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Petitioner: MUHAMMAD RAMZAN KATIAR through Legal Heirs;s VS Respondent: PAKISTAN REFINERY JUDGMENT
Court Name: Sindh High Court Judge(s): Mushir Alam Title:MUHAMMAD RAMZAN KATIAR through Legal Heirs;s vs PAKISTAN REFINERY
JUDGMENT
Reported As: 2013 P.C.T.L.R. 230, 2013 CLD 233 Result: Infra Court Appeal allowed Judgment JUDGMENT ' NISAR MUHAMMAD SHAIKH, J.--- This intra court appeal is directed against the judgment/decree dated 31-3-1999 passed by learned Single Judge of this Court on its original civil jurisdiction, whereby the Suit No,750 of 1981 filed by plaintiff/appellant (octroi contractor) for declaration, injunction, accounts and recovery, claiming octroi charges on the crude oil imported by respondent No,1 (company) for sale, use and consumption within octroi limits of respondent No,2 (Cantonment), was dismissed with no order as to costs. 2. Brief facts of the case, according to appellant, are that the appellant/plaintiff Muhammad Ramzan Katiar in pursuance of an open auction held on 14-5-1981 by Cantonment Board, Korangi Creek, Karachi (respondent No,2), acquired a right to collect octroi for a period from 1-7-1981 to 30- 6-1982 on the articles imported for use, consumption or sale within the limits of Korangi Creek Cantonment. Respondent No,1 i,e, Pakistan Refinery is a limited company having its registered office within the limits of Cantonment, from where it is operating its all functions viz. Sale, consumption and use of the crude oil, being imported by it regularly from abroad by sea route, which is discharged at Karachi Port and thereafter the same is transported by means of under ground pipelines and imported at its Refinery located within the area of Korangi Creek Cantonment. According to appellant, the import of crude oil within such limits was subject to levy of Octroi 1% ad valorem under item No,27, section V, Schedule A of S.R.O. 900(I)/76, alternatively at the same rate under item No, 99, section XX of Schedule A aforesaid. Thus the appellant estimated the value of crude oil imported during the period from 1-7-1981 to 21-11-1982 @ Rs,187.5 crores and accordingly he claimed a sum of
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Rs,1,87,50,000. Since the respondent No,1 did not pay due amount of Octroi duty on such demand of the appellant/plaintiff, therefore, he filed a suit on 22-11-1981 for a decree of Rs,1,87,50,000 against respondent No,1/ defendant No,1, praying further for a preliminary decree for accounts directing defendant No,1 to render true and accurate account of the crude oil imported from 1-7-1981 to 21-11- 1982 and to be imported till 30-6-1982 and then a final decree for the amount found due. 3. The respondent No,1 /defendant No,1 Company while denying the import of crude oil from abroad by Sea, submitted in its written statement that such crude oil is received through underground pipelines, at the Refinery and no octroi duty is prescribed for receiving crude oil from up-country through underground pipelines and thus the schedule which provided a duty on alleged import is ultra vires and is not applicable. Respondent No,1 also submitted that even otherwise, the crude oil was not for consumption, use or sale within Cantonment area as the same before it is processed, cannot be consumed, used or sold in any manner. However, after such process the finished products are derived and only those finished products can be marketed for consumption, use or sale and whatever commodities are consumed, used or sold the octroi duty is invariably paid in the area where such product is marketed for consumption, use or sale. Respondent No,1 also pleaded that the Government of Pakistan, Ministry of Defence vide letter dated 31-1-1982 issued through Military Lands and Cantonment Department, had issued necessary instructions for exemption and subsequently they vide notification dated 31-1-1988 also exempted the crude oil being the property of Federal Government, from payment of octroi duty w.e.f 1-7-1981 and as such, the plaintiff/appellant is not entitled to maintain his claim. Respondent No,1 also pleaded that crude oil being a federal subject, is not subject to octroi charges and the relevant schedule is ultra vires to the constitution and that the suit is not maintainable. 4. Whereas the written statement of defendant No,2/ respondent No,2 Cantonment Board is that the plaintiff/appellant was awarded contract for collection of octroi on the terms and conditions notified prior to its auction and he was entitled to collect such tax within its scope. The schedule of taxable items with rate of tax, was published in the gazette of Pakistan which is binding on the plaintiff as well as the importer or on the taxable items for use, consumption or sale within the limits of Korangi Creek Cantonment. Respondent No,2 also stated that the plaintiff has authority to prevent import of taxable items from entering within the Cantonment limits without prior payment of octroi and the same can be collected by adopting all measures allowed by Octroi Rules. 5. Out of the pleadings of the parties, following issues were framed in the suit:-- (1) Whether the above suit has become infructuous and is liable to be dismissed in view of the exemption granted by Ministry of Defence, Government of Pakistan, vide Notification No,S.R.O.83(1)/88 dated 31-1-1988 published in Gazette of Pakistan (Extraordinary) dated 9-2-1988 exempting crude oil being the property of Federal Government brought into the refinery of defendant No,1 in Korangi Creek Cantonment, from payment of octroi duty with retrospective effect from 1-7-1981? (2) Whether the crude oil being a federal subject is not subject to levy of octroi by the Cantonment Board and whether the relevant schedule to the Notification dated 10-9-1976, is ultra vires of the Constitution of the Islamic Republic of Pakistan, 1973? (3) Whether Notification No, S.R.O. 83(1)/88 dated 31-1-1988 is without lawful authority and of no legal effect in so far as it exempts levy of octroi on crude oil with retrospective effect? (4) Whether the crude oil imported by the defendant was not for sale, consumption and use? (5) Whether the octroi duty is payable on crude oil which is received through underground pipeline at Pakistan Refinery? (6) What should the decree be? 6. The plaintiff/appellant examined their General Manager namely Maqbool Ahmed and defendant No,1/ respondent No,1 examined their Internal Auditor namely Anwar Sadiq. They also produced
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various documents during their respective evidence. However, defendant No,2/ respondent No,2 did not adduce any evidence. On conclusion of the proceedings, learned Single Judge answered the legal questions involved in issues Nos,1 to 3, in the negative and while dealing with issues Nos, 4 and 5 jointly, decided the same against the plaintiff/appellant and thereby dismissed the suit vide judgment dated 31-3-1999 which has been impugned by the plaintiff/appellant through this appeal. However, the respondent No,1 has also filed memorandum of cross objections in respect of the findings on issues Nos,1 to 3. It appears that a review application being C.M.A. No,469 of 2002, filed by respondent No,1 in relation to an order dated 20-3-2002 passed for admission of this appeal for regular hearing, was disposed of on 26-3-2003 and the same is no more pending to be heard, therefore, the request for its hearing made in para-2 of written synopsis filed by advocate for respondent No,1, is of no effect. 7. We have heard learned counsel for the contesting parties and perused the relevant record including the R&Ps of the Suit. 8. Admittedly, the octroi contract was awarded to appellant under the "Terms and condition for open auction of octroi" (Exh.6/2), followed by an agreement dated 1-7-1981 (Exh.6/3) executed by Cantonment Board (Respondent No,2) in favour of appellant for collection of octroi duty on the goods brought within the limits of Korangi Creek Cantonment for sale, use or consumption, in accordance with Ministry of Defence Gazette Notification No, S.R.O.900(1)76 dated 10-9-1976. This notification (Exh.6/4) by which some amendment was made in original notification No,4/71 dated 1- 1-1971 (available at page 41 of R&Ps of Suit), prescribed the rate of Octroi duty as 1% ad valorem to be levied on the item shown at Serial No,27, section V of Schedule A, as under:-- "Mineral fuels, mineral oil and products of their distillation, bituminous substances and mineral waxes." ' The opening para of earlier/original notification No,4/74 of Ministry of Defence, published in Gazette of Pakistan dated 1-1-1971, reads as under:-- "In exercise of the powers conferred by subsection (1) of section 60 of the Cantonments Act, 1924 (Act II of 1924), the Cantonment Board Korangi Creek, with the previous sanction of the Central Government, hereby imposes an octroi duty on all goods and animals brought within the limits of Korangi Creek Cantonment for consumption, use or sale therein as per Schedule given below:-- ' It appears that after certain amendments in Schedule A of earlier/original Notification No,4/71 dated 1-1-1971, made through relevant notification dated 10-9-1976, some further amendments in the same notification dated 1-1-1971 were also made through subsequent notification No,S.R.O.472(1)/79 dated 31-5-1979 (available at page 71 of R&Ps of Suit) in respect of some articles of Schedule B which however is not alleged to have changed the position of relevant item No,27 of Schedule A of notification dated 10-9-1976. However, these notifications, according to learned counsel for respondent No,1, were since issued without compliance of pre-requisite conditions or adopting due procedure prescribed under sections 61, 62 and 255 of the Cantonments Act, 1924 therefore, the same being incompetent are already held by a Division Bench of this Court, to be of no legal effect, in the case of Burshane (Pakistan) Ltd. v. C.E.O Cantonment Board of Korangi Creek Karachi and 3 others reported in PLD 1983 Karachi 517. The decision made in this reported case, to the extent of the point raised by learned counsel, needs no comments as the same was not maintained by honourable Supreme Court in the appeal which was allowed. It is also reported as Cantonment Executive Officer and another v. Burshane (Pakistan) Ltd. And others (1986 SCMR 1308). Even otherwise, no such case has been filed by respondent No,1 challenging the alleged illegality of the respondent No,2 etc. In relation to the notification containing the octroi schedule in question. 9. All the aforesaid three notifications were issued by respondent No,2 with previous sanction of central/federal government in accordance with the provisions of relevant section 60 of the
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Cantonments Act, 1924 which reads as under:-- "60. General power of taxation---(1) The Board may, with the previous sanction of the Federal Government, impose in any cantonment any tax which, under any enactment for the time being in force, may be imposed in any municipality in the Province wherein such cantonment is situated. (2) Any tax imposed under this section shall take effect from the date of its notification in the official Gazette." ' Accordingly, the imposition of 'any tax' by respondent No,2 could be such that may be imposed in any municipality of the Province under the relevant' law. The Municipal Administration Ordinance (No,X of 1960) which was promulgated in 1960 replacing City of Karachi Municipal Act 1933, provided under section 33 read with clause 4 of Third Schedule that the tax on the import of goods for consumption, use or sale in the municipality, may be levied in the prescribed manner, by the Municipal Committee with previous sanction of the Government. This Ordinance of 1960 was substituted by Sindh Local Government Ordinance, 1972 which was then replaced by Sindh Local Government Ordinance 1979 (XII of 1979) and the same in its section 60 read with Fifth Schedule, also provides similarly as in the said Ordinance of 1960 under which the relevant Rules namely the W.P. Municipal Committees Octroi Rules, 1964 were framed and the same were then adopted by the Provinces including Sindh, after the dissolution of one unit. Its Rule 2(m) defines "Octroi" to mean a tax on the import of goods for consumption, use or sale within the octroi limits. The word "import" has also been defined in Rule 2(i) as an import within octroi limits. . 10. It is thus clear from the above that the expression "any tax" used in section 60 of Cantonments Act, includes the octroi tax for which the appellant was lawfully empowered under section 83 of the Cantonments Act 1924, for the period of his Octroi contract, to collect the octroi as per approved schedule, on the goods imported/brought in the octroi limits of cantonment for use, consumption or sale within such limits. In this connection, the contention of learned Counsel for respondent No,1 that the respondent No,2 had no right to levy and collect octroi through appellant on the imported crude oil for which a Municipality had no power to impose, is of no force. He also referred in this regard to the case of Mst. Nargis Moeen and another v. Government of Pakistan through Secretary Defence, Islamabad and another (PLD 2003 Lahore 730) in which the tax on the transfer of property, imposed by a cantonment board being permissible to be imposed in municipal area, was then omitted by amendment in municipal laws, therefore, the cantonment board's power to impose such omitted tax was automatically diminished and thus the demand of such tax by the Board was declared as without jurisdiction and lawful authority. But in the instant case, the levy/imposition of octroi tax in question was not omitted from the relevant municipal laws so as to put 'embargo upon Cantonment Board from levying the same. The above citation is therefore of no help to the respondent No,1. 11. It is however, an admitted position that the crude oil was brought in the Refinery of respondent No,1 within octroi limits of respondent No,2 Cantonment, for its refining purpose. The contention raised by learned counsel for respondent No,1 that the imposition of octroi tax is not applicable to the crude oil which is received at the Refinery not by road but through under ground pipelines, is not supported by any law to prevent levy of octroi or put any bar upon it, on the import in such a way. The use of pipelines is not a new thing for transportation and import of crude oil as appears from various Statutes, Rules, etc. Which include Petroleum Act 1934, Petroleum Rules 1937, Pakistan Petroleum (Refining, Blending and Marketing) Rules 1971, Oil and Gas Regulatory Authority Ordinance 2002 etc. But the same are not helpful to support the above contention. However, it needs no clarification that the octroi tax is not like a toll tax so as to be imposed at the entry on the road or bridge but the octroi tax is liable not merely on the import or entry of goods in the octroi limits but also on its sale, consumption or use within such limits. Hence, merely the import of crude oil is not of any significant so as to attract the levy of octroi. However, the entry of crude oil within
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octroi limits is since admitted therefore, it would be immaterial if the same is brought through under ground pipelines or by road etc. In this regard learned Single Judge rightly observed in the impugned judgment that the contention of defendants is not correct when they say that the octroi duty is only leviable when the goods are brought in by road. 12. Now, the point for determination is whether the crude oil imported in to the octroi limits of cantonment was brought in for sale, use or consumption within such limits? The petroleum activities of crude oil are usually split out in five stages, namely (a) exploration (b) production (c) transportation (d) processing/refining and (e) marketing/ distribution. In the present case, it appears that the crude oil was imported from abroad by sea route, it was unloaded from incoming vessels and discharged at Keamari Port, Karachi and then transported through underground pipelines to the Refinery within the limits of Cantonment, where the same was processed and refined and its purfied/finished oil products were transmitted out of cantonment area to oil marketing companies at Keamari where they effected its sale, distribution etc. In this connection, the learned counsel for appellant also referred relevant parts of the affidavit in evidence of the witness of respondent No,1 who stated therein that imported crude oil is not consumed, used-or sold by PRL (Pakistan Refinery Limited) within the limits of Cantonment area but after refining, it is pumped through underground pipeline to Keamari where the oil marketing companies effect the sale and distribution of refined crude oil for home consumption. He further stated that the crude oil is the property of Federal Government, it is imported by PRL on behalf of Federal Government and that the price of imported crude oil is reimbursed to PRL by Federal Government. He also stated that oil marketing companies pay all dues and taxes and PRL is not liable to pay any octroi for temporary retention. In cross examination he also deposed that they transfer refined oil to various oil companies namely Shell, PSO and Caltex upon payment by them, the prices of which are fixed by the Government. The above statement of the witness of respondent No,1 collected from different parts of his evidence, was referred by learned counsel for appellant treating it partly to be in support of the case of appellant. However, the same cannot be termed to be an admission in so far as the sale of refined oil products within octroi limits is concerned, nor there is any proof to support the contention of appellant that all business dealings and sale transactions were conducted and finalized by respondent No,1 within octroi limits of cantonment where the office or head office of respondent No,1 is situated. 13. However, the paramount question for consideration is whether the crude oil, changing its form etc. Through a process of refining, amounts to its use etc. Or otherwise? The relevant issue No,4 which was related, inter alia, to the term "use", was dealt with in the impugned judgment and was concluded with the following observations:-- ' The fact of refinement cannot by any stretch of imagination be called "use" because "use" essentially entails depletion of the goods so used either in quantity or quality. In this case the crude oil is only divided into different products and the value thereof being enhanced as a result. I therefore, find that crude oil that is brought in the limits of defendant No,2 was neither for sale, nor for consumption nor for use. ' The contention of learned counsel for respondent No,1 is also that there arises no question of use or consumption of crude oil in the refinery where only the crude oil is refined and then its finished bye products are transmitted out of the limits of cantonment where they are then sold and thereby used and consumed by the purchasers and useRs, He in support of above, also placed his reliance on the cases of Bela Automatic Ltd. v. KMC and 2 others (PLD 1999 Karachi 410), Messrs Universal Merchants v. Commissioner of Karachi and 2 others (1980 CLC 704) and Municipal Committee Multan v. Burmah Shell Storage and Distributing Co. Of Pakistan Ltd. And another (PLD 1976 Lahore 726).
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' Learned counsel for appellant however contended in this regard that admittedly, through the process of Refining, the crude oil was converted into purified oil products and consumable articles of commercially different nature therefore such act by itself amounts to "use" of crude oil in the refinery of respondent No,1 within the limits of respondent No,2. In support of his contention, he also placed reliance on the cases of Municipal Corporation, Faisalabad v. Atta Muhammad and others (1990 SCMR 84), Messrs Anwar Khan Mahboob Co. v. The State of Bombay and others (AIR 1961 SC 213) and Burmah Shell Oil Storage and Distributing Co. Of India Ltd. Belgaum v. Belgaum Borough Municipality, Belgaum (AIR 1963 SC 906). 14. Perusal of the case-law, cited by the parties' advocates respectively, shows that in the case of Bela Automatic Ltd. (supra) the petitioner-company had applied to the respondent-KMC for their enlistment in respect of the goods to be imported for their manufacturing plant in Balouchistan seeking exemption from payment of octroi at Karachi as the goods were not meant for consumption, use or sale within octroi limits of KMC but the same were imported for immediate transportation to Balouchistan. For such reason, the impugned action of KMC, withholding enlistment of petitioners for grant of transit pass facility, was held to be of no legal effect. However, neither the interpretation or definition of the term "use" etc. Nor the question of any process of the goods in the plant etc. Was involved in the reported case. Similar is the position in the remaining two reported, cases cited above, which are relied upon by learned counsel for respondent No,1 but none of these three cases is relevant to the point in question and, on the contrary, the case of Burshane (Pakistan) Ltd. (PLD 1983 Karachi 517) already cited by him and referred to above in para 8 in connection with another point, seems to be very relevant on the present point as the question in it was whether Octroi Duty was chargeable on empty liquified petroleum gas cylinders brought Into the area of Korangi Creek Cantonment for re-filling and whether re-filling the cylinders with L.P.G. Would amount to "using" the cylinders within the limits of the cantonment. Such question was answered by a Division Bench of this Court in the following words:-- "Since the word 'use' has not been defined by the Act or the rules (which have not been framed so far under the Act) it should be understood in its ordinary dictionary meaning. According to Concise Oxford Dictionary the word 'use' means 'employment, application to a purpose, treat in a specified manner'. Thus if an empty cylinder is imported for the purpose of re-filling, it is being employed or applied to specific purpose or is being treated in a specified manner. Hence there can be no manner of doubt that if an empty cylinder is brought within the limits of Cantonment for the purpose of re-filling with L.P.G at the plant of the petitioner, it shall fall within the mischief of the impugned Notification, because it has been brought within the Cantonment area for use therein. It is immaterial whether a cylinder is brought for the first time or repeatedly within the Cantonment area. If the same cylinder is brought repeatedly to use within the octroi limits of the Cantonment, it shall be liable to levy of octroi duty each time because it is being brought for 'use' within the said limits". ' The above conclusion was challenged on the ground that gas cylinders were brought into the area for use by reference to its meaning on the premises that their bringing into the area was for a temporary duration, namely re-filling of gas and did not entail total use as is the import of the word "use" occurring in the notification. Honourable Supreme Court observed in its judgment passed in the appeal, that:- "It is impossible to give to the word 'use' the same meaning as the word 'consumption' conveys for the latter entails a total loss of the material while the former denotes utilization or employment for or with some aim or purpose. Accordingly, it cannot be in its concept involve an element of total or partial application. Besides, the word 'use' is not qualified by any such word as 'total' or 'partial' in the Notification, therefore, such a meaning cannot be given to it".
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' Thus, the conclusion of the Division Bench of this court that re-filling of empty cylinders with L.P.G amounts to using the cylinders within the octroi limits of cantonment, was upheld by honourable Supreme Court as reported in C.E.O. And another v. Burshane (Pak) Ltd. (1986 SCMR 1308). 15. Whereas in the case of Municipal Corporation Faisalabad v. Atta Muhammad and others (1990 SCMR 84) relied upon by learned counsel for appellant, the primary question for consideration was as to whether the iron beams imported within octroi limits for the purpose of wrapping the yarn on them and for ultimate export could be said to have been imported for 'use' within the octroi limits under W.P. Municipal Committees Octroi Rules 1964. By its impugned judgment, Lahore High Court dismissed such civil revision of appellants corporation as, in its opinion, the empty iron beams after their import into octroi limits were not transformed into consumer articles by subjecting them to the process of wrapping with the yarn and the articles thus prepared did not lose their characteristics as the iron beams and thereby these cannot be said to have been 'used' within octroi limits. But, the honourable Supreme Court set aside such judgment of Lahore…
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