ORDER SHEET

IN THE HIGH COURT OF SINDH AT KARACHI

HCA No. 162 of 2009

 

1.   For order on office objection.

2.   For hearing of C.M.A No. 872/2009.

3.   For Katcha Peshi.

4.   For hearing of C.M.A No. 875/2009.

 

11-04-2012

Syed Mohsin Imam Wasti, advocate for appellants.

Mr. Moin Azhar Siddiqui advocate for respondent No.1.

Mr. M.G. Dastagir advocate for respondent No.2.

-.-.-.-.-.-.-.-.

The respondent No.1 is engaged in the business of manufacturing iron and steel products and purchases raw material such as billets and ingots from Pakistan Steel Mills. Exemption from Sales Tax was given on ingots but was not given on billets, though there was not much of a difference between two products as both are used as raw-material. Hence denial of exemption on billets was challenged in this Court in its Constitutional Jurisdiction in C.P No. 59-K/1991 and in other connected petitions. These petitions came up for hearing before Division Bench of this Court on 11.04.1991 and were allowed. The decision of High Court was challenged in appeals before the Supreme Court but the said appeals were withdrawn. Hence order of this Court attained finality. As the levy of Sales Tax on billets over and above Rs.375 per matric ton was struck down, the purchasers of billets sought refund of the excess amount recovered from them earlier.

The claim for refund was rejected by Assistant Collector of Customs vide his order-in-original. The respondent No.1 challenged the decision in appeal. The appeal also failed. The respondent No.1 then filed revision before Central Board of Revenue which too was dismissed vide order dated 15.02.1995. It was held by the Member C.B.R that as the incidence of tax for the disputed period was passed on to the ultimate consumers of the respondent No.1, the respondent No.1 was not entitled to claim refund.

On denial of its refund claim by the Central Board of Revenue, the respondent No.1 filed suit for recovery in 1996 on original jurisdiction of this court bearing Suit No. 131 of 1996. In the suit refund of Rs.33,808,969/- was sought on the ground that between 01.07.1985 to 24.04.1991 Sales Tax too was excessively  charged which chargeability was struck down by the High Court in a constitutional petition. Parties adduced evidence in support of their respective pleas. When matter came up for final arguments, the learned counsel representing the appellant expired. When this fact came to the notice of this Court, the Court vide his order dated 15.01.2008 ordered issuance of notice to the appellant and Federation of Pakistan. On 06.08.2008 final arguments were heard in absence of the counsel for Federation of Pakistan and judgment was reserved. Ultimately the suit was decreed in favour of respondent No.1 on 06.08.2008 who was held to be entitled to refund of sales tax judgment was delivered on 06.08.2008. On 25.03.2009 respondent No.1 served a legal notice on the appellant seeking refund of the amount based on the judgment and decree that was passed in favour of respondent in the suit. A copy of such judgment and decree was annexed with the notice. This notice led to filing of the present appeal seeking setting-aside of the judgment and decree passed in the suit on 06.08.2009.

The case of the appellant in the appeal is that their counsel expired during the pendency of the suit and without service of intimation notice the matter was heard and judgment and decree passed.

Learned counsel for the respondent No.1 on the other hand argued that as the decree was signed on 06.08.2008 and appeal was filed on 30.05.2009 it was clearly barred by time and this appeal be dismissed on this ground alone. In support of his arguments he relied upon the cases reported in P L D 1977 Supreme Court 437 Sajjad Nabi Dar & Co v/s The Commissioner Income Tax Rawalpindi and 1973 S C M R 282 The Batala Engineering Co. Ltd V/s The Income Tax Officer, Lahore.

We have noted from the suit file that the address on which Court motion notices were issued, there is no endorsement that it was served upon the appellants. At least intimation notice ought to have been issued to the Law Officers of the appellant after the death of its counsel who was representating the appellant in the suit but same was not done and it was assumed that the intimation notices have been served. The arguments of only respondent No.1’s counsel were heard and suit was decreed in its favour.

In the circumstances when intimation notice was not even served on the appellant, we are of the view that decree was wrongly passed. The appellant, on coming to know about passage of the judgment and decree through respondent No.1 filed the present appeal, within reasonable time. We, therefore, treat this appeal to be filed within time. We could have set-aside the impugned judgment and decree and  remanded the case back to the learned Single Judge to decide the matter afresh, however as the controversy is very old and the parties have already adduced evidence and decision in favour of respondent No.1 is based on merits, we proceeded to decide this appeal on merits as well instead of remanding the case.

It is an admitted position that respondent No.1 is seeking refund of the excessive sales tax which was paid on the purchase of the raw materials between the period from 01.07.1989 to 24.04.1991. The respondent No.1 is admittedly engaged in the business of manufacturing iron and steel products and uses ingots and billets as material for its products as is evident from paragraph No.1 of the plaint. After so utilizing its raw material, respondent No.1 sells its products in the market and at both the stages i.e at the stage of purchasing raw material as well as at the stage of selling its finished products Sales Tax is payable. The Sales Tax paid at the time of purchase of raw material is then adjusted as input tax against out put tax under the provisions of Sales Tax Act 1990. This clearly shows that incidence of tax for the said period as raw materials was passed on by the respondent No.1 to the ultimate consumers when it sold its finished products. In the case of Sajjad Nabi Dar v/s Commissioner Income Tax Rawalpindi reported in P L D 1977 Supreme Court 437 it was held that Sales tax collected from customers and deposited with Government though was not originally leviable on account of the fact that in tribal areas Sales Tax was not chargeable, yet as the incidence of tax stood passed on to consumers, the tax Collector being only an agent of the Government, it can not seek refund of such tax. This principle is fully attracted to the facts of the present case as well. Hence respondent No.1 had no locus standi to seek refund of the sales tax incidence of which had already been passed on to the ultimate consumers. It was for the ultimate consumers to come forward and claim and seek recovery when levy was declared to be illegal. We, therefore, allow this appeal and set-aside the judgment and decree passed in Suit No. 131 of 1996.

 

                                       JUDGE

                    JUDGE

Abdul Salam/P.A