Sitting Panel: Ajmal Mian, Sh. Ijaz Nisar, Sh. Riaz Ahmad, JJ

Summary

The Supreme Court of Pakistan heard a civil appeal (Civil Appeal No. 48 of 1993) filed by Messrs Pfizer Laboratories Limited against the Federation of Pakistan. The core issue was Pfizer’s claim for a refund of Rs. 461,145 in customs duties and sales tax paid on imported salinomycin, which they argued was exempt under Section 19 of the Customs Act, 1969, and Section 7 of the Sales Tax Act, 1951 (as per S.R.O. 349(I)/85).

Both the customs authorities and the High Court of Sindh had previously dismissed Pfizer’s claim, primarily on the grounds that the refund application was filed beyond the six-month limitation period specified in Section 33 of the Customs Act.

The Supreme Court, however, distinguished this case from those covered by Section 33, ruling that the limitation period did not apply because the duty was levied on an exempted item, making it an unlawful exaction rather than a mere erroneous refund. The Court emphasized that money paid under a mistake of law and not legally due must be repaid, referencing Section 72 of the Contract Act, 1872. While critical of the government using limitation as a defense against such claims, the Court also noted the necessity of timely action by claimants.

Crucially, the Court acknowledged that the exemption was conditional, requiring Pfizer to meet specific criteria outlined in the S.R.O. Since previous authorities had not verified compliance with these conditions, the Supreme Court allowed the appeal and remanded the case back to the Collector of Customs. The Collector was directed to determine if Pfizer had fulfilled the exemption conditions. If so, denying the refund would violate Article 24(1) of the Constitution, and the amount would need to be refunded. The Collector was instructed to finalize the matter within six months.

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