JUDGMENT: ABDUL RAHIM KAZI, J.--1. By this petition the action of the respondents for the assessment and the recovery of income tax and sales-tax pertaining to the years 1965/66 and 1965/66-1966/1967 respectively, has been challenged. The facts of the case are that in the year 1955, Government of Pakistan accorded permission to one Mir Ghulam Ali Talpur (since deceased to set up a cotton textile mills at Tando Mohammad Khan with the capacity of twenty-five thousand spindles and five hundred looms and that pursuant of said permission ten thousand spindles were imported.
However, as the grantee was unable to complete the project, he requested the assistance of Pakistan Industrial Development Corporation, the predecessor in interest of petitioner, who agreed to render the assistance through participation in the said venture by Muslin Cotton Mills Limited Dacca of which the PIDC were the managing agents. Accordingly, the promotor's agreement was executed between the parties on 17th April 1958, which provided for formation of a public company with paid up capital of Rs, 50,00,000/- and it also provided that the said Muslin Cotton Mills Limited will be the managing agents. The contemplated public limited company was never formed but the construction of the mills was however completed by PIDC which mill is referred to as Talpur Textile Mills. Subsequently that Central Government decided upon a policy of dis-investment by PIDC from its various ventures and thus it was decided to transfer the management of the mills to a private party for which the Fateh Textile Mills Limited made an offer which was accepted and accordingly the promotor's agreement was drafted on 12th May, 1961. By this agreement, it was contemplated that PIDC and Fateh Textile Mills Limited would with convenient speed cause to be incorporated a public limited company under the name of Fateh Textile Mills (subsidiary) limited or such other title as may be agreed upon and that 51% of the shares would be issued to Fateh Textile Mills Limited, while 49% of the shares will be retained by the PIDC and that Fateh Textile Mills were to act as managing agents of the new company for a period of 20 years. The possession and the management was taken over by Fateh Textile Mills on 1st July, 1961, but they did not incorporate the proposed public limited company. It is further contended that Fateh Textile Mills Limited were in sole possession of the said Mills and continued to run it for their exclusive use and benefit and retained the profits exclusively and the PIDC was not even informed regarding the purchase of raw material and sale of finished goods. Accordingly, the present petitioner which is the successor in interest of PIDC, filed the Suit No, 16/1963 in the then High Court of West Pakistan Karachi Bench claiming a decree for possession of said Mills, rendition of accounts and payment of various sums.
This suit alongwith Suit No, 115/1964 which was filed by Fateh Textile Mills against the petitioner alleging the breach of contract was disposed of by means of a judgment dated 6th May, 1968, whereby, the possession of the said Mills was directed to be handed over to the petitioner forthwith and the Fateh Textile Mills were directed to render accounts for the period during which the Mills remained in their possession and a Commissioner was appointed for taking accounts etc. It is further contended that in consequence of the said judgment the possession was taken over by the petitioner on 23rd October, 1968 and that the petitioner could not be held responsible for any liabilities etc.incurred during the period the Mills was in possession and management of the Fateh Textile Mills. The petitioner further contends that the Income-tax Officer and Sales Tax Officer issued notices to the petitioner in relation to the above years during which the Mills was under the possession and management of Fateh Textile Mills for recovery of income-tax and sales tax treating the Talpur Textile Mills as Assessee. The assessment was completed under Sections 23(4) and 10(4) of the Income-tax Act and Sales Tax Act respectively for the assessment years 1965/1966 and 1965/66-1966/1967 respectively. It is these assessments and the recovery thereof which has been challenged in the present petition.
2. At the very out-set Mr. Khalid Anwar, learned counsel for the petitioner stated that he would he challenging only the assessm ent and recovery of sales-tax pertaining to the above two years, i,e, 1965/66 and 1966/67.
3. We have heard the learned counsel for the parties. Mr. Khalid Anwar, learned counsel for the petitioner, while arguing the case for the petitioner, has stated that the main point for consideration in this petition will be whether WPIDC or Fateh Textile Mills are liable to pay the sales tax. He has referred us to the above mentioned two suits by parties, the judgment is reported in PLD 1968 Karachi 812. He has drawn our attention to paragraphs 2 and 5 of the judgment in order to advance the facts of the case and also paragraphs 32 and 33 to show that the suit of the petitioner was decreed and possession was ordered to be handed over to the petitioner with the consequential relief of rendition of accounts etc., for which purpose a Commissioner was also appointed. He has mainly urged the three points on which he challenges the impugned assessm ent and action for recovery. The first contention raised by the learned counsel is that the impugned order shows the name of the Assessee as "Talpur Textile Mills, Tando Mohammad Khan" which does not exist. As far as this plea is concerned, it may be pointed out that the facts as given in the petition themselves go to show that the said Mill was known as Talpur Textile Mills and the entire transaction etc. by the parties were in that name. We, therefore, do not agree with the said contention of the learned counsel.
4. The other two points taken by the learned counsel for the petitioner are that the impugned order shows that the returns were filed by Fateh Textile Mills and the licence was also taken out by them, therefore, they are estopped from denying their liability and that assessment order should have been against the Fateh Textile Mills and not the petitioner. In support of his contention, he has drawn our attention to the following provisions of the Sales Tax Act, as the same were applicable at the relevant time.
"3. Charge of Tax.-- (1) There shall be levied and collected a tax on the value of-- (a)all goods produced or manufactured in Pakistan payable by the manufacturer or producer;
(aa) all goods made wholly or partly of gold or silver sold in Pakistan, payable by the seller being a manufacturer of, or a person engaged in the business of purchasing and selling, such goods; (b)all goods imported into Pakistan, payable by the importer; (c)all goods sold by a licensed whole-saler, payable by the licensed wholesaler; (d)such goods or classes of goods as the Board may, by notification in the official Gazette, specify in this behalf which are exported from Pakistan payable by the exporter; (e)such goods or classes of goods purchased without payment of sales-tax by a licensed manufacturer or producer of taxable goods as are not used in the manufacture or production of taxable goods, payable by such manufacturer or producer."
"10. Assessm ent.--(1) Every manufacturer or producer and every licensed wholesaler and every exporter shall, within thirty days of the end of the quarter, send to the Sales Tax Officer a return in the prescribed form and in the prescribed manner relating to the sales made in each quarter.
(2)If the Sales Tax Officer is satisfied that the return sent under sub-section (1) is correct and complete, he shall make an assessment on the basis thereof and determine the amount of tax payable after giving credit for the tax paid in pursuance of the provisions of sub-section (1) of Section 12.
(3)If the Sales Tax Officer is not so satisfied, he may, after calling for such further particulars and such books of account and documents as he may require, determine the tax payable.
(4)If the return under sub-section (1) has not been sent or the books of account or documents called for under subsection (3) have not been produced, the Sales Tax Officer shall make an assessm ent to the best of his judgment after giving the assessee an opportunity of being heard."
He has argued that as provided in Section 3(1)(a) the liability to pay the sales tax is that of the manufacturer or producer and not the owner. He has argued that since the management and control was taken over by Fateh Textile Mills under a promoters agreement and it was Fateh Textile Mills who used to purchase the raw material and sell the finished goods without intimating the petitioner and also that the Mills was being used by Fateh Textile Mills for their own purpose and that they used to appropriate profit thereof exclusively, the petitioner had no concern whatsoever with the Mills during this period. In these circumstances the liability for sales-tax would fall upon Fateh Textile Mills and not the petitioner. He has further argued that even the impugned order shows that the returns were submitted by Fateh Textile Mills. He has further argued that second promoter's agreement between the petitioner and Fateh Textile Mills shows that Fateh Textile Mills was to have majority shares in the public limited company to be floated i,e, 51% shares, therefore, also the assessm ent should have been made in the name of Fateh Textile Mills and the petitioner would not be liable for the said tax. He has also referred to paragraphs 9 and 10 of the counter- affidavit, filed by Mr. Abdul Ghafoor Junejo, the Income Tax Officer, which reads as under:-- "9.--That as regards para 14 it is not denied that Income-tax and Sales Returns were filed by Fateh Textile Mills and rest is denied for want of knowledge.
10. That as regards para 15, it is submitted that assessment of Talpur Textile Mills in which the Petitioner held 49% shares and Fateh Textile Mills held 51% were finalised in the status of A.O.P. and issuance and services of notices on any member of the A.O.P. was not wrong or illegal. Such notices were also issued and served on Fateh Textile Mills but books of accounts of Talpur Textile Mills were not produced before the Assessing Officer and therefore ex parte assessment had to be made under Section 23(4) of the Income Tax Act."
It would be advantageous to reproduce also the paragraph 14 of the same affidavit, which reads as under:-- "14.- That as regards para 19, the contentions that since Returns has been filed by Fatch Textile Mills who were allegedly controlling the Mill during the relevant years and for the said reason the petitioner was not responsible for the tax liability pertaining to the said years, is denied. It is submitted that the Department is legally entitled to recover income tax and sales tax dues from every member of A.O.P. who are jointly and severally responsible for the payment of tax liabilities and thus recovery proceedings were correctly started."
5. Mr. Shaikh Haider, learned counsel appearing for the Department, repelling the above arguments of the learned counsel for the petitioner, has submitted that in the first instance the assessment proceedings are not challenged in the present petition but it is the action of the recovery which has been challenged, therefore, the petitioner's submission on the point of assessment cannot be taken into consideration. He has further contended that in the books the Mills is known and entered as "Talpur Textile Mills" and the notice is also served in the name of the said Mills. He has further contended that the ownership of the said Mills had transferred from Mir Ghulam Ali Talpur to PIDC on 5th November, 1961 when the PIDC had agreed to take-over. In support of his contention, he has referred us to PLD 1968 Karachi 812, observation at page 815 (the judgment in above said suits of the WPIDC against Fateh Textile Mills). Mr. Shaikh Haider has further argued that the possession was given to Fateh Textile Mills by PIDC in 1961 and that ever since then Fateh Textile Mills had acted as agent of PIDC, while the ownership remained with PIDC who had admittedly re-taken the possession in the year 1968 under above said judgment of this Court, and, therefore, the liability for payment of sales tax lies upon the petitioner. He has referred to Section 31 of the Sales Tax Act, which reads as under:-- "31. Transfer of ownership.--When the ownership of the business of a licensed manufacturer or a licensed wholesaler is transferred any tax payable in respect of such business remaining unpaid at the time of the transfer shall be payable by the transferee as if he were the licensed manufacturer or licensed wholesaler."
6. Mr. K.A. Wahab, learned counsel for respondent No, 5 (Fateh Textile Mills) has argued that Fateh Textile Mills was running the business on behalf of the PIDC as their agents and not on their own behalf. He has referred us to paragraph 24 of the above said judgment (PLD 1968 Karachi 812) in which it has been observed that the possession of the said Mills was handed over to Fateh Textile Mills w,e,f, 1st July, 1961 to manage the business and affairs of the Mills on behalf of PIDC and that during the period under dispute the respondent 5 was only acting as an agent of the petitioner. He has also referred us to the definition of "manufacturer or producer" as defined in Section 2(11) of the Sales Tax Act, which reads as under: "2(11).--"manufacturer or producer" means a person who engages whether exclusively or not in the production or manufacture of goods, and includes a printer, publisher, lithographer or engraver, or a person engaged in the ginning of cotton and also any person (not being an employee) who manufactures goods whether or not the materials of which the goods are manufactured are owned by him: Provided that where one person other than a person engaged in the ginning of cotton manufactures goods for another, wholly or in part out of materials supplied by that other, and the goods are not for the use of, but are for sale by that other, the person supplying the materials shall be deemed to be the manufacturer, and the person who so manufactures the goods shall be deemed not to be the manufacturer.
The expression also includes:--
(i) the assignee trustee in bankruptcy, liquidator, executor, or curator, of any manufacturer or producer and generally, any person who continues the business of a manufacturer or producer or disposes of his assets in any fiduciary capacity.
(ii) any person, firm or company which owns, holds, claims, or uses any patent, proprietary, sales, or other right to goods being manufactured, whether by them, in their name, or for or on their behalf by others, whether such person, firm or company sells, distributes, consigns, or otherwise disposes of the goods or not."
7. Considering the above arguments of the learned counsel, we are of the view that the respondent 5 had taken over the management of the said Talpur Textile Mills under the promotor's agreement in 1961 on behalf of the petitioner as their agent, which possession was re-taken by the petitioner in the year 1968. We are, therefore, of the view that the petitioner is liable to the payment of the Sales Tax. The liability of respondent 5, if any, will be that of an agent.
8. The learned counsel for the petitioner had then taken the plea that the impugned order has been passed under Section 10(4) of the Sales Tax Act, which could not have been passed in view of the fact that the returns have been filed by Fateh Textile Mills. His case is that sub-section (4) of Section 10 will be applicable only in case the returns are not filed, it may, be pointed out here that sub- section (4) of Section 10 had, originally provided that if no returns have been sent, then the Sales Tax Officer had the powers to make assessment to the best of his judgment .This provision was subsequently amended by Finance Act, 1966 to its present position as stated above. It will suffice to say that the impugned order shows that though the returns were sent but the same were not accompanied by statement of accounts whatsoever in spite of repeated notices which were sent and the other reason shown in the impugned order is that even in previous years the assessment was made under Section 10(4) of the Sales Tax Act. We, therefore, hold that in the circumstances the Sales Tax Officer had the power to make assessment to the best of his judgment under Section 10(4) of the Sales Tax Act.
9. Lastly, Mr. Shaikh Haider, learned counsel for the Department has argued that the law provides that there are other remedies available to the petitioner and, therefore, the present petition would not be maintainable. He has drawn our attention to Section 14 (a) of the Sales Tax Act which makes the provision for appeals. As far as this provision is concerned, it may be pertinent to point out that this provision was introduced in the year 1969 under the Finance Ordinance, while the impugned order was passed on 30th June, 1971. As such, this remedy can be availed of by the petitioner. Mr. Shaikh Haider has further referred us to Rules 74 and 75 of the Sales Tax Rules, which provide the remedy for remission. He has also drawn our attention to Rule 41, wherein, it has been provided that in case of change of ownership, the new and old owners are responsible jointly and severally. In support of his contention, he has relied on the case of Messrs Bashir & Co. Lakkar Mandi, Jhang Road, Lyallpur vs. The Income Tax Officer, B-Ward, Lyallpur and another (1968 SCMR 997). He has also stated that the petitioner has already applied for remission and that their case has not yet been decided. As against this, Mr. Khalid Anwar, learned counsel for the petitioner, has referred to the case of Utility Stores Corporation of Pakistan Limited v. Punjab Labour Appellate Tribunal and others (PLD 1987 SC 447) and has contended that the jurisdiction invested in a Tribunal to decide a particular matter means that the Tribunal has to decide it rightly and not wrongly. His contention is that if the Tribunal makes error of law in deciding matter before it, it goes outside its jurisdiction and therefore, this court has the jurisdiction to interfere in the matter. Be as it may, it is not denied that the case of remission of the petitioner is pending with the competent authority and decision has not yet been given. In these circumstances, it cannot be said that the authority will not decide according to law and this petition thus would be premature.
10. The up-shot of the above discussion is that this petition is dismissed. However, there shall be no order as to costs.