YUNUS TEXTILE MILLS LTD. VS PAKISTAN through Secretary (Revenue Division), 2016 PTD-KARACHI-HIGH-COURT-SINDH 1056 (2016)

Income Tax Ordinance (XLIX of 2001)---

----Ss. 4-B & Div. II-A, Pt.-I, First Schedule---Civil Procedure Code (V of 1908), O. XXIX, Rr.1 & 2---Suit for declaration and injunction---Interim Injunction, grant of---Super tax, vires of---Plaintiffs were assessees and they had assailed imposition of super tax levied pursuant to S.4-B of Income Tax Ordinance, 2001, being unconstitutional and invalid---Validity---Plaintiffs were unable to make out prima facie case as it was merely a challenge to the constitutionality of a law validly enacted by parliament---Plaintiffs might have a better reading of law but that would not make out a prima facie case for them to seek indulgence against a validly enacted law which remained in operation and was applicable---Unconstitutionality of the provision on the ground of mala fides and discrimination were mere assertions whereas, plaintiffs failed to substantiate the same prima facie with any material or cogent reasons---Balance of convenience also did not lie in favour of plaintiffs---Irreparable loss/injury would be caused to defendants instead of plaintiffs as even if ultimately it was held by High Court that such levy of super tax was unconstitutional, plaintiffs would be entitled for refund/adjustment---Passing of any injunctive order in the nature of restraint and allowing plaintiffs to file their income tax returns without depositing super tax, when the same was being demanded on the basis of a provision which for the time being was validly existing, the same would cause irreparable loss to exchequer---Application was dismissed in circumstances.

The Paracha Textile Mill Limited v. Federation of Pakistan (Suit No.430 of 2016) fol.

The Lahore Textile and General Mills Ltd. Lahore and others v. The Federation of Pakistan through Secretary Ministry of Finance, Islamabad and others 1997 SCMR 894; Messrs Quetta Textile Mills Limited through Chief Executive v. Province of Sindh through Secretary, Excise and Taxation, Sindh Secretariat, Kamal Attaturk Road, Karachi and another 2002 CLC 512; Messrs Inter-Ocean Cargo Services, Karachi v. Federation of Pakistan through Chairman, Central Board of Revenue, Islamabad and 2 others 1992 PTD 1411; Messrs Nasir Flour Mills (Pvt.) Ltd. Karachi v. The Federation of Pakistan through Chairman, Central Board of Revenue, Islamabad and 2 others 1994 PTD 1421; Messrs International Tea Traders, Karachi v. Chairman, Central Board of Revenue, Islamabad and another 1994 PTD 1422; Dr. Mubashir Hassan and others v. Federation of Pakistan and others PLD 2008 SC 80; Atco Lab (Pvt.) Limited v. Pfizer Limited and others 2002 CLC 120 Bolan Beverages (Pvt.) Limited v. Pepsicoinc and 4 others 2004 CLC 1530; Lotte Pakistan PTA Ltd. through Chief Financial Officer and Company Secretary v. Federation of Pakistan through Secretary Ministry of Finance, Islamabad and 4 others 2011 PTD 2229; Federation of Pakistan and others v. Mrs. Samra Shakeel and others 2001 PTD 3919 and Messrs Shahbaz Garments (Pvt.) Ltd and others v. Pakistan through Secretary Ministry of Finance, Revenue Division, Islamabad and others 2013 PTD 969 ref.

Dr. Farogh Naseem, Mushtaq Qazi, Haider Ali Khan, Ali Almani, Anwar Kashif Mumtaz, Usman Alam, Ammar Athar Saeed, Kashif Hanif, Faiz Durrani, Samia Faiz Durrani, Furrukh Ansari, Zulfiqar Ali Memon, Omair Akbar Soomro, Salman Shaikh, Muhammad Ishaq Khan, Muhammad Shahid, Shahzad Raheem, Mir M. Ali Talpur, Iqbal M. Khurram and Manzoorul Haq for Petitioners.

Salman Talibuddin Additional Attorney General of Pakistan, Abdul Qadir Leghari, Muhammad Sarfaraz Ali Metlo, S. Irshad ur Rehman, Muhammad Aqeel Qureshi, Ghulam Shoaib and Muhammad Taseer Khan for Respondents.

ORDER

MUHAMMAD JUNAID GHAFFAR, J.---Through all the listed Suits, the plaintiffs have challenged the vires of Section 4B and Division II-A in Part-I to the First Schedule of the Income Tax Ordinance, 2001, introduced through Finance Act, 2015 being without jurisdiction, mala fide, unconstitutional, unlawful, void ab-initio and of no legal effect. Through listed application(s) filed under Order XXXIX, Rules 1 and 2, C.P.C. in respective Suits, the plaintiffs have sought restraining orders against the defendants from taking any coercive action for non-deposit of Super Tax levied pursuant to Section 4B ibid with further prayer to allow them to file Income Tax Return(s) manually.

Dr. Farogh Naseem Counsel for the plaintiff(s) in the aforesaid Suits has contended that the plaintiffs have challenged the vires of the aforesaid provision i.e. 4B as the amendment brought through Finance Act 2015 is on the face of it Un-constitutional and invalid. He has further contended that the impugned levy does not fulfill the requirement of levying a tax; therefore, the same is ultra vires to the Constitution. He submits that the plaintiffs have a prima facie case therefore, the ad-interim injunction granted earlier may be confirmed in favour of the plaintiffs and the matter be listed for final arguments as it involves only legal issues and no evidence is to be led by the plaintiffs. In support of his contention he has relied upon the case(s) of The Lahore Textile and General Mills Ltd. Lahore and others v. The Federation of Pakistan through Secretary Ministry of Finance, Islamabad and others (1997 SCMR 894), Messrs Sardarpur Textile and others v. Federation of Pakistan and others, Messrs Quetta Textile Mills Limited through Chief Executive v. Province of Sindh through Secretary, Excise and Taxation, Sindh Secretariat, Kamal Attaturk Road, Karachi and another (2002 CLC 512), Messrs Inter-Ocean Cargo Services, Karachi v. Federation of Pakistan through Chairman, Central Board of Revenue, Islamabad and 2 others (1992 PTD 1411), Messrs Nasir Flour Mills (Pvt.) Ltd. Karachi v. The Federation of Pakistan through Chairman, Central Board of Revenue, Islamabad and 2 others (1994 PTD 1421), Messrs International Tea Traders, Karachi v. Chairman, Central Board of Revenue, Islamabad and another (1994 PTD 1422) and Dr. Mubashir Hassan and others v. Federation of Pakistan and others (PLD 2008 SC 80).

Mr. Mushtaq Hussain Qazi also appearing for some of the plaintiffs submits that through impugned amendment Super tax has been levied even in cases which are of final discharge of tax liability as provided under Section 169 of the Income Tax Ordinance, 2001. Counsels appearing for other plaintiff(s) have adopted the arguments of Dr. Farogh Naseem.

On the other hand, the learned Additional Attorney General submits that this Court vide order dated 19.1.2016 in the case of The Paracha Textile Mill Limited v. Federation of Pakistan (Suit No. 430/ 2016) has already dismissed the injunction application in respect of the same dispute and therefore, no exception may be taken while deciding the listed applications.

Mr. Muhammad Sarfaraz Ali Metlo Counsel for defendants submits that the plaintiffs have failed to make out any case including the three ingredients required for grant of permanent injunction i.e. prima facie case, balance of convenience and irreparable loss, whereas, loss if any, which can be compensated does not entitle a party, to an injunction. He further submits that if the plaintiffs are finally successful in their challenge, the amount of tax recovered can be adjusted or refunded. In support of his contention he has relied upon the case(s) Atco Lab (Pvt.) Limited v. Pfizer Limited and others (2002 CLC 120), Bolan Beverages (Pvt.) Limited v. Pepsicoinc and 4 others (2004 CLC 1530), Lotte Pakistan PTA Ltd. through Chief Financial Officer and Company Secretary v. Federation of Pakistan through Secretary Ministry of Finance, Islamabad and 4 others (2011 PTD 2229), Federation of Pakistan and others v. Mrs. Samra Shakeel and others (2001 PTD 3919) and Messrs Shahbaz Garments (Pvt.) Ltd. and others v. Pakistan through Secretary Ministry of Finance, Revenue Division, Islamabad and others (2013 PTD 969).

Mr. Ghulam Shoaib Counsel for one of the defendant submits that insofar as the question of final discharge of tax liability is concerned, the same is only to the extent that the advance tax paid would not be adjusted or refunded; however, this does not mean that no further tax can be levied on the tax payer.

I have heard all the learned Counsel and perused the record. Since I have already decided the injunction application in the case of The Paracha Textile Mill Limited (supra) vide order dated 19.1.2016 in respect of the same issue, therefore, I would not like to address the arguments so raised on behalf of the parties including the arguments on merits of the case as it may prejudice the final outcome of the proceedings. While refusing the injunctive relief in the aforesaid case I have observed as follows:--

"It is to be borne in mind that if a certain provision is introduced in the Ordinance or Law, through Finance Act and has become part of the Law/Ordinance, it remains a valid part of the Statute, unless otherwise, it is clearly demonstrated that it lacks Constitutional authority. It is a settled proposition of law that until and unless a Statute or a part of it, has been held or declared to be ultra-vires, the same remains operative for all intents and purposes. The present applications are to be decided keeping in view the three main ingredients for passing an injunctive order i.e. prima facie case, balance of convenience and irreparable loss. Insofar as the prima facie case is concerned the plaintiffs have been unable to make out any such case as it is merely a challenge to the Constitutionality of a law validly enacted by the Parliament. It may be that the Plaintiffs may have a better reading of the law, but that would not make out a prima facie case for them to seek indulgence against a validly enacted law which remains in operation and is applicable as of today. The grounds urged on behalf of the Plaintiffs with regard to the Unconstitutionality of the provision on the ground of mala fides and discrimination are mere assertions, whereas, they have failed to substantiate it prima facie with any material or cogent reasons. Similarly, the balance of convenience also does not lie in favour of the plaintiffs and in fact insofar as irreparable loss/injury is concerned, the same would be caused to the defendants instead of the plaintiffs as even if ultimately it is held by this Court that such levy of Super Tax is unconstitutional, the plaintiffs would be entitled for refund/adjustment. It is pertinent to observe that passing of any injunctive order in the nature of restraint and allowing the plaintiffs to file their Income Tax Returns without depositing Super Tax, when the same is being demanded on the basis of a provision which for the time being is validly existing, would cause irreparable loss to the exchequer, whereas, the contention that if successful, the plaintiffs would have to pass through the rigors of seeking refunds does not seems to be a valid contention, as if ultimately the plaintiffs are successful in their challenge, the tax so deposited would be subject to outcome of these proceedings finally. Hence no irreparable loss would be caused presently to the plaintiffs. It is also of utmost importance to note that what the plaintiffs are seeking through listed applications as an interim relief is in fact the final relief which they have sought through instant proceedings. Hence no such relief can be granted at this stage of the proceedings whereby the law itself could be suspended by this Court.

The Hon'ble Supreme Court of Pakistan in the case of Federation of Pakistan v. Aitzaz Ahsan and others reported as PLD 1989 SC 61, in somewhat similar situation has been pleased to observe that it is a well settled principle of law that unless a law is finally held to be ultra vires for any reason it should have its normal operation. Similarly the Hon'ble Supreme Court in C.P. No.1796 of 2013 has suspended the operation of an ad-interim order passed by a Division Bench of this Court in a matter, whereby, the provisions of Income Support Levy Act, 2013 had been challenged and by way of interim measures, the operation of the said law was suspended and the petitioners were allowed to file their Tax returns manually, however, the same was not approved by the Hon'ble Supreme Court."

In view of hereinabove facts and circumstances of the case I am not inclined to deviate from the findings earlier recorded by me and therefore, by means of a short order passed in the earlier part of the day, injunction application(s) in all the aforesaid Suits filed under Order XXXIX, Rules 1 and 2, C.P.C. were dismissed and above are the reasons for the short order.

Since the matter involves purely a legal question and would not require any evidence to be led by the parties and the Suits can be decided on the basis of legal issues as provided under Order XIV Rule (2), C.P.C., therefore, office is directed to fix the matter for settlement of issues on 3.2.2016, whereas, the parties are directed to file proposed legal issues, if any, in the meantime.

MH/Y-2/SindhApplications dismissed.