WATER AND POWER DEVELOPMENT AUTHORITY through General Manager and Project Director, Ghazi Barotha Hyedro Power Project and another VS ADMINISTRATOR, DISTRICT COUNCIL SWABI and 5 others, 2005 PTD-SUPREME-COURT 627 (2004)

(On appeal from the judgment, dated 9‑9‑1999 passed by the Peshawar High Court, Peshawar in Writ Petition No. 12 of 1999).

Constitution of Pakistan (1973)‑‑‑

‑‑‑‑Arts.165 & 165‑A‑‑‑Exemption from taxation‑‑‑Federal Government of Pakistan through WAPDA had executed a project and WAPDA had assigned execution on the spot to the contractor and contractor installed a crushing plant and concrete mixing unit for the production of various materials to be used in construction‑‑‑Contractor, for said purpose quarried stones, gravel etc. from the site within the jurisdiction of District Councils "S" and "H"‑‑‑District Council levied export tax and Educational Cess on the production and transportation of the said material ‑‑‑WAPDA's objection on the levy having been turned down, it directed the contractor to pay export tax as demanded which the contractors started making payment under intimation to WAPDA which, in turn, was to reimburse such payment on the basis of written agreement between WAPDA and the contractor‑‑‑Contractor, after having paid such tax for a long time, it was stopped by deriving advantage of some territorial dispute between the two District Councils ‑‑‑WAPDA filed Constitutional petition against the imposition of such tax claiming exemption purportedly under Arts. 165 & 165‑A of the Constitution, which was dismissed‑‑‑Contention of WAPDA before the Supreme Court was that WAPDA, due to executing a project of and on behalf of the Federal Government, its properties and income etc. was exempt from taxation under Arts.165 & 165‑A of the Constitution‑‑‑Validity‑‑‑Held, appellant could not derive benefit from either Art.165 or from 165‑A of the Constitution‑‑‑Contractor, by no stretch of imagination or arguments could equate itself with the Federal Government nor it had claimed so, which was proved by its conduct of having paid such tax for a considerably long time, constituting against it estoppel as well‑‑ Reimbursement of amount of tax was a pure and personal contractual liability shouldered by WAPDA itself in view of the agreement‑ ‑‑Levy of tax being on the contractor, it could not be exempted therefrom‑‑ Whatever WAP.DA had undertaken qua the‑ reimbursement thereof was a contractual liability which could not be evaded on the pretext of exemption‑ ‑‑Lifting of the corporate veil as such was no longer permissible and the distinct juristic personality of the incorporated or statutory body was recognized notwithstanding the control, the destination and the functioning of such‑bodies.

Daewoo Corporation's case 2001 SCMR 1012 and Union Council v. Associated Cement 1993 SCMR 468 ref.

Fida Muhammad Khan, Advocate Supreme Court with Ch. Akhtar Ali, Advocate‑on‑Record for Petitioners.

Jehanzeb Rahim, Advocate‑General N.‑W.F.P., Masood. Kousar, Advocate Supreme Court with M.S. Khattak, Advocate‑on- Record for Respondents.

Date of hearing: 29th November, 2004.

JUDGMENT

SARDAR MUHAMMAD RAZA KHAN, J.‑‑‑Water and Power Development Authority (WAPDA) through its General Manager and Project Director Ghazi Barotha Hydropower Project, Hattian, District Attock and its contractor, Ghazi Brotha Contractors have filed this appeal after leave of the Court against the judgment, dated 9‑9‑1999 of a learned Division Bench of Peshawar High Court having dismissed their writ petition.

2. Brief and relevant facts are that Federal Government of Pakistan through WAPDA is executing a project for electricity generation by the name of Ghazi Barotha Hydropower Project The barrage and its ancillary works including part of power channel are located in Districts Sawabi and Haripur of North‑West Frontier Province; while, a part of power channel and the power complex are located in District Attock of the Punjab.

3. The execution on the spot was assigned by WAPDA to Ghazi Barotha Contractors under an admitted contract between the parties. The latter installed a crushing plant and concrete mixing unit for the production of various materials to be used in the construction. For this purpose the contractor quarried stones, gravel etc from the site within the jurisdiction of District Council Swabi and Haripur The exact location having, been decided by the Government of N.‑W . F. P. , we would hence be referring to it as one in District Council Swabi.

4. The District Council levied export tax and educational cess on the production and transportation of the said material. WAPDA through letter, dated 15‑10‑1998 raised an objection which was turned down whereafter it directed through letter, dated 31‑10‑1998, the contractor to pay export tax as demanded. Accordingly, the contractor started making payment under intimation to WAPDA which, in turn, was to reimburse such payment on the basis of written agreement between WAPDA and the contractor.

5. After having paid such tax for a long time, it seems that it was stopped deriving advantage of some territorial dispute between District Council Swabi and District Council Haripur. The appellants filed a writ petition against the imposition of such tax before Peshawar High Court claiming exemption purportedly under Articles 165 and 165‑A of the Constitution. The dismissal of such writ petition has led to the filing of this appeal.

6. The crux of appellant's case as argued before us is that WAPDA, due to executing a project of and on behalf of the Federal Government, its properties and income etc. is exempt from taxation under Articles 165 and 165‑A of the Constitution. Let us see how far, in the circumstances of the present case aforesaid provisions of the Constitution are attracted.

7. Starting with sub‑Article (1) of Article 165, it pertains to the properties owned by and the income, as such, of the Federal Government and the Provincial Government. It simply lays down that no tax can be levied on the properties and income of the Federal Government by Provincial Legislatures and no property of a Provincial Government can be subjected to tax either‑by the Parliament or by any other Provincial Assembly. This sub‑article does not cover the peculiar situation in hand.

8. Sub‑article (2) of Article 165 provides that if a trade or business of any kind is carried on by or on behalf of the Government of Province outside that Province, the Government carrying on such trade or business, can be taxed under act of Parliament or under act of Provincial Assembly of the Province in which that trade or business is carried on. In the present case no trade or business is carried on by Government of one Province outside that Province. Here Ghazi Barotha Hydropowey Project is executed on behalf of the Federal Government and hence sub article (2) of Article 165 is also not applicable. The advantage of working on behalf of some Government is available only in this sub Article 2 of Article 165, which, as remarked earlier, is not attracted in the instant claim.

9. Coming to Article 165‑A, it undoubtedly provides that the Parliament has power to make a law to provide for the levy and recovery of a tax on the income of corporation, company or other body etc. This categorically deals with the levy of income‑tax. Whereas, in the instant case the tax is being levied on the export of produce which are located within the limits of a District Council. Not dealing with the question of income tax in the present case, Article 165‑A is also not applicable.

10. This Court in case of Daewoo Corporation (2001 SCMR 1012) has already held that quarrying of stones and the like material like gravel and sand, is covered by the expression `produce' and is taxable.

12. Again this Court in case of Union Council v. Associated Cement (1993 SCMR 468 at page 480 para. 12) has categorically held that the lifting of the corporate veil as such is no longer permissible and the distinct juristic personality of the incorporated or statutory body has been recognized notwithstanding the control, the destination and the functioning of such bodies. This was with regard to previous remarks of this Court in case of Karachi Development Authority decided on 29‑12‑1991 but reported in (2000 Appeal Cases 53). In the circumstances, we are of the view that the appellant cannot derive benefit from either Article 165 or from Article 165‑A of the Constitution.

12. This was with regard to the grounds, as such, of the exemption) but another very important aspect of the case is altogether different and not at all related to the aforesaid exemptions. The fact is that the District Council has imposed export tax and educational cess not on WAPDA butt on Ghazi Barotha Contractors, and the same had continuously been paid for a long time. The. contractors, by no stretch of imagination or arguments can equate them with the Federal Government nor have they claimed so. This is proved by their conduct of having paid such tax for a considerably longtime, constituting against them estoppel as well. The WAPDA has stepped in merely because such payments are to be reimbursed by it to the contractor. This reimbursement is a pure and personal contractual liability shouldered by WAPDA itself in para. 9 of written contract. The learned High Court has elaborately dealt with this aspect of the case. Rather this aspect has mainly prevailed with the High Court while dismissing the writ petition. We fully agree that the actual imposition of the tax is on the contractor who cannot be exempted therefrom. Whatever WAPDA has undertaken qua the reimbursement thereof is a pure contractual liability and now it cannot be evaded on the) pretext of exemptions, which otherwise are not available. On the one, hand, WAPDA realizes that various taxes or cesses are most likely to be imposed on the contractor but when so imposed as well as recovered, the reimbursement thereof is now practically avoided.

13. Seen from any angle, we do not find any illegality to have been committed by the High Court.) There being no merit in the appeal, it is hereby dismissed.

M. B, A./W‑11/SCAppeal dismissed.