' AKHTAR HASSAN, J.-This Regular First Appeal is directed against a decree, dated 1st March, 1980 of Mr. Zulifqar All Khan, the then Senior Civil Judge, Mianwali, in a suit for recovery of Rs, 3,30,770 brought by the respondent Amir Abdullah Khan against the appellant Pak American Fertilizer Limited as arrears of tax imposed by respondent Zila Council on the export of fertilizers from the District.
2. The respondent/plaintiff's case was that the Zila Council imposed the impugned tax at the rate of Re.
0.25 per bag on the export of the fertilizers from the limits of the District Council vide Notification No, 3674, dated 27th November, 1976 ; that right of its collection was leased out to him; that it remained in force till 22nd June, 1977 when it was revoked by the Provincial Government ; that during this period, the appellant/defendant exported 3,007 Railway wagons each containing 440 bags without paying the tax and lastly that all his efforts to persuade them to pay it up proved futile and hence the present suit for its recovery. He impleaded the Zila Council, Mianwali, as proper party.
3. The appellant-Company contested the suit claiming itself to be a 100 % Government owned concern and as such not liable to tax without the approval of the Government; that it being only a manufacturer rather than "exporter" of the fertitizers was not liable to pay the tax; that the Zila Council was not competent to impose it as it was against the declared policy of the Central/Provincial Government ; that the suit did not lie in its present form ; that the amount claimed was incorrect inasmuch as the respondent/plaintiff had been recovering illegally from many dealers certain amounts which in any event had to be accounted for ; that the civil Court at Mianwali did not have jurisdiction to entertain the suit and that the plaintiff was estopped to bring it. It was further contended that the tax was imposed mala fide by the officials of the Zila Council acting in concert with the plaintiff/respondent without observing certain procedural formalities for which reason it was subsequently withdrawn by the Provincial Government.
4. In replication, the respondent/plaintiff reiterated his assertions and denied having recovered the tax from any dealer. On these pleadings, the trial Court framed elaborate issues and found them all against the appellant-Company. The amount recoverable, however, was held to be Rs, 3,25,270 and was decreed not only with costs but also interest at the rate of 10 % per annum from the date of the institution of suit viz. 15th April, 1978.
5. Counsel was bitter about the manner of trial pointing out firstly, that while the respondent had been given four opportunities to produce evidence, the appellant-Company was instead allowed only two adjournments and that too within the span of the same week i. e. From 23rd January, 1979 to 31st January, 1979 and all requests to allow time to produce its evidence particularly of the official nature lying with the Central Government at Islamabad, were turned down. Secondly, he submitted that the order, dated 31st January, 1979 by which the appellant's case was closed squarely fell under Order XVII, rule 3, C. P. C. But then the judgment was not announced "forthwith" as was contemplate and that though the hearing was further adjourned yet he was disallowed to avail the opportunity. Thirdly, he canvassed that awarding interest at the rate of 10 % on such a heavy amount was uncalled for inasmuch as even the respondent/plaintiff had not prayed for it in his plaint. He stressed that these were the instances which indeed by their lopsided nature vitiated the very trial as it did not proceed on fair and equitable basis.
6. Next, the most crucial plea raised was that the appellant was only a manufacturer of the fertilizers and not the "exporter", who in this case was the National Fertilizer Marketing Ltd., an independent entity, and the liability if at all to pay the tax rested in it. It was claimed that this was the reason why the said Company ventured to ask for joinder as necessary party but the lower Court would not accept it. Attention was adverted to the notification itself as published in the Punjab Gazette, dated 27th November, 1976, which, according to him, imposed the tax on the person who exported the fertilizers from the District, and such person being the National Fertilizer Marketing Ltd., the liability shifted on it. Lastly, he contended that since the amount was recoverable as arrears of land-revenue, section 172 (2), clause (xv) of the Land Revenue Act, 1967, barred a civil suit for its recovery.
7. All the above points were seriously challenged by Rana Muhammad Sarwar, counsel for the respondent/plaintiff. He submitted that since the appellant was maintaining a railway siding in the premises of the factory wherefrom wagons were dispatched to outside places, it acted as an exporter and hence in the terms of the notification, the liability to pay the tax rested on it. He referred to some evidence whereby it was disclosed that the appellant had been paying such tax even on gypsum with which it also dealt, and therefore, it was idle on its part to dissociate itself from payment of tax on a sister-product like the fertilizers. He urged that the so-called exporter, namely, the National Fertilizer Marketing Ltd., was only a subsidiary Company of the appellant, and, therefore, in the eye of law, both were one and the same juristic person liable to discharge the obligation. He described the attempt of the latter Company for implement to be odd inasmuch as the relevant application was made at a very late stage of the proceedings and that the same had been rightly spurned. He maintained that the suit was quite competent because it proceeded on contractual relationship with the respondent. Zila Council, to whom the amount had already been paid by the plaintiff/respondent, and that, therefore, in equity he was entitled to be reimbursed.
8. There is room to agree to the contention that compelling the appellant to produce all its evidence within the next week after the close of the respondent's case, was inequitable, particularly when the latter had been given considerable adjournments. Likewise, awarding interest, without a prayer for it, was unusual. However, to insist for a decision "forthwith" after foreclosing the appellant's right to produce evidence, was not required. Maulvi Abdul Aziz Khan v. Mst. Shah Jehan Begum and 2 others (1) settled it down. Nevertheless, the appellant may
(1) PLD 1971 SC 434 ' well have been allowed to avail the adjournment when it appeared' unavoidable. The order of the lower Court in this behalf was indeed) unnecessarily stringent and lopsided.
9. The basic question, however, related to the liability to pay the tax. The notification evidently imposed it on the person who exported it from the District. D. Ws. 1 and 2 clearly stated that the appellant only manufactured it while its sales were conducted by M/s. National Fertilizer Marketing Ltd., which was an independent corporate body. This aspect could not be disproved. Merely because the appellant was maintaining a railway siding for carriage of fertilizers or that it was paying export tax on gypsum did not necessarily lead to the conclusion that it was also exporting fertilizers. As already mentioned, the case of the appellant at the trial was that it was not exporting any fertilizers. The respondent/plaintiff was fully aware of the stand taken by the appellant. This will so appear from the application which the appellant had made for the amendment of its written statement. Yet the respondent-plaintiff led no evidence to refute the stand taken by the appellant.
The railway goods clerk (P. W. 2) examined by him had no personal knowlege as to who had exported the fertilizers. Similarly his record was completely silent on the) point. The mere fact that there was a railway siding inside the premises of the factory of the appellant would not mean that it was the appellant who was exporting the fertilizers ; the siding could very well have been intended for the use of the buyers of fertilizers. It is to be noticed that we are dealing with a taxing statute and before the appellant could be burdened with liability created by the statute it was necessary for the respondent/plaintiff to firmly establish that the appellant was the actual exporter of fertilizers. In our view he has been remiss in this regard.
10. On behalf of the respondent/plaintiff it was contended before us that the National Fertilizer Marketing Limited which claimed to be the exporter of fertilizers was merely an agent of the appellant. We find little evidence in support of this contention. It may be mentioned that during the course of trial, the respondent/plaintiff had moved an application praying that the appellant be asked to produce certain record mainly relating to the export of fertilizers. In its reply the appellant indicated the record which was available with it and also mentioned the places from where the remaining record could be found. The trial Court permitted the respondent/plaintiff to summon the record. However, the respondent/plaintiff did not avail of this opportunity. In the circumstances, the failure of the respondent/plaintiff to produce the relevant record in support of his plea of agency furnishes a basis for drawing an inference that if the record had been produced before the trial Court, it would not have supported his case.
11. No doubt, both the appellant-Company as well as the National Fertilizer Marketing Limited are entirely owned by the Central Government, but that would not make them so indistinguishable from each other that the liability of one could be treated as liability of the other. Admittedly both were separately incorporated and the mere fact that shareholders of the one were also the shareholders of the other, did not suffice to treat them as one person. Reliance was placed on Re : Ebbw Vale U. D. C. v. South Wales Traffic Area Licensing Authority (1) which laid down the rule :- "...That a subsidiary company is not the agent of the parent com pany, but is an entirely separate entity. Its acts are not the acts of the parent company, and the parent company is not responsible for its acts or defaults...".
' Similar was the view adopted in Salomon v. Salomon & Co. Ld. (2). The contention had no force absolutely. If the notification imposed tax on the "person who exports" fertilizers from the District, it was not at least the present appellant whose, activities extended only to the production rather than the marketing of the stuff. The lower Court did not address itself to this aspect. And failed to draw distinction between "production" and "export" of the item. The two obviously cannot be synonymous, and for that reason the former is not, covered by the mischief of the notification. It is after all a taxing instrument and has had to be strictly construed. It surely did not mean to tax the production. Consequently, the appellant could not be subjected to its incidence. The finding of the lower Court on the point is reversed.
12. Learned counsel referred to a number of legislations to spell out that mechanism of the price structure of the fertilizers was such as did not permit local taxation. The argument may Not be examined in detail as the suit seems to fail on the above-mentioned ground. The objection that the suit was not maintainable as the amount was recoverable as 'land revenue" also did not much there, as section 172 (2) (xv) of the Land Revenue Act, 1967, barred a civil suit only where the claim was "connected with, or arising out of, the collection by Government". The present tax undeniably was imposed by a local body which was not the same as the Government and hence the objection had no force.
10. The appeal is accepted, the decree of the lower Court is set aside and the suit is dismissed leaving the parties to bear their own costs throughout.
(1) (1951) 2 K B 366 (2) 1897 A C 22