RAZZAK STEEL (PVT.) LTD. VS FEDERATION OF PAKISTAN through Secretary Ministry of Finance, 2008 PTD-KARACHI-HIGH-COURT-SINDH 1851 (2008)

(a) Limitation Act (IX of 1908)---

----Art. 62---Recovery of money---Bar of Art.62 of Limitation Act, 1908---Proof---Where there was no evidence available on record to show that taxes were recovered by authorities for the use of plaintiff, suit filed by plaintiff was not barred under Art. 62 of Limitation Act, 1908.

Municipal Board of Ghazipur v. Deokinandan Prasad AIR 1914 All. 338 rel.

(b) Sales Tax Act (VII of 1990)---

----S.66, second proviso---Refund of excess duty---Limitation---Bar of S.66 of Sales Tax Act, 1990---Applicability---Plaintiff in Constitutional petition before High Court assailed recovery of excess sales tax, which petition was allowed and High Court declared that the authorities had recovered excess sales tax from plaintiff---Relying upon declaration by High Court, plaintiff-company filed suit against authorities for recovery of excess sales tax---Authorities resisted the suit on the ground that under S.66 of Sale Tax Act, 1990, suit was barred by limitation---Validity---Claim of plaintiff was refused by Appellate Tribunal on 15-2-1995, and suit was filed on 14-2-1996---As such the suit was filed within one year from the date of passing the orders by Appellate Tribunal as envisaged under second proviso to S.66 of Sales Tax Act, 1990, thus the suit was not barred---Judicial pronouncement by High Court fully empowered plaintiff to claim sales tax recovered forcibly by authorities---Recovery of sales tax in question by the authorities was illegal and authorities were liable to refund the same to plaintiff---Plaintiff in its plaint as well as in evidence had well worded that sales tax to the tune of Rs.33,808,969 was recovered from it by authorities which was not denied by authorities, therefore, plaintiff was entitled to refund of the amount so recovered---Suit was decreed in circumstances.

Moin Azhar Siddiqui for Plaintiff.

Nemo for Defendants Nos.1 to 3.

Muhammad Asif Mufti holding brief for M.G. Dastgir for Defendant No.4.

JUDGMENT

ARSHAD NOOR KHAN, J.---The plaintiff has filed the present suit for recovery, of Rs.33,808,969 against the defendants stating therein that the plaintiff is 'a limited company, having its head office at D/41, S.I.T.E., Karachi and produces various steel products by processing billets purchased from Messrs Pakistan Steel Mills, the defendant No.4, as raw material. Defendant No.4 produces billets, which is identical/interchangeable with ingots. The billets are processed by continuous casting system, whereas ingots are processed by old system of blast furnace. However, both billets and ingots serve the same purpose and in the market are also treated as one and same product. That under the Central Excise and Salt Act, billets do not find separate mention and are dealt with under Item No.09.04 and are included in the definition of steel ingots. It is further stated in the plaint that upto 10-9-1989 both billets and ingots were liable to sales tax and excise duty as identical product. On 10-7-1989 through S.R.O. 734(I)/89 sales tax on ingots in excess of Rs.375 per MT was exempted, but such exemption was not given to billets. The different treatment given to billets by the defendants was challenged before the High Court in Constitution Petition No.59-K of 1991. Some other similar petitions were also filed and all those petitions came up for hearing before this Court on 11-4-1991 and the learned D.B. of this Court vide judgment, dated 24.2-1991 allowed all those petitions. The Collector of Central Excise and Sales Tax preferred appeals against the judgment, dated 24-2-1991before the Honourable Supreme Court of Pakistan, but subsequently withdrew the same. It is further stated in the plaint that the plaintiff in the meantime made payment of sales tax in terms of Notifications, dated 10-8-1989 and 3-6-1989. The plaintiff in all made payment at the rate of 12.5% by way of sales tax on billets to the defendants Nos.1 to 3 through defendant No.4 in accordance with notification in between the period from 1-7-1989 to 24-4-1991. After succeeding in the petition, the plaintiff demanded the refund of the excise duty, but the defendants failed to refund the same and advised them to file claim before the Assistant Collector of concerned division vide their letter, dated 5-10-1992. The plaintiff, therefore, made their claim amounting to Rs.33,808,969 before the Assistant Collector concerned, who rejected the same. The appeal filed before the Collector of Customs (Appeals) also met with the same fate and the Revision preferred before the Government of Pakistan, Ministry of Finance was also dismissed as such the plaintiff filed the suit for recovery of excess amount which was recovered from them through defendant No.4.

Notice the suit was served on the defendants and defendants Nos.1 to 3 filed their written-statements, stating therein that the suit is hopelessly time-barred, for which no application for condonation of the delay has been filed nor the plaint discloses any cause of action and that the suit is bad for non-joinder of necessary parties and furthermore the plaintiff is not the aggrieved party, therefore, they possess no locus standi to file the present suit. The claim of the plaintiff about the nature of billets and ingots mentioned in paragraph 2 of the plaint has, however, been admitted by these defendants. It is reiterated by them that billets and ingots are not one and the same item. Accordingly to them ingots are classifiable under PCT Heading 73.06, whereas the billets fall under PCT Heading 73.07, therefore, they prayed for dismissal of the suit. Defendant No.4 filed separate written statement, admitting, inter alia, the claim of the plaintiff about similarity of the billets and ingots and have further admitted to have recovered the taxes at the rate of 12.5% and further stated that the same were deposited into Government treasury in accordance with Sales Tax Rules and consequently no amount is lying with them, which has already been paid to the concerned authorities.

From the pleadings of the parties, the following issues were framed:--

(1) Whether the suit is barred by Article 62 of the Limitation Act, 1908?

(2) Whether the suit is barred by section 66 of the Sales Tax Act, 1990?

(3) Whether the suit is without cause of action and is liable to be dismissed?

(4) Whether the plaintiff had paid any Sales Tax to the defendants Nos.1 to 3 through defendant No.4 during the period of 1989 to April, 1991? What is the figure of such amount?

(5) Whether the plaintiff is entitled for recovery of Sales Tax after declaration of the notification as illegal and without lawful authority by this Court? If so, who is liable to refund the same?

(6) What relief is plaintiff entitled for?

(7) What should the decree be?

After framing the issues, the plaintiff filed his affidavit-in- evidence and produced certain original documents from Exhs.P.3/B to C-309. The learned counsel for the defendants cross-examined the plaintiff and closed their side. Defendants Nos.1 to 3 examined P.W. Nooruddin son of Syed Hussain, who was also cross-examined by the learned counsel for defendant No.4. Defendant No.4 did not lead any evidence.

I have heard Mr. Moin Azhar Siddiqui, learned counsel for the plaintiff, and Mr. Muhammad Asif Mufti, Advocate, holding brief for Mr. M.G. Dastgir, learned counsel for defendant No.4. Defendants Nos.1 to 3 did not appear in spite of service of intimation notice.

Learned counsel for the plaintiff vehemently, contended that the tax on billets levied by the defendants was declared to be illegal, void and ultra vires by the Honourable High Court in constitutional petition filed by the plaintiff, as such the recovery of the sales tax was ,illegal and after grant of the petition, the recovered tax ought to have been refunded by the defendants to the plaintiff, but they did not return the same, therefore, the act of the defendants in refusing to refund the recovered tax is illegal and the plaintiff has rightly filed the suit for recovery of the excess sales tax recovered by the defendants. He further contended that neither the suit is barred under any provision of the Limitation Act, nor under the provisions of Sales Tax Act, 1990. He, further, candidly admitted that since defendant No.4 has deposited the taxes recovered from the plaintiff in the treasury of the Government, as such defendant No.4 is not liable for refund of the tax deducted by them.

Mr. Muhammad Asif Mufti, Advocate, holding brief for Mr. M.G. Dastgir, learned counsel for defendant No.4, contended that the defendant No.4 after deduction of the sale tax have remitted the same to defendants Nos.1 to, 3, which fact has not been controverted by defendants Nos.1 to 3, as such defendant No.4 is not responsible for refund of any tax.

I have considered the arguments advanced by the learned counsel for the parties and have gone through the entire evidence available on record. It would be appropriate to consider the respective contentions advanced by the learned counsel for the parties in the context of issues framed hereinabove.

My Findings on the above issues are as follows:--

ISSUE No.1:

The burden heavily lies on defendants Nos.1 to 3 to prove this issue, but the defendants have not led any evidence to prove that the suit filed by the plaintiff was barred under Article 62 of the Limitation Act. The defendants have not led any evidence to show that the said taxes were recovered for the use of the plaintiff, which is the preliminary requirement of Article 62 of the Limitation Act. Article 62 of the Limitation Act provides a period of three years for recovery of the money payable by the defendants to the plaintiff for money received by the defendants for the plaintiff's use, when the money is received. In the present case it is not the case of the defendants Nos.1 to 3 that the money was recovered for the use of the plaintiff, as such in my humble opinion the provisions of Article 62 of the Limitation Act are not attracted. The same point came for consideration before the D.B. of Allahabad High Court in the case of Municipal Board of Ghazipur v. Deokinandan Prasad, reported in AIR 1914 All. 338, wherein the octroi duty was recovered from the respondents, who filed suit for recovery of the duty recovered forcibly from him and the suit was dismissed by the trial Court, holding that the suit was barred under Article 62 of the Limitation Act. The said judgment was reversed in appeal by the District Judge, who observed that the suit was governed under Article 120 of the Limitation Act. The Municipal Board, being aggrieved against the judgment passed by the District Judge, preferred appeal and in appeal their Lordships while considering the scope of Article 62 of the Limitation Act, were pleased to observe as under:--

" and other cases decided by Courts in India, seem to lay down that Art. 62 applies only when the money at the time of receipt can be said to have been received by the defendant for the plaintiff's use. According to the respondent's allegations as we understand that, the sum in question cannot at the time of receipt be said to have been received by the Board for the respondent's use."

It was further observed by the same Bench that the suit of recovery of the duty was governed under Article 120 of the Limitation Act and Article 62 of the Limitation Act was not applicable. The relevant observation in the case of Municipal Board of Ghazipur (supra) are usefully quoted hereinbelow for the sake of convenience:---

"His case being that the demand of octroi was rightful and that the refusal to refund was wrongful, we must hold that Art. 62 is not applicable. For the reasons given in the case first above cited we hold that Art.62 also is not applicable. The suit is governed by Art. 120 and having been brought within six years of the refusal to refund the money is within time. The appeal is therefore, dismissed. Costs will be costs in the cause and abide the result."

The interpretation of Article 62 of the Limitation Act in the aforesaid case also fully applicable in the present case as no evidence is available on record to show that the said taxes were recovered by the defendants for the use of the plaintiff. The suit filed by the plaintiff, therefore, does not appear to be barred under Article 62 of the Limitation Act, but governs under Article 120 of the Limitation Act, which provides a period of six years for recovery from the date of its receipt. The issue is answered in negative.

ISSUE No.2.

The burden also heavily lies upon the defendants to prove this issue, but the answering defendants have not led any evidence to show that section 66 of the Sales Tax Act, 1990 attracted under the peculiar circumstances of the present case. On the contrary, the second proviso to section 66, ibid, supports the case of the plaintiff. Section 66 is, therefore, usefully quoted hereinbelow for the sake of convenience:--

"66. Refund to be claimed within one year.----No refund of tax claimed to have been paid or over paid through inadvertence, error or misconception or refund on account of input adjustment not claimed within the relevant tax period, shall be allowed, unless the claim is made, within one year of the date of payment:

Provided that in a case where a registered person did not deduct input tax within the relevant tax period, the Collector may, after satisfying himself that input tax adjustment is due and admissible, allow the registered person to take such adjustment in the tax period as specified by the Collector:

Provided further that in a case where the refund has become due on account of any decision or judgment of any Officer of Sale Tax or Court or the Tribunal, the period of one year shall be reckoned from the date of judgment or decision of such officer, Court or Tribunal:

Provided further that the application or claim filed under this section shall be disposed of within a period not exceeding ninety days from the date of filing of such application or claim."

A perusal of second proviso attached with section 66 of the Sales Tax Act, 1990 shows that the period to refund the dues is provided within a period of one year after decision or judgment of any Officers of Sales Tax or Court or the Tribunal. In the present case the plaintiff in paragraph 12 of the plaint has contended that their Revision Application was finally rejected on 15-2-1995 by the Additional Secretary, Government of Pakistan, Ministry of Finance, which fact has not been controverted by defendants Nos. 1 to 3 rather the contents of para graph 12 of their written-statement. It is, therefore, admitted position that the claim of the plaint was refused by the Appellate Tribunal on 15-2-1995, whereas admittedly the present suit was filed on 14-2-1996, as such the suit was filed within one year from the date of passing the orders by the Appellate Tribunal, as envisaged under second proviso to section 66 of the Sales Tax Act, 1990, as such on this score also the suit filed by the plaintiff was not barred under section 66, ibid. The issue is, therefore, answered in negative.

ISSUE No.3

Defendants Nos.1 to 3 have not led the evidence to show that the plaintiff has no cause of action to file the present suit, whereas the plaintiff in paragraph 15 of the plaint has elaborately stated about the accrual of cause of action against the defendants which finally arose on 15-2-1995. Admittedly the defendants have recovered a huge amount of sales tax from the plaintiff, which recovery appears to be illegal in view of the judgment passed by a DB of this Court, dated 24-2-1991, as such the plaintiff has cause of action to file suit against the defendants.

ISSUES NOS.4 AND 5

Since both these issues are interlinked with each other and evidence on these issues is also common, as such I propose to discuss both these issues simultaneously.

The plaintiff has claimed that there was an exemption in payment of sales tax on billets prior to 10-7-1989 and from 10-7-1989 the sales tax on ingots in excess of Rs.375 per MT was imposed by the defendants. The plaintiff also stated that they paid all the sales taxes from 1-7-1989 to 24-2-1991. The fact of recovery of sales tax from 1-7-1989 to 24-4-1991 has not been disputed by all the defendants in their written-statements. The plaintiff in his evidence has also reiterated the payment of sales tax by the defendants and the said piece of evidence has also not been controverted by the defendants. D.W. Nooruddin, examined by defendants Nos.1 to 3, in his cross-examination has also admitted that the sales tax received by the Pakistan Steel Mills from the plaintiff has been paid to the Government of Pakistan. The said statement of the witness of defendants Nos.1 to 3 without any doubt shows that the sales tax was recovered through the defendant No.4, who remitted the same to defendants Nos.1 to 3, which has been deposited with the Government of Pakistan. The deduction of the sales tax by defendant No.4 and its remittance by him to defendants Nos.1 to 3, therefore, remains unshaken which strengthens the claim of the plaintiff for recovery of the sales tax by defendants Nos.1to 3. The constitutional petition, filed by the plaintiff, is also an admitted fact which has been allowed, thereby declaring the recovery of sales tax on billets and ingots to be void and ultra vires to the constitution and judicial pronouncements by this Court, fully empowers the plaintiff to claim the sales tax recovered forcibly by the defendants. The claim of the plaintiff regarding recovery of the sales tax from 1-7-1989 to 24-4-1991, therefore, was illegal and defendants Nos.1 to 3 are liable to refund the same to them. The plaintiff in his plaint as well as in evidence has well-worded that Sales Tax to the tune of Rs.33,808,969 was recovered from him by defendants Nos.1 to 3, which quantum of recovery has not been denied by the defendants. It is therefore, observed that an amount of Rs.33,808,969 is refundable to the plaintiff by defendants Nos.1 to 3. The issues are, therefore, answered in affirmative.

ISSUES NOS.7 AND 8

From the appraisal of the whole evidence available on record it has been emerged out that defendants Nos.1 to 3 had deducted the sales tax from the plaintiff through defendant No.4 from, 1-7 1989 to 24-4-1991, which was neither legal, nor proper pronouncements of this Court in Constitutional Petition No.59-K of 1991, filed by the plaintiff and the defendants are responsible for return of the same after the judgment passed by this Court. The plaintiff is, therefore, entitled for refund of the sales tax paid by the plaintiff to defendants Nos.1 to 3, who admittedly received the said sales tax from defendant No.4. The suit filed by the plaintiff for recovery of D Rs.33,808,969 is, therefore, decreed with 2% interest per annum including the cost of the suit against defendants Nos.1 to 3. The suit against defendant No.4 is hereby dismissed.

M.H./R-28/KSuit decreed.