P L D 1975 Karachi 26 (PLP)

(b) Permanent injunction restraining the K. M. C. from realising the terminal tax on goods in transit and meant for places outside the K. M. C. limits and also those goods which are imported by Sea." The plaintiff also challenged the validity of the notification of the Chief Commissioner dated 4‑6‑1957 which introduced the new Revised Schedule `A' and which, as stated earlier, had already been declared invalid by the Supreme Court in the aforementioned Pakistan Textile Mill Owners' Association's case it was, however, not necessary for it to do so, as the tax in question was levied according to the old Schedule on the three consignments and not according to the Revised Schedule. Issue No. 5 in that suit was as follows: "Whether the K. M. C. was not competent to levy and realise terminal tax on goods imported by sea?" In his judgment dated 31‑8‑1964 the learned Civil Judge discussed this issue along with issues Nos. 1 and 4 which raised the question of the validity of the notification introducing the Revised Schedule. Following the judgment of the Supreme Court in the Pakistan Textile .Mill Owners' Association's case above‑mentioned, he held that although the notification introducing the Revised Schedule was invalid and inoperative in so far as it related to terminal on goods imported by sea or air, "still the Karachi Municipal Corporation was competent to levy terminal tax on goods imported by sea at the old rates" as was‑ observed by the Supreme Court in that case. He therefore, decided this part of the issue against the plaintiff. He also held that the Karachi Municipal Corporation was not entitled to levy terminal tax on goods in transit provided the bulk is not changed in any form. In the result lie decreed the suit and granted the declaration and injunction prayed. As the issue of res judicata has been raised in the present suit, it is necessary to set out the operative part of the decree which is Exh. 6/3 :‑ "This suit coming on this day of 31st August 1964 for final hearing before Mr. Syed Wajid Ali Shah, Civil Judge First Class, Karachi in the presence of Mr. Abdul Rauf, Advocate for the plaintiff and Mr. Tahir Hussain, Advocate for the defendant, it is held that :‑ (a) The K. M. C. is not entitled to recover terminal taxes on goods imported by sea according to new schedule, they may however, levy taxes on such goods in accordance with the old schedule. (b) The K. M. C. is not entitled to charge terminal tax on goods in transit provided the bulk is not changed in any form." While the Karachi Municipal Corporation filed an appeal to the Addi tional District Judge, Karachi (Civil Appeal No. 99/65) which, however, was withdrawn on 8‑11‑1967, the plaintiff did not file any appeal nor any cross‑objections to challenge that part of the decree which was against it, which declared that the Karachi Municipal Corporation was competent to levy terminal tax on goods imported by sea in 'accordance with the old Schedule.

5. The remaining 7 consignments of oil were imported by the plaintiff as per statement Annexure 'A' to the Plaint, the last of which was imported on 21‑9‑1966 and the tax levied was at the old rate of 0‑2‑0 annas per maund. As the plaintiff failed to pay the terminal tax in respect of these imports, the Karachi Municipal Corporation imposed a penalty under rule 18 of the Terminal Tax Rules (1940). The plaintiff preferred an appeal on 15‑12‑1966 to the Chairman under the provisions of the Municipal Administration Ordinance, 1960. The plaintiff's counsel was heard but he was advised to pay the outstanding terminal tax of Rs. 1,22,054.75 which was levied under the Old Schedule (1940), before the question of penalty could be considered, and the plaintiff was so informed by the defendant's letter (Exh. 6/4) dated 25‑2‑1967. The plaintiff then paid the said amount by cheque dated 27‑2‑67 which was deposited into defendant's account with the Habib Bank Limited, K. M. C. Branch, on 9‑3‑1967 under challan (Exh. 7/1).

6. On 7th March 1967 the judgment of their Lordships of the Supreme Court was announced in Pakistan Tobacco Company Ltd. v. Karachi Municipal Corporation (P L D 1967 S C 241). The validity of the terminal tax imposed by the Karachi Municipal Corporation after coming into force of the Municipal Administra tion Ordinance, 1960 came up for consideration in that case on appeal. It was held that after the repeal of the Karachi Municipal Act, 1933 by the Municipal Administration Ordinance, 1960, the Karachi Municipal Corpora tion was no longer competent to levy any terminal tax at all and further that the Terminal Tax Rules framed under the repealed enactment being clearly inconsistent with the provisions of tae Municipal Administration Ordinance were not saved. Therefore, the terminal tax levied by the Municipal Corporation after the coming into force of the Ordinance on 15‑4‑1960, was without lawful authority and illegal. The Karachi Municipal Corporation was not only directed to refrain from imposing or recovering such tax but it was also directed to refund any portion of the tax, if already recovered, to the appellant.

7. A year after the above judgment of the Supreme Court was announced, the plaintiff relying on it, demanded refund of the amount of Rs. 1,22,054.75 which it had paid as terminal tax on all the 10 consignments in question as having been imposed illegally and without lawful authority. The plaintiff received no reply. Therefore, it filed the present suit on 15‑5‑1969 for recovery of the said amount. The plaintiff's case is set out in paragraph 18 of the plaint, in which it is pleaded that "after the pronounce ment of the above judgment by the Supreme Court of Pakistan, the Karachi Municipal Corporation has no power to withhold the amount illegally recovered by them and their action in not refunding the said amount is illegal and unauthorised and ultra vires of the powers of the K. M. C".

8. The defendant filed a written statement denying the plaintiff's cases for refund of the terminal tax. It pleaded that the terminal tax was realised on goods imported by sea at the rates prevailing prior to revision of rates, which the Supreme Court had observed in its judgment in the Pakistan Textile Mill Owners' Association's case (1957) could still be levied. It was further pleaded that the suit for refund of the tax was barred by res judicata in view of the decree of the Court of the Civil Judge which had become final and that the plaintiff cannot re‑open the issue by relying upon the judgment of the Supreme Court in the Pakistan Tobacco Company's case‑ above mentioned.

9. On these pleadings the following issues were framed:‑ (1) Whether the defendant had no power to levy and recover the tax in question? If so what is its effect? (1‑A) Whether the plaintiff is entitled to refund of the amount in suit from the defendant? (2) What was the scope and effect of notification of 1957, referred to in para. 5 of the plaint? (3) Whether any quantity of lubricants imported within K. M. C. limits was re‑exported? if so in what quantity and in what form? (4) Whether the lubricants after blending when exported were exempt from terminal tax? (5) Whether the claim is time‑barred? (6) Whether the suit is barred by res judicata? (7) To what decree, if any, is the plaintiff entitled? . Only one witness was examined by the plaintiff, a clerk from the Municipal Corporation to produce the challan ,for payment pf the terminal tax (Exh. 7/1) No witness was examined on behalf of the defendant. At the hearing of arguments, counsel dropped issues Nos. 2 to 5 leaving only issues Nos. 1, 1(a) and 6 for consideration.

10. I have heard counsel at length and have considered the documents exhibited in the case and my findings on the issues are as follows: Issue No. 1.‑The finding on this issue has been concluded by the judgment of their Lordships of the Supreme Court in the Pakistan Tobacco Company's case, abovementioned, in which their Lordships have held that the Karachi Municipal Corporation had no power to levy any terminal tax after the coming into force of the Municipal Administration Ordinance, 1960 on 15‑4‑1960. As the terminal tax was levied and paid by the plaintiff after the coming into force of the said Ordinance, the levy on each of the A 10 consignments imported by the plaintiff, was therefore illegal. The effect of the finding is that prime facie tax paid under a demand which is illegal, is liable to be refunded under section 72 of the Contract Act, 1872, as money paid under coercion. It has been held by the High Court of Nagpur in Secretary, Municipal Committee, Karanja v. The New East India Press Co. Ltd., Bombay (A I R 1949 Nag. 215), that even if the tax is paid without protest, as in this case, it is an involuntary payment and must be presumed to have been paid under coercion because of the unpleasant consequences which are convert in the demand.

11. Issue No. 1‑A.‑The short question is whether on the facts and in the circumstances of this case, the plaintiff is entitled to obtain a refund of the amount in suit. At the time the plaintiff made payment of the tax, there was a decree of the Civil Judge dated 31‑8‑1964 (Exh. 6/4) which declared that the Karachi Municipal Corporation was competent to levy the terminal tax in question in accordance with the old schedule. The plaintiff neither filed any appeal nor any cross‑objections for varying that portion of the decree which was against it which declared that the plaintiff was liable to pay terminal tax on the goods imported by sea according to the old schedule. Therefore, the declaratory decree became final and binding. It also had that effect under section 43 of the Specific Relief Act, 1877 which makes a declaration binding on the parties to the suit and persons claiming through them. That decree has now been found to be erroneous in view of the later judgment of the Supreme Court in the Pakistan Tobacco Company's case. But the correctness of a decree passed by a Court of competent jurisdiction is not a relevant consideration to its finality and operation. An erroneous decree which has become final is conclusive between the parties and may be set up as an estoppel by res judicata. To quote from Spencer‑Bower ands Turner on the "Doctrine of Res Judicata", 2nd Edn. at p. 14 "This proposition rests on the well known fact that a competent tribunal has jurisdiction to give a wrong judgment. It has jurisdiction to decide wrongly, as well as rightly, and if it makes a mistake that mistake is conclusive between the parties unless and until corrected by an appeal duly constituted." The effect of the Supreme Court judgment in the Pakistan Tobacco Company's case, is that it cannot affect the operation of the decree of the Civil Judge. Several cases were cited by Mr. Tahir Hussain, learned counsel for the defendant. It was observed by the Chief Justice Cornelius of the Supreme Court in the case of Muhammad Yousuf v. The Chief Settlement and Rehabilitation Commissioner, Pakistan, Lahore and others (P L D 1968 S C 101), that a judgment of the Supreme Court cannot have the effect of rendering void of its own force all previous orders of executive and quasi‑judicial authorities or of the High Court made in the light of an erroneous interpretation of statutory provisions. To quote (p. 107):‑ "This judgment was delivered on the 2nd November 1964 and its con sequence was that as from that date all Courts subordinate to the Supreme Court and all executive and quasi judicial authorities were obliged by virtue of the Constitution to apply the rule as laid down by the Supreme Court in cases coming up before them for decision. It did not have, and it cannot be contended that it had, the effect of altering the law as from the commencement of the Act so as to render void of its own force all relevant orders of the Settlement authorities or of the High Court made in the light of the earlier interpretation which was that the exercise of the delegated power was subject to the provisions in Chapter VI of the Act."

12. The effect, therefore, is that while the judgment of the Supreme Court in the Pakistan Tobacco Company's case, establishes a judicial precedent for the future which is binding upon all persons, whether parties to the proceedings or not, and upon all other subordinate Courts in Pakistan by virtue of Article 189 of the Constitution, it does not, by its own force, render void or inoperative the erroneous decrees to the opposite effect. The distinction between res judicata and judicial precedent is well contrasted and illustrated in Spencer‑Bower and Turner's Treatise on the "Doctrine of Res Judicata" aforesaid in paragraph 16 at page 15: "There is an essential difference between the doctrine of estoppel per rem judicatam and the doctrine of judicial precedent. By virtue of the former a final decision of a concrete issue between parties, by any Court having jurisdiction to determine that issue, will for even thereafter preclude either party from raising the same issue against the other party to the decision, whether before the same Court, or before any Court exercising a higher or lower jurisdiction. The doctrine of judicial precedent, on the other hand; is not concerned with concrete issues as between parties. Its effect is to declare the law, not the facts, and to declare it so as to be binding upon all persons, whether parties to the proceedings or not, in all Courts of inferior, and in some cases of the same, jurisdiction; . . . . ." In this connection the case of Mafazal Ahmed v. Haji Abdus Sattar ((1964) 16 D L R 92), paras. 23 and 39 may be referred to in which it was observed that a subsequent ruling of the Supreme Court cannot undo the effect of an erroneous decision of subordinate Judge which had become final. In Noor Hussain v. Mukham Din (P L D 1953 Azad J & K 1), it was observed at page 4 as follows:‑ "An erroneous decision on a question of law in a previous suit is not a bar in a subsequent suit between the same parties and different decision may be given on that question but decision so given should not in any way affect the operation of the former decree or take away the rights acquired by the parties thereto. Following this principle the plaintiffs cannot take advantage of the High Court's decision being erroneous and deprive the defendants of the fights acquired by them under that decision."

13. Therefore, on the date on which the plaintiff made payment of the j terminal tax, it was bound to pay it under the declaratory decree and the defendant was entitled to realise payment. It was not made under mistake of fact or law but was made pursuant to the decree by acting upon it. F Therefore, the question whether the plaintiff paid the tax under threats or` not, is irrelevant. Even otherwise, there is no evidence that the plaintiff paid the tax pursuant to threats by the defendant. No such letter threatening recovery proceedings has been produced by the plaintiff. The covering letter dated 1‑3‑1967 (Exh. 6/5) with which the plaintiff enclosed the cheque makes no mention of any threats or coercion. It simply refers to the defendant's letter dated 22‑5‑1967 (Exh. 6/4) requesting the plaintiff "Kindly to make payment before 1‑3‑1967" before "the question of penalty under rule 18 Terminal Tax Rules is taken up". The plea of the plaintiff in paragraph 14 of the plaint that the plaintiff's counsel "was clearly told by the Chairman that if the tax amount was not paid, coercive process would be issued to recover the tax amount and also the amount regarding the penalty" has not been proved and cannot be accepted. That the payment was made voluntarily is clearly borne out by the plaintiff's own admission in para graph 15 of the plaint in which it stated that "the plaintiff was anxious that their appeal be heard as the plaintiffs were confident that the demand was illegal and therefore with this point in view the plaintiff paid the amount". It is also significant that the plaintiff has withheld disclosure in the plaint of the decree passed by the Civil Judge declaring the right of the Municipal Corporation to levy and realise the tax according to the old Schedule. Therefore, my conclusion is that the money was paid under the declaratory decree and under the pressure of it and it cannot be recovered back while the decree remained in force as a final and binding decree. Restitution of money paid under a decree is possible under section 144, C. P. C. only if the decree is reversed in appeal, revision or review. In this connection the case of Secretary of State v. Tatvasaheb Yeshwantrao Holkar (A I R 1932 Bom. 386), may be cited as an illustration that money paid under pressure of legal process cannot be recovered. In that case, the defendant's land was acquired by the Government under the Land Acquisition Act. At his request a reference was made to the High Court as to the amount of compensation payable. The High Court enhanced the amount of compensation pursuant to which the Government paid compensation money to the defendant. It later discovered that the defendant was not entitled to compensation as the land in fact belonged to the Government. It was held that as the amount was paid under the pressure of legal process, it could not be recovered.

14. Mr. A. Rauf learned counsel for the plaintiff next submitted that the decree of the Civil Judge being against the provisions of the Constitution (in so far as it assumed that the Municipal Corporation had constitutional power to levy the terminal tax) was passed without jurisdiction and is therefore a nullity in law. He referred to Muhammad Swaleh and another v. Messrs United Grain & Fodder Agencies (P L D 1964 S C 97). But the observations therein do not support him for it was held that "merely because an order passed H was in violation of some provision of law, it does not follow that the order is a nullity and that it would further be shown that there was a such violation of some statutory provision or principle of natural justice as would render the proceedings coram non judice". In this connection M. Monir on the "Law of Evidence" (1969) at page 138 explains the distinction between a decree passed without jurisdiction which is nullity and one passed wrongly in the exercise of jurisdiction: "When a Court assumes jurisdiction where there is absolute want of it, the decision is void and a nullity. While where the Court in the exercise of its jurisdiction acts wrongly it is only voidable, and has due effect unless set aside by appropriate proceedings." Therefore, in my view there is no force in the submission of Mr. Rauf that the decree of the Civil Judge was passed without jurisdiction. In the result my finding on this issue is against the plaintiff.

15. Issue No. 6.‑Before the plea of res judicata can prevail under section 11, C. P. C. the matter directly and substantially in issue should be the same in both suits. But the issues in the two suits are different. In the former suit, the issue (Issue No. 5) was "whether the Karachi Municipal Corporation was not competent to levy and realise terminal tax on goods im ported by sea?", whereas in the present suit the issue is whether, assuming that j the Karachi Municipal Corporation had no such power (as decided by the Supreme Court in the Pakistan Tobacco Company's case), the plaintiff is nevertheless entitled to refund of the amount paid despite the final decree of the Civil Judge and in the circumstances of the case. Therefore, in my view the suit is not barred by res judicata as contended by Mr. Tahir Hussain learned counsel for the defendant. It is therefore not necessary to consider the submission of Mr. Rauf that the lower Court being a Court of limited pecuniary jurisdiction was not "a Court competent to try such subsequent suit" under section 11, C. P. C. There is yet another reason against his contention. The finding of the Civil Judge on issue No. 5 in the former suit was decision on a question of law as to the interpretation of the constitutional powers of the Municipal Corporation to levy terminal tax after the coming into force of the Municipal Ordinance, 1960. The conclusion of that question of law has now been found to be erroneous by the judgment of the Supreme Court in the Pakistan Tobacco Company's case, which judgment is binding on the parties as on all other persons, and Courts in Pakistan.

16. In the foregoing reasons, I would dismiss the suit but in view of the difficult question of law involved, I would leave the parties to bear their own costs. S. A. H. Suit dismissed.