BOARD OF TRUSTEES VS MUHAMMAD IQBAL, 2018 PTD-KARACHI-HIGH-COURT-SINDH 712 (2017)

Sales Tax Act (VII of 1990)---

----S. 3---Suit for recovery of money---Refund of sales tax---Admission---Suit filed by plaintiff for recovery of money against Karachi Port Trust was decreed along with markup---Validity---Incident of taxation and liability/charging was provided in S.3 of Sales Tax Act, 1990---Liability was put under S.3(3) of Sales Tax Act, 1990 on person making supply---Rail tracks which were to be removed by plaintiff were being supplied by Karachi Port Trust---Burden to pay sales tax was upon Karachi Port Trust since it had been making supply of rail tracks to plaintiff---Karachi Port Trust had admitted refund therefore, findings of Judge in Chambers of High Court were not against facts, law and documents on record---Similar question had already been decided in a Constitutional petition---High Court declined to interfere in the judgment and decree passed by Judge in Chambers of High Court as there was no perversity, illegality and incorrectness in same---Appeal was dismissed in circumstances.

Karachi Gas Co. Ltd. v. Dawood Cotton Mills Ltd. PLD 1975 SC 193 and Messrs Superior Textile Mills Ltd. v. Federation of Pakistan and others 2000 PTD 399 ref.

Jawaid Farooqui for Appellant.

Ishtiaq A. Memon for Respondent.

Date of hearing: 16th March, 2017.

JUDGMENT

ABDUL MAALIK GADDI, J.---Being aggrieved and dissatisfied with the judgment dated 21.04.2010 and decree prepared on 17.05.2010 passed by the learned Single Judge of this court in Civil Suit No.1451 of 2001, whereby the suit filed by the respondent for recovery of Rs.49,24,029.16/- against the appellant has been decreed in the sum of Rs.4,062,322.05/- along with markup at the rate of 10% per annum. The appellant has preferred the instant High Court Appeal with the prayer to set-aside the impugned judgment and decree and allow the appeal with costs.

2.Briefly the facts of the instant case as stated in the appeal are that the respondent filed a Civil Suit bearing No.1451 of 2001 for recovery of Rs.49,24,029.16/- against the appellant. It is averred in the plaint that in lieu of Tender Notice dated 29.11.1999 issued by the appellant for removal of rail tracks from T.P.X., the respondent had submitted his bid on 22.12.1999 for subject matter, which was accepted by the appellant on 17.04.2000 and formal agreement was executed in between them on 03.05.2000. Thereafter, work order was issued to the respondent and subject work was commenced on 22.05.2000. It is also averred in the plaint that for the first time, the dispute with regard to deposit of sales and income tax was arose when letter dated 31.05.2000 issued by the appellant for payment of sales tax and the respondent replied the same vide letter dated 07.06.2000. The legal notice was also sent by the respondent to the appellant on 29.09.2000 by stating that under the law they were not under obligation to pay sales tax nor the terms of the contract provided for payment of sales tax and according to legal notice, the payment of sales tax was the duty of the appellant. However, it appears from the record that in order to avoid blacklisting, the required sales tax was deposited by the respondent under protest and on this background, the respondent filed aforesaid civil suit, which was decreed.

3.The appellant filed its written statement and specifically denied the case and claim of the respondent. It was alleged by the appellant in the written statement that liability to pay sales tax is always upon the purchaser and in this case the respondent is liable to pay the sales tax and under the contract, the respondent has undertaken to keep the appellant indemnified from all the liabilities. The respondent was well aware that the payment of sales tax is his liability. In this regard, the respondent himself had sent a letter to the sales tax department asking whether he was liable for payment of sales tax. The sale tax department informed him through letter dated 28.11.2000 that sales of dismantled track is a taxable supply and is chargeable to sales tax. Therefore, under this scenario of the case, the appellant has prayed in the written statement for dismissal of the suit filed by the respondent.

4.From the pleadings of the parties, the learned Single Judge has framed the following issues:--

i. Whether the suit is not maintainable?

ii. Was the plaintiff liable to pay income tax and/or sales tax under the agreement dated 03.05.2000?

iii. Is the plaintiff entitled to refund of income tax and/or sales tax with markup or otherwise? If yes, to what amount?

iv. Whether the plaintiff has not indemnified the defendant as per Condition No.21 of the Conditions of Contract between them against all penalties and liabilities of every kind for breach of any Statute, Law, Regulation or Bye-Law?

5.It reveals from the record that learned Single Judge vide his order dated 19.12.2002, by consent of the parties had treated the suit as short cause matter as the case and claim of the parties was based on documents exchanged between them and its admission and denial took place, therefore, parties have not led any evidence and directly argued the matter on the basis of the documents on record. However, the learned Single Judge after hearing them decreed the suit of the respondent, which is impugned before this court.

6.It is contended by learned counsel for the appellant that the impugned judgment and decree passed by the learned Single Judge of this Court is against law and facts. Per learned counsel, this High Court appeal has been filed by the appellant against the judgment and decree, wherein learned Single Judge held that the contract price was inclusive of the sales tax liability and the sales tax liability cannot be charged over and above the contract price and directed the present appellant to refund the amount of Rs.4,062,322.5/- back to the respondent/plaintiff to refund along with markup at the rate of 10% per annum to be calculated till the date the amount is recovered. The learned counsel further submits that the liability of sales tax, unless otherwise mentioned in the contract, has to be charged on all sales made to any party unless the same is entitled to zero rating or there is any other exemption and only if it is specifically mentioned in the contract that the liability of the sales tax shall be borne by the seller, then the sales tax could not be charged from the purchaser and in this case no such clause is available in the contract and the tender document and, therefore, the learned Single Judge erred in holding that the amount of sales tax charged has to be refunded. Per learned counsel, the learned Single Judge failed to consider clause 21 of general conditions of contract for which all the liabilities are to be borne by the respondent and under the Sales Tax Act, 1990, the respondent is liable for payment of tax purchased from the appellant. In the last, he has prayed that respondent has no case on merits, therefore, the impugned judgment and decree in the suit passed by the learned Single Judge is liable to be set-aside and allow the appeal filed by the appellant by dismissing the suit filed by the respondent.

7.Conversely, learned counsel for the respondent has supported the impugned judgment and decree by arguing that the impugned judgment and decree has been passed by the learned Single Judge after due appreciation of pleadings of the parties and documents on record. During the course of arguments, learned counsel for the respondent has placed his much emphasizes upon Instruction No.2 of Instructions for tender, which reads as follows:-

"2. The rates and price set down by the Tenderer against the items in the bill of quantities are to be the full inclusive value of the finished work described thereunder and shall cover profit and all obligations of every kind which under the contract are to be borne by the contractor."

Mr. Ishtiaq A. Memon, Advocate argued that in terms of the above quoted instructions, the contract price was inclusive of entire obligation which the respondent was required to pay for dismantled material and, therefore, nothing was to be demanded by the appellant from the respondent. The liability of sales tax was to be deducted by the appellant from the contract price already settled between the parties and deposited with the sales tax authorities. No additional amount was to be claimed from respondent. In support of his contention, he also relied upon section 3(3)(a) of the Sales Tax Act, 1990, which provides that "the liability to pay the tax shall be in the case of supply of goods of the person making the supply." Lastly, he has prayed for dismissal of instant appeal while relying upon the case of Karachi Gas Co. Ltd. v. Dawood Cotton Mills Ltd. reported as PLD 1975 SC 193, Messrs Superior Textile Mills Ltd. v. Federation of Pakistan and others reported as 2000 PTD 399 and Statement dated 05.11.2014.

8.We have given our anxious thoughts to the contentions raised at the bar and have gone through the pleadings of the parties and documents on record.

9.It appears from the record that instructions on tender in clause-2 had clearly instructed to write full inclusive value against the items. It also appears that the respondent acting upon such instructions, submitted the bid by including every rate/charges against the item. In this respect, instructions are available on pages 52 to 54 of the paper book. The respondent was specifically asked to put rate against the work description. Normally, if other party to contract intends to have the sales tax and income tax calculated separately, then a separate column is given for such calculation. In the instant case, clear instructions were given to right full inclusive, which was so done by the respondent. The value of bid against work description including all taxes or incidental rates. The respondent cannot be burdened to pay additional amount, against the clear instructions given in the tender document.

10.The incident of taxation and the liability/charging section of the Sales Tax Act, 1990 is provided in section 3. The subsection (3) clearly and unambiguously puts a liability on the person making the supply. In the instant case, the rail tracks which were to be removed by the respondent contractor, were being supplied by the appellant. On simple application of charging Section, the burden to pay sales tax is clearly upon the appellant since it is making supply of the rails tracks to the contractor. Moreover, the additional presence of subsection (3A) requires the presence of gazette notification in case the Federal Government intends to shift the liability to pay tax on the person receiving the supply. In the instant appeal, the appellant has failed to produce or point to any such notification which would shift the burden to pay sales tax on the person receiving the supply. We have gone through the case diary dated 07.08.2007 of suit file and statement dated 06.11.2014 along with annexures Q-1 and Q-2 available in the appeal file, wherein the admission of refund in paragraph No.16 of the letter dated 27.02.2004 and liability therein was conceded. During the course the arguments, we have specifically asked the question to the learned counsel for the appellant/KPT that in paragraph No.16 of the letter dated 27.02.2004, the admission of refund was admitted by the appellant, how the findings of learned Single Judge are against facts, law and documents on record, he did not reply satisfactory. When we confronted the order dated 21.10.2008 passed by this court in C.P. No.D-186 of 2007 in which almost identical question was raised and decided in terms of payment of sales tax liability, he has no answer with him.

11.In view of the above facts and circumstances of the case, no perversity, illegality and incorrectness have been found in the impugned order. Learned Single Judge while passing the impugned order has appreciated all the facts and documents involved in the case. No illegality has been pointed out. We, therefore, under the facts and circumstances of the case, could not find any merits in this appeal, which is dismissed with no order as to cost.

MH/B-1/Sindh Appeal dismissed.