though difficult to quantify with a high degree of 
precision.  
 
(iii) 
It was estimated that at least 7,922 transit containers 
were pilfered within Pakistan during the last almost 
four years. However, this could be just a tip of the 
iceberg. 
 
(iv)  
The estimated loss to national exchequer during 
2007-June 2010, based on 7,922 containers, was 
worked out at Rs.19 billion.  
 
(v) 
It was gathered that the Customs procedural 
framework being highly porous suffered from serious 
vulnerabilities.  
 
(vi) 
While responsibility in general terms has been fixed, 
the individuals involved in various mega scams of 
recent years are to be indentified through criminal 
investigation for which a mechanism is provided 
under Section 17 of the FTO Ordinance.  
 
(vi) 
One-Customs manual clearance system was found 
particularly prone to huge transit scams. 
  
CMA No.2243-2010 
- 3 - 
(viii) The senior management of Customs failed to take 
necessary steps to put in place appropriate 
countermeasures against repeatedly occurring scams.  
 
(ix) 
The Investigation of four mega scams of containers in 
past few years indicates a clear pattern. The 
phenomena of pilferage is not new, neither are the 
glossing over efforts by senior officers to provide 
cover 
up 
 
through 
creating 
hindrances 
in 
investigations, manipulation of record and data, 
diverting 
focus 
by 
‘fact 
finding 
committee.’ 
Deliberate attempts to diffuse focus of investigation 
against corrupt and influential officials through ‘fact 
finding committee’ were clearly discerned.  
 
(x) 
In Lunar case the Collector who had failed to prevent 
wrong clearance of 52 containers laden with liquor 
was made part of the ‘fact finding committee’. To 
frustrate the course of investigation by Director 
General (Intelligence and Investigation). 
 
(xi) 
The leadership of Customs rather than initiating 
appropriate 
disciplinary/criminal 
proceedings 
against the real culprits repeatedly tried to put a 
different gloss on these scams.  
 
(xii) 
The modus operandi in these mega scams remains the 
same; fake/forged documents, primitive and manual 
clearance and processing systems, wide discretion in 
the hands of unscrupulous customs officials, lack of 
transparency 
and 
effective 
accountability, 
involvement of seniors otherwise responsible for 
oversight.  
 
(xiii) The picture that emerges is of gross inefficiency, 
maladministration and corruption in an organization 
CMA No.2243-2010 
- 4 - 
that is geared to further principally individual and 
communal self interest of a few individuals at the cost 
of Pakistan and her people.  
 
(xiv) This report is an exploratory start-up to. Although it 
provides some answers, it raises many more 
questions. The report indentifies the work that needs 
to be done in future and provides a good roadmap for 
the way forward.  
 
RECOMMENDATIONS:  
 
(i) 
Customs clearance and cross border certification and 
reconciliation procedures need massive improvement, 
consolidation and rationalisation.  
 
(ii) 
Cross checks need to upgraded, diversified and 
externalized.  
 
(iii) 
Transport system used for ATT needs to be organized 
on competitive basis, and transporters given a level-
playing field.  
 
(iv) 
Only bonded carries should be allowed to transport 
ATT cargo. The vehicle fleet used for the purpose 
must be upgraded in terms of technology input for 
safe transpiration of transit cargo.  
 
(v) 
Security of cargo needs immediate enhancement 
through RFID seals, and live monitoring through 
GPS.  
 
(vi) 
ATT cargo should bear bar code embeddings for ease 
of detection, and to minimise the chances of its 
smuggling back into Pakistan.  
 
CMA No.2243-2010 
- 5 - 
(vii) 
ISAF/UN/NATO should adopt the same technology 
and transport precautions as are being used by US 
Forces (e.g. RFID seals and effective tracking/ 
monitoring though GPS) 
 
(viii) Collusion by and corruption of Customs Officials be 
effectively discouraged and deterred in a sustainable 
manner.  
 
(ix) 
A specialized and dedicated Collectorate needs to be 
created to deal exclusive with the entire cargo in 
transit to Afghanistan.  
 
(x) 
The definition of smuggling should be broadened to 
include in its purview any enroute pilferages of 
transit goods.  
 
(xi) 
The 
Directorate 
General 
(Intelligence 
and 
Investigation) needs to be suitably upgraded to act as 
an effective deterrent against actual and potential tax 
evaders and their accomplices within the Customs 
Department.  
 
(xii) For better administration, FBR should be split into two 
Boards, one dealing exclusively with Customs matters 
and the other dealing with taxes like income tax, sales 
tax and federal excise duty. If that is not found 
appropriate at this stage, a competent and honest 
senior officer of Pakistan Customs Service may be 
appointed as deputy chairman FBR. The measure will 
provide better focus on matters relating to 
management of Customs.”  
 
4. 
 
The said report inter alia indicated the quantum of the loss 
caused to the Public Exchequer. Such loss in fact is approximately 
CMA No.2243-2010 
- 6 - 
Rs.55 billion as was disclosed by Mr. Suleman Siddique, the then 
Chairman, FBR, which fact was incorporated in our order dated 
22.11.2011. The report now filed by the FBR, indicates that to-date  the 
amount recovered is only Rs.5,602,754/- which for all intents and 
purposes is insignificant, when examined in juxta position, with the 
loss to the Public Exchequer admittedly occasioned, as has been 
admitted by the FBR.  
5. 
 
The performance of the FBR, as indicated by the report, 
now submitted is far from satisfactory. Despite elapse of almost one 
and a half year since the Report was compiled by the Federal Tax 
Ombudsman, no progress worth mentioning has been made for the 
recovery of the loss identified, which is regrettable.  
6. 
 
It has also not been brought on record as to how far the 
Recommendations made by the FTO in his above mentioned report 
have been implemented despite the fact that a time frame in this behalf, 
having specifically been mentioned in Section 11(1) of the Ordinance.  
7. 
 
Consequently, let the report be obtained from the Federal 
Tax Ombudsman  as well as Chairman, FBR as to the extent of the 
implementation of the Recommendations of the FTO by the 
Department and further such reports shall also identify the modus 
operandi  proposed and required to be undertaken to efficiently and 
expeditiously effect the recovery of the loss caused to the Public 
Exchequer. Such report should be filed within two weeks.  
CMA No.2243-2010 
- 7 - 
8. 
 
The Chairman, FBR, is directed to appear in person, on the 
next date of hearing.  Re-list after two weeks.  
 
 
  
 
 
 
 
 
 
 
 
 
Chief Justice  
 
 
 
 
 
 
 
 
 
 
   Judge  
 
 
 
 
 
 
 
 
 
 
   Judge  
 
Announced on _______________ 
at Islamabad 
 
 
 
 
 
 
 
Judge