MAULVI ANWAR-UL-HAQ, J.- Vide an agreement dated 30.6.1999, the petitioner's Company purchased the assets of respondent No. 4 Company. Both the petitioner as well as respondent No. 4 are Public Limited Companies registered in accordance with law. The circumstances in which the said assets came to be purchased by the petitioner are also narrated in the said agreement (Annex- C). The petitioner feels aggrieved of a letter dated 6.1.2001, whereby respondent No. 2 requested respondent No. 3 to deduct a sum of s. 12,272,474/- found to be due against respondent No. 4 from the Sales Tax refund due to the petitioner's Company. According to the writ petition both the Companies are separate legal entities and the liability of one cannot be recovered from the other.
2. Report and comments were called for. In the comments, it has been insisted that the petitioner's Company also acquired liability of respondent No. 4 including the amount in question.
3. The learned counsel for the petitioner contends that both the Companies i.e. Petitioner and respondent No. 4 being independent legal persons, impugned letter (Annex-D) is illegal and void.
Refers to the said letter to state that respondents Nos. 1 to 3 had wrongly assumed that the name of the petitioner's Company i.e. Irfan Textiles is the new name of respondent's No. 4 Company i.e. Hayat Textiles? Further contends that the respondent No. 4 contested the matter of the said dues before the Collector of Customs who passed the order in original (Annex-H) against the respondent No. 4 and the matter is pending before the Customs, Excise and Sales Tax Appellate Tribunal vide an appeal (Annex-I). Refers to the conditions of agreement (Annex-C), to state that only liabilities to the extent of Bank dues were taken over and no other liability was taken over. Mr. Jawahar A. Naqvi, learned Legal Advisor for the Department, on the other hand, contends that it was represented by respondent No. 4 in the agreement that the assets are free from encumbrance. The contention of the learned counsel is that since under Section 49 of the Sales Tax Act, 1990, the chargeable sales tax is to be paid by the vendee/transferee of taxable activity, by virtue of Section 202 of the Customs Act, 1969 the Customs Department can call upon the Sales Tax Department to make a deduction of the Customs duties payable by respondent No. 4 from the amount due to the petitioner's Company.
4. I have gone through the several documents placed on record by the parties, with the assistance of the learned counsel for the parties. There is no denial of the fact that the petitioner is an independently registered Public Limited Company and so is the case with respondent No. 4. There is no apparent nexus, even the Board of Directors is different. The agreement dated 30.6.1989 (Annex-C) narrates that respondent No. 4 has obtained loan from the National Bank of Pakistan against its fixed assets as also personal assets and personal guarantees of its Directors and the assets have been agreed to be sold to the petitioner and whereas the Board of Directors of both the said Companies have authorised sale and purchase, the assets are being sold and purchased.
Condition No. 1 (ii) of the said agreement clearly narrates that the said buyer i.e. The petitioner has agreed to take over the liability of the Bank to the extent of Rupees 93.486 millions. Condition No. 1
(iv) then narrates that the liability has been taken over only to the said extent with regard to Bank and no further liability whether related to the Bank or any other party, Govt. Department or Director of Company shall be taken over nor any other consideration whether in cash or in any other form shall be paid by the buyer, It is true that a representation has been made in Condition No. IV(iii) that the assets with the exception of the Bank are free from any other charge claim or commitment but it is also evident on the face of this document that the representation has not been acted upon and the petitioner had made it clear in the agreement itself that no other liability except that of the Bank is being taken over.
5. The argument of Mr Jawahar A. Naqvi, Advocate based on Section 49 of the Sales Tax Act, 1990 does support his case but the admitted position is that it is not the Sales Tax but Customs duty which is being sought to be recovered from the petitioner when admittedly it is not due from the petitioner to the respondent Department and is, in fact, due from respondent No. 4 Company.
Similarly to my mind Section 202 of the Customs Act, 1969 has no nexus with the said Section 49 of the Sales Tax Act, 1990. On the other hand, this Section rather supports the contention of Syed Mansoor Ali Shah, learned counsel for the petitioner inasmuch as it provides the manner in which the Customs Duty or any other dues are to be recovered from a person from whom. It is due.
According to the Section 202(1 )(a) of the Customs Act, 1969, the appropriate officer may deduct or require any other officer of, inter alia, Sales Tax to deduct such due amount from any money owed to such person which may be in the control of the Sales Tax authorities. Now the said Section does not at all authorise the Customs Department to call upon the Sales Tax authorities to deduct the amount of customs duty due from respondent No. 4 from the money, the said Department owes to the petitioner's company. All other process in default are to proceed against the defaulter i.e. The person owing money to the Customs Department.
6. For all that has been discussed above, in the said admitted factual background, I do find that the amount due to the Customs Department from respondent No. 4 cannot be ordered to be deducted from the amount due to the petitioner's . Company from the Sales Tax Department/authorities. This writ petition accordingly is allowed and the said letter dated 6.1.2001 of Customs (Recovery Officer)
C.S.F., Lahore to the Collector of the Sales Tax Department, Lahore (Annex-D) is declared to be without lawful authority and as such void.
7. No order as to the costs.