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Petitioner: M/S. Pfizer Laboratories Limited. VS Respondent: Federation Of Pakistan And Other
Court Name: Supreme Court of Pakistan Judge(s): Ajmal Mian, Sh. Riaz Ahmad, Sh. Ijaz Nisar Title: M/S. Pfizer Laboratories Limited. vs Federation Of Pakistan And Other Case No.: Civil Appeal No. 48 of 1993 Date of Judgment:1997-11-28 Reported As: PTCL 1998 CL. 354 Result: Order accordingly.
JUDGMENT
JUDGMENT AJMAL MIAN, J.-l. This is an appeal with the leave of the Court against the order dated 10-8-1992 passed by a Division Bench of the High Court of Sindh in Constitution Petition No. D-1440 of 1992, filed by the appellant pertaining to the orders of the official respondents declining to refund Rs. 4,61,145 paid by the appellant as duties and taxes in respect of imported salinomycin though the same was exempted from the payment of customs duty and sales tax under section 19 of the Customs Act, 1969, hereinafter referred to as the Act, and section 7 of the Sales Tax Act, 1951, dismissing the same in limine. 2. Leave to appeal was granted to consider, as to whether refusal on the part of the official respondents to refund the above sum has deprived the appellant to have, hold and enjoy its property, being violative of Articles 2A, 4, 18, 24 and 25 of the Constitution of the Islamic Republic of Pakistan, 1973, hereinafter referred to as the Constitution. 3. The brief facts are that the appellant manufactures medicines of which the maximum prices are fixed by the Government of Pakistan. In the manufacturing process they inter alia use salinomycin which is one of the main ingredients of the medicines which, according to the appellant, is exempted from the payment of customs duty and sales tax under S.R.O. 349(l)/85 dated 15-4-1985 issued under section 19 of the Act and sub-section (1) of section 7 of the Sales Tax Act, 1951, amended by S.R.O. 1148(l)/89, dated 27-11-1989. 4. It seems that the appellant filed bill of Entry No. 1533 on 27-11-1989 for clearance of salinomycin.
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On which respondent No. 3 assessed the aforesaid sum of Rs. 4,61,145 as duties and taxes, which the appellant paid and got the goods cleared. It appears that after the expiry of nearly 1-1/2 years they filed an application on 20-4-1991 for refund of the above amount before respondent No. 3, who rejected the same on the ground that the aforementioned application was not filed within six months as provided in section 33 of the Act. The appellant's appeal and revision were also dismissed by orders dated 6-11-1991 and 28-3-1992 by respondent No. 2 and respondent No. 1 respectively. After that the appellant filed aforesaid Constitution Petition in the High Court of Sindh, which was dismissed in limine by a Division Bench by observing that the ground taken by the appellant that they were under the impression that it would i.e the claim after they had consumed the imported goods was not sustainable and that the appellant did not come within the term "good faith". Thereupon they filed a petition for leave to appeal which was granted to consider the above question. 5. The above appeal had come up for hearing before this Court on 20-10-1997. However, it was adjourned on the joint request of the learned counsel for the parties to second week of November, 1997. The appeal had come up for hearing before us on 13-11-1997 when Mr. S.M. Abbas, learned Advocate-on- Record appearing for the respondents, requested that the hearing be adjourned as the respondents were unable to engage a counsel. Since the appeal was adjourned on the joint request of the learned counsel for the parties on 20-10-1997 nearly four weeks back, we declined the above request and asked Mr. S.M. Abbas, learned Advocate-on-Record to assist the Court on behalf of the respondents. 6. In support of the above appeal Mr. Makhdoom Ali Khan, learned Advocate Supreme Court for the appellant, has urged as follows: - (i) That in view of Article 77 of the Constitution no tax could have been levied without the authority of the Parliament and any tax recovered illegally is refundable. (ii) That where goods are exempt from tax under a notification and in spite of that customs duty and taxes are recovered, for claiming refund limitation of six months provided in section 33 of the Act is not applicable. (iii) That a duty which is paid not on demand but without knowledge of the exemption notification, must be refunded. (iv) Shat where duty is paid under a mistake, section 72 of the Contract Act, 1872, would apply for claiming refund of such amount through a suit and under Article 96 of the Schedule to the Limitation Act a period of three years is provided and that section 33 of the Act would have no application. (v) That the state should not defeat a claim of a citizen in respect of an amount illegally recovered on the plea of limitation. On the other had, Mr. S.M. Abbas, learned Advocate-on-Record for the respondents, has submitted that the plea that appellants were not aware of the above notification of exemption is belied by para. (F) of the grounds of memo, of appeal, wherein they have alleged that they in good faith genuinely believed that they could apply for refund after they could satisfy the authorities that they had consumed the raw material for the manufacturing of medicines. He has further contended
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that the appellant had paid the duty on 27-11-1989 and refund of the same was claimed on 20-4- 1991, admittedly, beyond the period of six months provided under section 33 of the Act and, hence, the respondents were justified in declining the aforesaid request and that the High Court also acted within its jurisdiction by dismissing the aforementioned Constitution Petition. He has further urged that though the appellant have alleged that they had applied for extension of time under section 224 of the Act but neither a copy of any alleged application filed by them has been produced nor any order passed thereon declining the above request. According to him this is an afterthought plea of the appellant. 7. There seems to be no factual controversy on the question that salinomycin was exempted from the payment of customs duty and sales tax. In this view of the matter, it seems to be an admitted position that the appellant had paid the aforesaid amount to the respondents which they were not liable to pay under the law. The basic question which requires consideration is, as to whether the appellants were entitled to refund of the above sum in spite of the fact that they applied for its refund after expiry of six months' period mentioned in section 33 of the Act. They were late in approaching for the refund of the said amount for nearly one year. 8. Before proceeding with the matter any further, we may refer to sub-sections (1), (2) and (3) of section 32, section 33 and section 224 of the Act, which read as under:- Sub-sections (1), (2) and (3) of section 32: "32. Untrue statement, error, etc.-If any person, in connection with any matter of customs.-- (a) makes or signs or causes to be made or signed, or delivers or causes to be delivered to an officer of customs any declaration, notice, certificate or other document whatsoever, or (b) makes any statement in answer to any question put to him by an officer of customs which he is required by or under this Act to answer, knowing or having reason to believe that such document or statement is false in any material particular, he shall be guilty of an offence under this section. (2) Where, by reason of any such document or statement as aforesaid or by reason of some collusion, any duty or charge has not been levied or has been short-levied or has been erroneously refunded, the person liable to pay any amount on that account shall be served with a notice within three years of the relevant date, requiring him to show cause why he should not pay the amount specified in the notice. (3) Where, by reason of any inadvertence, error or misconstruction, any duty or charge has not been levied or has been short-levied or has been erroneously refunded, the person liable to pay any amount on that account shall be served with a notice within six months of the relevant date requiring him to show cause why he should not pay the amount specified in the notice." Section 33 of the Act: "33. Refund to be-claimed within six months.- (1) No refund of any customs-duties or charges claimed to have been paid or over-paid through inadvertence, error or misconstruction shall be allowed, unless such claim is made within six months of the date of payment.
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In the case of provisional payments made under section 81, the said period of six months shall be reckoned from the date of the adjustment of duty after its final assessment." Section 224 of the Act: "224. Extension of time limit. -The Federal Government, the Board or the appropriate officer of customs, may, upon being approached by an aggrieved party if satisfied that the delay was beyond the control of the applicant and that by granting such extension there is a possibility of some loss or hardship to the applicant being mitigated or prevented, extend the time limit laid down in any section." A perusal of above sub-section (1) of section 32 of the Act indicates that if any ..Person, in connection with any matter of customs, makes or signs or causes to be made or signed, or delivers or causes to be delivered to an officer of customs any declaration, notice, certificate or other documents whatsoever, or makes any statement in answer to any question put to him by an officer of customs which he is required by or under the Act to answer, knowing or having reason to believe that such document or statement is false in any material particular, he shall be guilty of an offence under the above section. It may further be noticed that sub-section (2) lays down that where, by reason of any such document or statement i.e. a document or statement referred to in sub-section (1) or by reason of some collusion, any duty or charge has not been levied or has been short-levied or has been erroneously refunded, the person liable to pay any amount on that account shall be served with a notice within three years of the relevant date (relevant date has been defined in sub-section (5) of section 32 of the Act), requiring him to show cause why he should not pay the amount specified in the notice. It may also be pointed out that sub-section (3) deals with the cases where, by reason of any inadvertence, error or misconstruction, any duty or charge has not been levied or has been short- levied or has been erroneously refunded, the person^ liable to pay any amount on that account shall be served with a j notice within six months of the relevant date requiring him to show cause why he should not pay the amount specified in the notice. It may be highlighted that above sub-section (2) provides a period of three years where non- recovery or short-levy or the refund is on account of untrue statement made orally or through a document by the person concerned. Whereas under sub-section (3), where the non-levy or short- levy or the refund of the amount has been made on account of any inadvertence, error or misconstruction, the period of six months has been provided for the Government to serve a show- cause notice. It may be noticed that sub-section (1) of section 33 of the Act , is couched in the negative language by providing that no refund of any customs-duties or charges claimed to have been paid or over- paid through inadvertence, error or misconstruction shall be allowed, unless such claim is made within six months of the date of payment. Whereas sub-section (2) thereof lays down that in the case of provisional payments made under section 81, the said period of six months shall be reckoned from the date of adjustment of duty after its final assessment. It may be noted that section 224 of the Act provides that the Federal Government, the Board or the appropriate officer of customs, may, upon being approached by an aggrieved party if satisfied that the delay was beyond the control of the applicant and that by granting such extension there is
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a possibility of some loss or hardship to the applicant being mitigated or prevented, extend the time limit laid down in any section. 9. It may not be out of context to observe that where there is no element of unfair act on the part of the person involved and by reason of any inadvertence, error or misconstruction, any duty or charge has not been levied or short-levied or has been erroneously refunded, a period of six months has been provided for the Government to serve a notice for the demand on the person concerned. Similarly, under section 33 of the Act, a person who has paid or over-paid customs- duties or charges through inadvertence, error or misconstruction, is entitled to claim the refund of the same within six months from the date of payment. In other words, the Government and a citizen are placed at par as to the period of limitation. It may further be pointed out that under section 224 of the Act, extension can be granted if an aggrieved party can satisfy that the delay was beyond his control and not for any other reason. 10. Having dealt with the factual background of the case and the relevant provisions of the Act, we may now refer to the case-law relied upon by Mr. Makhdoom Ali Khan, learned counsel for the appellant. (i) The Sales Tax Officer, Banaras and others, Appellants v. Kanhaiya Lai Makund Lai Saraf Respondent, Agra Bullion Exchange and others, Intervenors AIR 1959 SC 135; in which the facts were that the respondent was a firm registered under the Indian Partnership Act dealing in Bullion Gold and Silver ornaments and forward contracts in Silver bullion at Banaras. In the assessm ent years 1948-49, 1949-50 and 1950-51, the Sales Tax Officer, Banaras, the appellant before the Supreme Court, assessed the respondent to U. P. Sales Tax on its forward transactions in Silver Bullion. The respondent had deposited the sums of Rs. 150-12-0, Rs. 470-0-0 and Rs. 741-0-0 for the aforesaid three years, which amounts were appropriated towards the sales tax liability of the respondent firm under the respective years. The levy of sales tax on forward transactions was held ultra vires by the High Court of Allahabad by its judgment dated 27-2-1952. The respondent by its letter dated 8-7-1952 asked for refund of the amount of sales tax paid as aforesaid. The appellant No. 2 i.e. The Commissioner of Sales Tax, U.P., Lucknow, however, by his letter dated 19-7- 1952 refused to refund the same. After that the respondent filed a Civil Miscellaneous Writ Petition in the High Court of Allahabad under Article 226 of the Indian Constitution and asked for a writ of certiorari for quashing the aforementioned three assessment orders and a writ of mandamus requiring the appellants to refund the above sums aggregating to Rs. 1365-12-0. It may be stated that the aforesaid judgment of the Allahabad High Court declaring levy of sales tax on forward transactions as ultra vires was affirmed by the Indian Supreme Court in the case of Sales Tax Officer v. Budhparkash Ji AIR 1954 SC 459. The respondent's aforesaid writ petition was allowed by the Allahabad High Court and the Revenue was directed to refund the amount paid by the respondent. Against the above judgment, the Revenue Officer filed an appeal before the Indian Supreme Court. The Indian Supreme Court while maintaining the judgment of the Allahabad High Court observed as under as to the applicability of section 72 of the Contract Act:- "24. We are of opinion that this interpretation put by their lordships of the Privy Council on section 72 is correct. There is no warrant for ascribing any limited meaning to the word 'mistake' as has been used therein and it is wide enough to cover not only a mistake of fact but also a mistake of law. There is no conflict between the provisions of section 72 on the one had and sections 21 and 22 of the Indian Contract Act on the other and the true principle enunciated is that if one party under a
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mistake, whether of fact or law, pays to another party money which is not due by contract or otherwise that money must be repaid. The mistake lies in thinking that the money paid was due when in fact it was not due and that mistake, if established entitles the party paying the money to recover it back from the party receiving the same." It was observed by the Indian Supreme Court in the above report hat merely because the State had not retained the monies paid as sales tax by the assessee but had spent them away in the ordinary course of business of the State would not make any difference to the position and under the plain terms of section 72 of the Contract Act, the assessee would be entitled to recover the monies paid under a mistake of law. It was further observed that the question of estoppel did not arise. (ii) Aluminium Corporation of India Ltd., Appellant v. Union of India and others, Respondents AIR 1975 SC 2279: In the above case the facts were that the appellant company manufactured aluminium plates, sheets circles, strips and foils which were the end products of its composite factory, but, as intermediate products, it also manufactured ingots, bars, slabs, billets, pellets and the like which got consumed mostly in the process of manufacturing of plates, sheets and other end products and rarely by way of sale of slabs as such. The raw material i.e. Aluminium was extracted by the company from bauxite from which ingots, slabs and the like were made which, in turn, were rolled into sheets, circles etc., for sale. It was an admitted position that in the above manufacturing process about 50 per cent, of the ingots, slabs and billets used for further manufacture of plates, sheets, circles, slabs etc., became scrap and were melted to be put back along with raw scrap for the purpose of recycling. To avoid complication experienced in the enforcement of the two-tier system of levy of duty at different rates prevailing from 1960, a notification was issued under Rule 8(1) of the Central Excise Rules, 1944, imposing a single point levy at the ultimate stage of the manufacture. The appellant company claimed refund of over-levied excise duty. They were unsuccessful before the Revenue and the High Court. The Indian Supreme Court while allowing the appeal of the company (the judgment of which was authored by V.R. Krishna Oyer, J.) observed as follows:-- "13. To return what has been taken wrongly is as much a duty and grace of Government as to levy relentlessly and fully what is due. Default in either, not altogether unfamiliar, brings down the confidence of the community in the Administration. That a party should have been put to two expensive and elongated litigations to recover a relatively small sum is regrettable." (iii) The Madras Port Trust, Appellant v. Hymanshu International by its Proprietor v. Venkatadri (dead) by L.Rs., Respondents AIR 1979 SC 1144: in which the Madras Port Trust brought an appeal before the Indian Supreme Court against the judgment of the High Court whereby a decree for Rs. 4,838.87 was granted to the respondent in respect of the refund claimed by them on account of the amount paid by them as wharfage, demurrage and transit charges. The only question on which leave was granted by the Indian Supreme Court was, whether the claim of the respondent for refund of the amount of wharfage, demurrage and transit charges was barred by section 110 of the Madras Port Trust Act (II of 1905). The Indian Supreme Court while recalling the leave granting order observed as under:-
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"2. We do not think that this is a fit case where we should proceed to determine whether the claim of the respondent was barred by section 110 of the Madras Port Trust Act (II of 1905). The plea of limitation based on this section is one which the Court always looks upon with disfavour and it is unfortunate that a public authority like the Port Trust should, in all morality and justice, take up such a plea to defeat a just claim of the citizen. It is high time that Governments and public authorities adopt the practice of not relying upon technical pleas for the purpose of defeating legitimate claims of citizens and do What is fair and just to the citizens. Of course, if a Government or a public authority takes up a technical plea the Court has to decide it and if the plea is well-founded, it has to be upheld by the Court, but what we feel is that such a plea should not ordinarily be taken up by a Government or a public authority, unless of course the claim is not well-founded and by reason of delay in filing it, the evidence for the purpose of resisting such a claim has become unavailable. Here, it is obvious that the claim of the respondent was a just claim supported as it was by the recommendation of the Assistant Collector of Customs and hence in the exercise of our discretion under Article 136 of the Constitution, we do not see any reason why we should proceed to hear this appeal and adjudicate-upon the plea of the appellant based on section 110 of the Madras Port Trust Act (II of 1905)." (iv) Messrs Shiv Shanker Dal Mills etc. v. State of Haryana and others AIR1989 SC1037: In the above case the facts were that the appellants who were petitioners before the High Court in Constitution Petitions had paid market i.e at the increased rate of 3 per cent, (raised from the original 2 per cent,). The Indian Supreme Court in the case of Kewal Krishna v, State of Punjab AIR 1980 SC 1008) decided on 4-5-1979 held that cess of 1 % over the original rate of 2% was ultra vires. After that the appellants filed Constitution petitions in the High Court claiming refund of the excess amount paid by them but failed to get any redress. Thereupon they filed an appeal with the leave of the Indian Supreme Court which was allowed. Again the above judgment was authored by Krishna Oyer, J., who made the following weighty observations:-- "Where public bodies, under colour of public laws, recover people's moneys, later discovered tp be erroneous levies the dharma of the situation of no equivocation. There is no law of limitation, especially for public bodies, on the virtue of returning what was wrongly recovered to whom it belongs. Nor is it palatable to our jurisprudence to tum down the prayer for high prerogative writs, on the negative plea of "alternative remedy", since the root principle of law married t (v) The Commissioner of Sales Tax, U.P. v. Messrs Auriaya Chamber of Commerce, Allahabad 1986 (8) ECR 1 (S.C): in which the facts were that the respondent paid sales tax on 'forward contracts' (not being completed sales) during the assessment period 1949 under the belief that the tax was due and payable. In May, 1954 the Indian Supreme Court in another case declared that such taxation was ultra vires as the scope of the words "Taxes on the sale of goods" did not extend to 'agreements to sell'. Thereupon, the assessee filed a revision petition in 1955 for the refund of the tax deposited by mistake which was rejected as time-barred. Again on 24-5-1959 the assessee filed an application for the refund of the tax. This claim was also held by the authorities to be hit by limitation. Finally the assessee succeeded in obtaining relief from the Additional Judge (Revisions) who held that when the assessm ent was. Made and taxes were paid there was no limitation as section 29 having come into operation with effect from 1-4-1959. The matter was brought before the Indian Supreme Court by the Revenue which maintained the above order of the Additional Judge (Revisions) and made inter alia the following observations:--
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"13. Though not in this context but in a different context, the question whether tax collected by the State without authority of law can be directed to be refunded without any period of limitation was considered in a writ application by the Calcutta High Court in Suresh Chandra Bose v. The State of West Bengal (38 STC 99). This decision of the Single Judge of the Calcutta High Court was approved by the Division Bench of that High Court in State of West Bengal and others v. Suresh Chandra Bose 45 STC 118. The Court under Article 226 directed refund in that case. The Court emphasised that when moneys are paid to the State which the State has no legal right to receive, it is ordinarily the duty of the State subject to any special provisions of any particular statute or special facts and circumstances of the case, to refund the tax of the amount paid." f-i 16. We might in this case bear in mind certain observations, though we are conscious that the same was rendered in a different context, of this Court in Hindustan Sugar Mills etc. v. State of Rajasthan and others (1970) 1 SCR 276 at 297-ECR C 557--SC) where directing payment of certain sales tax collected from the assessee, this Court observed that , though there was no legal liability on the Central Government but as we are living in a democratic…
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