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Petitioner: BAYER PAKISTAN (PVT.) LTD. and others VS Respondent: BOARD OF REVENUE and others
Court Name: Sindh High Court Judge(s): Muhammad Moosa K. Laghari, S. A. Sarwana Title: BAYER PAKISTAN (PVT.) LTD. and others vs BOARD OF REVENUE and others Case No.: Civil Petitions Nos.318, 374, 539 and 351 of 1997 Date of Judgment:2001-12-31 Reported As: 2002 CLD 823 Result: Petitions allowed
JUDGMENT
JUDGMENT S. AHMED SARWANA, J.---By this common judgment we propose to dispose of four Constitution Petitions filed by the petitioners, namely Bayer Pakistan (Pvt.) Ltd., Metalex (Pvt.) Ltd., Pioneer Cement Ltd. And Abbott Laboratories (Pak.) Ltd against Member (RS & EP)/Chief Revenue Authority, Board of Revenue, Sindh (respondent No,1), Senior Inspector of Stamps/Assistant Collector Grade-1, Board of Revenue (respondent No,2) and Inspector of Stamps/Assistant Collector Grade-1, Board of Revenue, Sindh (respondent No,3). As the facts and the points of law involved in all the four petitions are common, we shall primarily refer only to the facts stated in the petition filed by Bayer Pakistan (Pvt.) Ltd. (hereinafter referred to as "Bayer"), which are as follows: 2. Bayer is a private limited company carrying on business of manufacture and distribution of pharmaceuticals. In the normal course of its business Bayer availed financial facilities from Deutsche Bank and Bank of America and in this respect executed, among others, an agreement for Financing for Short/Medium/ Long Term on Mark-up basis dated 1-9-1995 with Deutsche Bank in the sum of Rs,12.00 Million and a similar agreement dated 1-4-1996 with Bank of America in the sum of Rs,30.00 Million (hereinafter referred to as "Mark-up Agreement"). On 10-4-1996, respondent No,3 inspected the office records of Bayer which included the two Mark-up Agreements. About a month thereafter, Bayer received an Inspection Report, dated 9-5-1996 from respondent No,3 alleging deficiency of stamp duty, among others, in the two Mark-up Agreements in the sum of Rs,220,825 and Rs,517,150 respectively and requiring Bayer to hand over the original documents for impounding. As the original documents were in the custody of the respective banks, Bayer could not and did not hand over the same to respondent No,3 and informed him accordingly. It is alleged that a few days later Bayer received a copy of an Order dated 20-6-1996 passed by respondent
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No,2 demanding payment of the alleged deficit amount of stamp duty in the two Mark-up Agreements amounting to Rs,737,975 and a deficit of Rs,172,080 in respect of four Lease Agreements between Bayer as Lessee and various property owners thereby making a total of Rs,910,055 alongwith a penalty of an equal amount i,e, a total of Rs,1,820,110 only. 3. Being aggrieved by the aforesaid Order, Bayer filed a Revision Petition under section 56 of the Stamp Act, 1899 read with sections 7 and 8 of the Board of Revenue Act, 1957 before respondent No, 1. By Order dated 31-12-1996 respondent No,1 rejected the revision petition holding that the mark-up agreement is covered under the provisions of the notification of Government of Sindh, Finance Department No,PA/DS (B) Miscellaneous 1 of 1984 dated 1-1-1985 and is chargeable at the rate prescribed under Article 40(c) of Schedule I to the Stamp Act, 1899 and consequently, maintained the Order, dated 20-6-1996 passed by respondent No,2 to the extent of the deficit Stamp Duty of Rs,910,055 on the two mark-up agreements treating them to be conveyance deeds; however taking a lenient view, he reduced the penalty to Rs,10 only. Consequently, Bayer filed the present Constitution petition against the Order passed by respondents Nos.1 and 3 which was admitted for Regular Hearing as it involved important questions of law. The facts and circumstances and the order passed in the Revisions relating to the other three Constitutional petitions are substantially similar. 4. Mr. Ijaz Ahmed, learned counsel for Bayer submitted the following arguments in support of the petition: (i) That a perusal of the preamble and clauses (1) and (2) of the mark-up agreement, dated 1-9- 1995 executed by Bayer and Deutsche Bank clearly show that it is not a Conveyance Deed as defined in section 2(10) of Stamp Act, 1899. The said document at the most can be termed as an agreement of sale or an instrument recording a past transaction which cannot be termed as Conveyance Deed and referred to the following cases reported in PLD 1952 Baghdad-ul-Jadid 41, AIR 1932 Allahabad 291, AIR 1934 Allahabad 201, AIR 1918 Lahore 354 and AIR 1934 Lahore 530. (ii) That the question before respondent No,1 was an intricate question of law involving interpretation of section 2(10) of the Stamp Act and added that treating a Mark-up Agreement as a conveyance deed would have a very strong impact on the entire Banking System of Pakistan and consequently respondent No,1 should have referred the matter for opinion of the High Court under section 57 of the Stamp Act and referred to the case reported in PLD 1959 Karachi 1 (DB) in this respect. (iii) Under section 33 of the Stamp Act, the Collector has the power to impound any instrument if he is of the opinion that the such instrument is not duly stamped and requires payment of the proper stamp duty or the document requires further stamp duty to make up the deficit together with penalty thereon. To do so, he must be in possession of the original document whereas he had only seen a photocopy of the document and was not in possession of the original Mark-up Agreement alleged to be conveyance deed which was in fact in the possession of the bank and as such the Order of respondent No,2 and finally that of respondent No,1 are without jurisdiction and of no legal effect. He cited AIR 1958 Rajisthan 291 in this respect. 5. Mr. Muhammad Naeem, learned counsel appearing for Pioneer Cement Ltd. And Abbott Laboratories (Pak.) Ltd., submitted as follows:-- (1) The Mark-up Agreement is covered by Article 5, clause (d) of Schedule I of the Stamp Act. The document in question is neither an agreement nor a memorandum of an agreement and would therefore fall in the category of some other agreement which is "not otherwise provided for" and consequently liable to stamp duty of Rs,50 only. He submitted that if an instrument has been stamped for the principal purpose it is sufficiently stamped and all other impositions are subsidiary which should be overlooked and referred to PLD 1975 Karachi 861 in this behalf.
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(ii) Under section 9-A of the Stamp Act, 1899, the Provincial Government is empowered, by Notification in the Official Gazette, to generally exempt from payment of the whole or any part of the duties on any instrument executed by or in favour of a banking company in the normal course of its banking business. By Notification in the Official Gazette, the Government of Sindh in exercise of the aforesaid powers exempted several instruments executed by or in favour of banking companies from payment of stamp duty. One such instrument is "Conveyance of any property to or by a banking company to or by its customer in pursuance of finance provided by such banking company under any mode of finance not based on interest" and the exemption granted is to the extent of "Duty in excess or duty under Article 40(c) of the Schedule I to Stamp Act, 1899". (iii) He added that the Supreme Court has held that Mark-up which is being charged by the banks is interest and accordingly Un-Islamic (PLD 2000 SC 225 at 735) and therefore, the Mark-up Agreement does not fall within the definition of a conveyance. 6. Mr. Abul Inam, learned counsel appearing for Metalex (Pvt.) Ltd., added the following further argument in support of the petition:-- (1) He referred to clause 6 of the Mark-up Agreement dated 29-6-1994 executed between Metalex (Pvt.) Ltd. And Bank Al-Habib which states that the price for which the goods have been sold is reducible by the bank and consequently the document cannot be regarded as a sale or a conveyance of property. He further referred to several provisions in the above-referred Mark-up Agreement and submitted that the sale alleged in the document did not take place in fact but was only a paper transaction as the space for the Schedule of Goods had been left blank by the parties. Further, as there was no mention of any goods it was only a notional sale of non-existent goods which does not attract any stamp duty. 7 Mr. Abbas Ali, learned Additional Advocate-General appearing for the Government of Sindh, submitted the following in reply: (i) The definition of "conveyance" as given in section 2(10) of the Stamp Act includes a conveyance on sale and every instrument by which property, whether movable or immovable, is transferred inter vivos. The Mark-up Agreement, which forms the basis of the Constitution petition, is a conveyance by way of sale of movable property and therefore, liable to payment of stamp duty. He referred to the Division Bench judgments in the case of Ameen v. Haji Abdul Sattar and others 1998 CLC 1256 and Messrs Mehrban Fabrics (Pvt.) Limited v. Allied Bank of Pakistan PLD 1997 Lahore 654, in support of his contention. (ii) Under section 33 of the Stamp Act, the original document is not required for the purpose of impounding as the word used in the section is instrument which includes any document. Further, if a party admits the actual amount of the stamp duty payable on the instrument which in the opinion of the Inspector of Stamps is insufficiently stamped, the latter is empowered to demand from the party, who is in possession of the non-original document, the deficiency in the stamp duty on the instrument and' also impose a penalty thereon. (iii) Under Rule 6 of the West Punjab Stamp Inspection and Audit Rules, 1949, the Auditor is required to undertake the audit of various districts under his charge by rotation, in accordance with the circle tour programme which after approval by the Assistant Secretary to the Financial Commission is communicated to the Collector of the District concerned. The inspection of the petitioner's office by the Auditor was conducted under the programme duly approved in accordance with the Rules and the inspection of the documents at the office of the petitioner was carried out by him personally. As the audit was conducted in the presence of the petitioner, they had sufficient notice and should be deemed to have been given a hearing thereby complying with the principles of natural justice that no person shall be condemned unheard. (iv) The impugned order, dated 31-12-1996 passed by respondent No,1 clearly states that the Mark- up Agreement is liable to stamp duty under Article 5(d) of Schedule I of the Stamp Act after giving
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exemption of the stamp duty as notified under section 9-A of the Stamp Act and consequently Bayer is liable to pay the deficit stamp duty as determined by him. He added that respondent No 1. Had taken a lenient view and had reduced the penalty from Rs,9,10,055 to Rs,10 only." 8. We have heard the arguments of Messrs Aijaz Ahmed, Muhammad Naeem and Abul Inam, the learned counsel for the petitioners and Mr. Abbas Ali, learned Additional Advocate-General, perused the record and the provisions of the Stamp Act, 1899, the Rules and Notifications issued thereunder:-- 8-A. According to the arguments advanced by the learned counsel, the Court is required to decide whether the Mark-up Agreement would be subject to stamp duty as an agreement under Article 5(d) of Schedule I or as a conveyance as amended by Government of Sindh, Finance Department Notification No, PA/DS(B) Miscellaneous 1/84 dated 1-1-985 according to which the Mark-up Agreement is chargeable at the rate prescribed under Article 40(c) of Schedule I, Stamp Act, 1899. 8-B. Article 5 of Schedule-I reads as follows:-- "5. Agreement or memorandum of an agreement--- (a) if relating to the sale of a bill of exchange;One rupee (b) if relating to the sale of Government SecurityFifty paisa for every Rs,10,000 or part thereof of the value of the security, subject to a maximum of fifty rupees. (c) If relating to the sale of a share in an incorporated company or other body corporate;Twenty-five paisa for every Rupees 5,000 or part thereof of the value of the share. (cc) if relating to the sale of an immovable property;One hundred rupees (d) if not otherwise provided for Fifty rupees." In exercise of the powers conferred under section 9-A of the Stamp Act, 1899, the Government of Sindh exempted various documents executed by or in favour of the banking companies from the payment of stamp duty to the extent specified against each, namely:-- "DESCRIPTION OF INSTRUMENT EXTENT OF EXEMPTION 1. Any instrument for redeemable Capital of a company as defined under the Companies Ordinance, 1984 (XLVII of 1984).In full. 2 Conveyance of any property to or by a banking company to or by its customer in pursuance of finance provided by such banking company under any mode of finance not based on interest.Duty in excess of duty under Article 40(c) of the Schedule I to Stamp Act, 1899 Consequently, respondent No,1 in the impugned order, dated 31-12-1996 has held that Mark-up Agreement is chargeable to stamp duty at the rate prescribed under Article 40(c) of Schedule I to the Stamp Act, 1899. Article 40 of Schedule I which reads as follows: "40. Mortgage-deed not being an agreement relating to Deposit of title-deeds, pawn or pledge (No,6), Bottomry Bond (No,16). Mortgage of a Crop (No,41). Respondent bond (No,56) or Security bond (No,57). (a) ......... (b) .........
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(c) When a collateral or auxiliary or additional or substituted security, or by way of further assurance of the abovementioned purposes were the principal or primary security is duly stamped-- For every sum secured not exceeding Fifteen rupees Rs,1,000 And for every Rs,1,000 or part thereof Fifteen rupees secured in excess of Rs,1,000." 9. While interpreting the provisions of Stamp Act, we must keep in mind that it is a fiscal statute and consequently, it must be construed liberally in favour of the citizen and against the Government and any substantial doubt be resolved in favour of the citizen. 10. Under section 33 of the Stamp Act, the Collector is empowered to inspect any instrument and if he is of the opinion that such instrument is chargeable with duty and is not duly stamped, he shall impound the same and under section 40(b) of the Stamp Act require the payment of the proper duty or the amount required to make-up the same together with a penalty not exceeding ten times the amount of the proper duty or of the deficient portion thereof. This he can do only if he impounds the instrument. The term "instrument" has been defined in section 2(14) of the Stamp Act as follows:-- "instrument includes every document by which any right or liability is, purports to be created, transferred, limited, extended, extinguished or recorded." The term 'document' has not been defined in the Stamp Act. It will therefore have to be given the ordinary dictionary meaning. The Concise Oxford Dictionary, Ninth Edition, 1998 at page 398 defines "document" as "a piece of written or printed matter that provides a record or evidence of events." The Chamber Dictionary, 1994 Edition, on page 496 defines it as "a paper, esp. Of official character, affording information, proof or evidence of anything". According to Black's Law Dictionary, Sixth Edition it means "An instrument on which is recorded, by means of letters, figures, or marks, the original, official or legal form of something, which may be evidentially used" (page 481). By use of the term "includes" in the definition, the Legislature has extended the meaning of the term "instrument" by including documents which would otherwise ordinarily be not included in the meaning of the term 'instrument'. Now, Black's Law Dictionary Sixth Edition (1990) at .Page 801 defines "instrument" as "a formal or legal document in writing such as a contract, deed, will, bond, or lease. Anything reduced to writing a document of a formal or solemn character. A document or writing which gives formal expression to a legal act or agreement, for the purpose of creating, securing modifying or terminating a right." According to Stroud's Judicial Dictionary, Fourth Edition (1971-72) at page 1368 "instrument" means (1) a writing, and generally imports a document of a formal legal kind semble, the word may include an Act of Parliament... (7) "instrument" whereby any property is transferred to, or vested in, any persons" (Underlining added). In the definition of "instrument" the Legislature has not stated that a copy of an instrument is a document which is included in the definition of an instrument. The meaning of the term "instrument" cannot be extended beyond what was intended by the Legislature. If the intention of the Legislature was to treat every kind of document to be an instrument it would not have included the words "by which any right or liability is, or purports to be created, transferred, extended, extinguished or recorded" in the definition and would have defined the term to include every document which evidences title in property. Every word in a Statute has to be given its plain and ordinary meaning and due weight must be given to every word used in the Statute. Therefore, the term "instrument" as defined in section 2(14) of the Stamp Act would include every document by which any right or liability is or purports to be created, transferred, extinguished etc. Consequently, the definition would not include those documents by which no right or liability is so created transferred or extinguished etc. 11. The term "conveyance" has been defined in section 2(10) of the Stamp Act as follows:--
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"2(10) Conveyance: "Conveyance" includes a conveyance on sale and every instrument by which property, whether movable or immovable, is transferred inter vivo and which is not otherwise specifically provided for by Schedule I." (Underlining added). It is well-established that where there is a written instrument relating to a transaction between parties, one must look at its substance and not at its form for the purpose of determining its true nature. The verb used in the definition is in the present tense. It therefore, means that the transfer of the property must take place in the present by virtue of the instrument. The property in the goods must be transferred by the document itself and it should not be a record of a fact which has taken place in the past or a record of a past transaction between two or more parties. In the case of Rustomji v. Emperor, AIR 1918 Lahore 354, a question arose whether a document which contained the fact of transfer of property fell within the ambit of section 2(10) read with Article 23 of Schedule I of the Stamp Act be subject to payment of stamp duty thereon as a conveyance. The wordings of the documents were as follows:-- "I am enclosing herewith the original sale-deed dated 22nd October, 1904, in respect of the land measuring 38 Kanals, 18 Marlas, Khasra No,3388 in Mauza Mozang situate on Jail Road, Lahore, which I have sold to you for the sum of Rupees 1,000 and in respect of which I have already received the purchase-money from you. Your faithfully, J. Rustomji." The learned Division Bench after discussing the definition of conveyance given in the Stamp Act, held as follows:-- "The document is a mere letter, reciting an earlier sale and an earlier receipt of the consideration money and for that sale. It is at most a receipt for the consideration money and an admission of the sale, but it is not in itself the instrument of sale or conveyance. Had for the words 'which I have sold' the words 'which I hereby sell' been substituted, the document would have been the instrument of sale. In its present condition, the document A, we hold, is not a 'conveyance' and is not liable to be charged with stamp duty as a `conveyance'." 12. In another case reported as Bhola Barn and Sons, Ltd. v. Emperor, AIR 1934 Lahore 530, while discussing section 104 of the Companies Act, 1913, requiring, the particulars of the contract constituting the title of the allottee to be filed with the Registrar, the Court observed as follows:-- "It would appear from this definition that an actual transfer of property is an essential feature of a `conveyance'. Consequently an agreement to transfer property in the future cannot be treated as a conveyance'." 13. In the case of Muhammad Hasham v. Emperor, (1932) 139 IC 154, a question arose whether a document purporting to be a receipt for sale of land was a conveyance and liable to be Stamp Duty accordingly. The learned Full Bench of the Lahore High Court discussed the facts and the law relating thereto as follows:-- "The document is in Urdu and, as stated already, it purports to be a 'receipt'. It begins with the words: Tahrir Anke' and recites that the executant had sold land measuring 5 Marlas and 53 square feet to Muhammad Hasham son of Allah Ditta, and Muhammad Din, son of Suba, Caste Sheikh of Domeli for the Rs,1.038-15-3 for building purposes, at the rate of Rs,200 per Marla. Out of the purchase money, Rs,700 had been received in cash and for the balance another receipt would be given at the time when the payment is made. The document further stated that the possession of the land had been given to the purchaser and wound up with the words, 'is waste sanadan tahrir kar dete hain'."
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After examining the wording of the deed and hearing both counsel, I am of the opinion that it is a "receipt" which it purports to be, and is not a "conveyance" and that it had been properly stamped I can find nothing in the document to show that title in the property was being conveyed by the vendor to the vendee by it. On the other hand, the document refers to the sale as a completed transaction under which possession had been delivered to the vendee. The primary object of the execution of Exh.P.3, appears to be to record the fact that out of the total purchase price of R.1,038- 15-3, a portion, namely, Rs,700 had been received by the vendor from the vendee and to safeguard the latter against a fresh demand for that sum, rather than to create title in the vendee as owner of the land, which had been done' already by an independent transaction altogether." (Emphasis added). 14. It would be appropriate to refer here to section 17 of the Registration Act, 1908, relating to documents of which registration is compulsory, which reads as follows:-- "17. Document of which registration is compulsory.---(1) The following documents shall be registered, if the property to which they are related is situate in a district in which, and if they have been executed on or after the date on which, Act No,XVI of 1864, or the Indian Registration Act, 1866, or the Indian Registration Act, 1871, or the Registration Act, 1877, or this Act came or comes into force, namely:-- (a) instruments of gift of immovable property; (b) other non-testamentary instruments which purport or operate to create, declare, assign, limit or extinguish, whether in the present or in future, any right, title or interest, whether vested or contingent of the value of one hundred rupees and upwards, to or in immovable property; Explanation.--In the case of an assignment of a mortgage the consideration for the deed of assignment shall be deemed to be the value for registration; (c) non-testamentary instruments (other than the acknowledgment of a receipt or payment made in respect of any transaction to which an instrument registered under clause (o) relates) which acknowledge the receipt or payment of any consideration on account of the creation, declaration, assignment, limitation or extinction of any such right, title or interest; and (Emphasis added), The Privy Council in the case of Thakur Bageshwari Charan Singh v. Thakurain Jagarnath Kuari (1932) 136 Indian Cases 798, while discussing the meaning of the word "declare" used in section 17 of the Registration Act, 1908, wherein the document acknowledged of certain right in favour of a certain party observed as follows:-- "Their Lordships have no doubt that this track of decision is right though the word declare" might be given a wider' meaning, they are satisfied that the view originally taken by West, J., is right. The distinction is between a mere recital of a fact and something which itself creates title. The distinction has been acted on in cases connected with mortgages by deposit of documents of title. A comparison of the case Ariff v. Dawood (6), with that of Subramonian v. Lutohman (7) will show that, according to this distinction, a document requires registration or not. In the present case the statement in the petition of the respondent did not create any right in the Thakur. It merely acknowledges as a fact that such right was his. There was, therefore, no necessity for registration. (Emphasis added). In Raghubur Dayal v. Emperor, AIR 1934 Allahabad 201, where the…
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