2021 PLP 629 (CLD)

AGHA FAISAL, J.

The petitioners are cellular companies operating in Pakistan under license granted by the Pakistan Telecommunication Authority ("PTA"). The customers of the petitioners executed Cellular Services Agreement Forms ("Forms") to receive telecommunication services. The respondents have subjected the Forms to stamp duty, however, recoverable from the petitioners. The present petitions were instituted in 2011 assailing the recovery of stamp duty. Since the subject matter is common inter se and these petitions were heard and reserved conjunctively, therefore, determination hereof shall be endeavored vide this common judgment.

2. The facts pertaining to C.P. D-190 of 2011 are representative of the facts pertaining to the rest of the petitions, listed supra, therefore, it may suffice to confine the factual discussion to the controversy as presented in the aforementioned petition. Briefly stated, the petitioners had maintained that the stamp duty on Forms cannot be levied / recovered there from, hence, made an application dated 15.06.2010 to the Chief Inspector, Stamps for clarification as well as refund of stamp duties paid. The Chief Inspector of Stamps, respondent No.2, rendered a reply / opinion ("Opinion") in such regard, dated 16.08.2010 and it is considered illustrative to reproduce the contents herein below: "Please refer to your application dated 15.06.2010 and 31.07.2010 on the subject noted above.

2. It is clarified that the stamp duty on Agreement under Article 3(e) of the Schedule to the Stamp Act, 1899, but not section 5(d) of ibid.

3. It is further clarified that No. 3(e) of Section 29 of the Stamp Act, which reads as under: 29. "In the absence of any agreement to the contrary, the expense of providing the proper stamp shall be borne in the case of any instrument described in any of the following Articles of Schedule namely". No.3 (Agreement Memorandum of an Agreement (a) and (b) by the purchaser(s) by the person(s) in whose favour the reconveyance is executed (d) by the partner(s); and by the executants(s)". In view of the above, duty is to be paid by the executant (s), therefore, it is for the executant(s) to decide who shall be paid the duty or share the burden of duty amongst themselves." (Underline added for emphasis). It was contended that notwithstanding the aforementioned Opinion, the respondents have continued to levy and collect stamp duty from the petitioners, hence, the present petitions.

3. Learned counsel for the petitioners submitted that the levy and collection of stamp duty in respect of the Forms upon the petitioners is contrary to the law, inter alia, on the grounds that the stamp duty is not to be levied in respect of subjects within the federal legislature list1; no liability in respect of stamp duty on the Forms can be imposed upon the petitioners per section 29 of the Stamps Act, 1899 ("Act")2; the Forms do not fall within the ambit of Article 3 of the Schedule to the Act if the rule of interpretation of ejusdem generis is applied3; a public officer, as defined under section 2(22B) of the Act is not in itself liable for payment of stamp duty; and that in any event even if the petitioners were to be considered as liable to stamp duty the same could only be held valid within province of Sindh, however, the relevant enabling law in such regard was not promulgated until 2020.

4. Learned Additional Advocate General Sindh, at the very onset, submitted that the respondents had no cavil to the Opinion and the same remains in field, however, stamp duty upon the Forms has been rightfully levied/recovered from the petitioners in accordance with law. Learned counsel submitted that per section 17 of the Act, stamp duty is payable before or at the time of execution by the petitioners and such a legal obligation cannot be permitted to be abjured. It was articulated that the petitioners qualify within the definition of public officer, within the meaning of the Act, hence recovery there from is duly mandated. It was further averred4 that section 10 of the Electronic Transmission Ordinance, 2002 ("Ordinance") is an encroachment upon the field of provincial legislation, hence, ultra vires of the Constitution in any event. Learned counsel relied upon Shirazi Trading5 in order to augment his arguments and concluded that the present petitions are devoid of merit.

5. We have appreciated the arguments of respective learned counsel and have also considered the law to which our surveillance was solicited. The Opinion has been placed before us, not controverted by the respondents, hence, the scope of this determination is abridged6 to consider whether in the light of the said Opinion the levy / recovery of stamp duty, on the Forms, from the petitioners was merited, notwithstanding the Opinion, within the confines of law. Stamp duty on Forms

6. Section 37 of the Act delineates instruments that are chargeable with stamp duty. The term instrument was defined8 to include every document by which any right or liability is, or purports to be, created, transferred, limited, extended, extinguished or recorded. Section 299 of the Act determines the obligation to pay stamp duty and inter alia specifies that in the absence of an agreement to the contrary, the expense of providing the proper stamp duty shall be borne by the executant of the instrument. The term executed10 has been defined in the Act, with reference to instruments, to mean signed. The respective learned counsel relied upon the provisions of the Act cited supra to argue their respective briefs, thus, the Form shall be construed in the said context.

7. Our attention was sought to the terms and conditions appended to each Form wherein it was explicitly stated that Taxes, Duties and Levies which are or may become leviable in accordance with laws, rules and regulations form a constituent of the charges payable by the customer. The veracity of the text of the Form has not been controverted by the respondents and in the paragraph wise comments. The respondents specifically admit11 that there is an agreement between the petitioners and their customers whereby all customers have expressly agreed to the relevant terms and conditions, thereby, liable to pay stamp duty.

8. The primary constituent of section 29 of the Act states in the absence of an agreement to the contrary; however, it is manifest that in the present facts and circumstances there exists a prima facie agreement between the parties to befall the burden of taxes, duties and levies upon the customer. Respondents' counsel had sought to invoke section 1712 of the Act to justify the chargeability of stamp duty; however, the said provision has to be read in conjunction with section 29 of the Act to determine the person upon whom such an obligation has been placed.

9. The residual constituent of section 29 stipulates that in the absence of an agreement to the contrary the pertinent duty is to be borne by the executant of the instrument. We will consider the aspect of the executant while discussing the implication of Shirazi Trading subsequently; however, for purposes of the present discussion it suffices to observe that the residual constituent does not come into effect since admittedly there exists an agreement to the contrary.

10. The respective learned counsel were specifically queried as to whether the petitioners were saddled with the obligation of being collection agents on behalf of the respondents, to recover stamp duty even if it was encumbered upon the customers. Both learned counsel responded to our query in the negative; therefore, no further deliberation is warranted in such regard.

11. Since the verbiage of Section 29 of the Act confers primacy upon an agreement, delineating the person whereupon the burden to pay stamp duty shall lie, therefore, in the manifest admitted presence of such an agreement13 requiring the customer to bear such liability, and in the admitted absence of any responsibility upon the petitioners to act as collection agents, no case is made out before us to consider the petitioners liable in such regard in derogation of the statutory provisions. Issue of public office

12. The respondents had articulated that since the petitioners fall within the definition of public office14, hence, stamp duty was being rightly levied/recovered therefrom. Section 3315 of the Act empowers a public officer to impound an insufficiently stamped instrument. Section 3816 permits for an impounded instrument to be sent to the collector. Section 4017 allows the collector to assess stamp duty and/or penalty in respect of an impounded instrument.

13. The respondents' claim is that the petitioners are liable to pay stamp duty in respect of the Forms; and it was never the respondents' case that the petitioners were required to impound the Forms and convey them to the collector for the relevant proceedings.

14. In consideration of the statutory provisions, cited supra, it is clear that the Act does not impose liability to pay stamp duty upon a public office/public officer; therefore, it is considered safe to conclude that the respondents' assertion, holding the petitioners liable for payment of stamp duty as public office / public officers, does not find sustenance per the law. Interpretation of fiscal statutes

15. It is settled law that that interpretation of a fiscal statute has to be made strictly and any doubts arising from the interpretation of a fiscal provision must be resolved in favor of the taxpayer

18. In Citibank19 a Division Bench of this Court has maintained that it is a fundamental principle of interpreting fiscal statutes that there is no intendment or equity with regard to the charging provision, which must be applied as they stand. Munib Akhtar J maintained the enshrined principle of law that even if two reasonable interpretations were possible, the one favoring the taxpayer would be adopted20.

16. In the present facts and circumstances the statute is clear in so far as the obligation to pay stamp duty is concerned and there appears to be no question of any divergent interpretations arising in respect of the provisions under scrutiny. It would also be pertinent to mention that the Opinion, rendered by the department itself, also appears to compliment the interpretation of the relevant provisions of the Act relied upon herein. Implication of Shirazi Trading

17. Shirazi Trading is an illumining Division Bench Judgment of this court, upon which the respondents had rested their case. However, such reliance is respectfully entirely misplaced as the pronouncement lends more credence to the petitioners' stance.

18. Munib Akhtar J drew a distinction between parties to an instrument and the executant/s thereof and held that the two roles were mutually exclusive. In the context of purchase orders, it was maintained that it was irrelevant whether the contract was performed by both parties and that a party, who was not the executant, could not be saddled with the obligation to pay stamp duty. It was further held that listing of an instrument in the Schedule to the Act was a necessary but not sufficient condition for the levy of stamp duty and that the obligation pivoted upon satisfaction of the necessary ingredients for such an obligation to crystallize. The crux of the finding was that a party to the contract that had not executed the said instrument could not be encumbered with the obligation to pay stamp duty thereupon.

19. In the present facts and circumstances it has been argued before us, by the petitioners' counsel, that the Forms were executed by the respective customers and the petitioners, while being parties thereto, were not ordinarily executants thereof. While the respondents' counsel did not entirely subscribe to the aforesaid proposition, it is observed that the obligation for the executant to be responsible for stamp duty21 is a residual obligation, provided that there is no agreement to the contrary. The existence of an agreement to the contrary is an admitted fact before us; hence, recourse to the residual provision has no application in the present scenario. Relevance of the Opinion

20. The Opinion was rendered by the department itself and the respondents' counsel has raised no cavil in respect thereof. The Opinion concludes that duty is to be paid by the executant(s), therefore, it is for the executant(s) to decide who shall pay the same or share the burden of duty amongst themselves. The respondents have themselves admitted22 that there is an agreement whereby the customers have expressly agreed to the relevant terms and conditions, thereby, liable to pay stamp duty. In view of the proclaimed adherence to the Opinion by the respondents, no rationale has been placed before us to justify the department's insistence to encumber the petitioners with the levy / recovery of stamp duty. Vires of the Ordinance

21. The Ordinance was promulgated in 2002, much prior in time to the institution of the present petitions and by way of a belated defense the respondents have asserted that section 10 thereof amounts to colorable legislation. The challenge to the vires was not invoked by the respondents during the hearing of the said petitions and the comments23 filed by the Respondent No. 124 are also silent in such regard.

22. During the course of the petitioners' rebuttal, we had specifically queried the respondents' counsel as to whether a challenge to section 10 of the Ordinance had been initiated by the respondents at any time till the said date; and the learned counsel had responded in the negative.

23. The belated defense raised by the respondents pertains to an issue pertaining to the comity of the federating units despite Article 18425 of the Constitution, conferring original jurisdiction in such regard exclusively upon the august Supreme Court. No justification was articulated as to how this Court could exercise jurisdiction in view of the prevailing law.

24. In any event, since the said issue does not have a material bearing on the determination herein as the matter is clinched in so far as the present facts and circumstances are concerned, therefore, we deem it prudent to eschew deliberation hereon and leave the matter for future consideration in an appropriate case26.

25. In view of the reasoning and rationale herein contained, we are of the considered view, in the facts and circumstances pleaded vide the petitions under scrutiny, that the levy/recovery of stamp duty upon the petitioners was dissonant with the law, as well as the avowed Opinion of the department itself.

26. Accordingly, these petitions are disposed of in terms delineated herein below: a) In view of an admitted agreement between the petitioners and customers, making the customer liable to pay all duty and taxes in respect of the Form in question, it is held that the same cannot be recovered from the petitioners. b) In respect of the claim for refund, it is our deliberated view27 that the same cannot be adjudicated in a writ petition; as it requires a factual determination including burden of proof and passing of incidence, if any; however, the petitioners may seek appropriate recourse/remedy as may be available per the law. c) Since some changes have been introduced in the law, post institution of these petitions, it is clarified that our findings herein are predicated upon the facts and law governing these petitions and not otherwise. KMZ/P-2/Sindh Order accordingly.