KARACHI: The Sindh High Court (SHC) allowed constitutional petitions with directions that “it being declared that EPOs generated prior to or during the subsistence of the 2006 Adaptation were not covered by the Charging Section so as to be chargeable with stamp duty. Needless to say, the Petitioners may approach the Respondents for refund/adjustment of any sums paid in that regard” on petition filed by M/s Bayer Pakistan (Pvt) Limited, M/s Kassim Textile Mills (Pvt) Limited & M/s Gul Ahmed Textile Mills.
On 19 January 2022 court released details judgment and observed that “while engaged in industrial and commercial activity across different sectors, the Petitioners are bound by the common thread that system generated procurement requests constituting Electronic Purchase Orders (―EPOs ‘‖) are processed and transmitted between them and contracting counterparties from time to time during the course of trade.
Albeit indisputably serving the same purpose as a traditional purchase order in terms of encapsulating the salient terms of a transaction, viz – product description, quantity, price, delivery, etc., the EPOs is in the form of an email or otherwise processed digitally online through a software application connecting the transacting parties.
Hence, they lack the physical form of a document in the traditional sense. Be that as it may, as the designated functionaries of the Board of Revenue, Sindh (―BOR‖) under the (Sindh) Stamp Act 1899 (the ―Act‖), being the Chief Collector of Stamps and subordinate officers, sought to nonetheless bring the transactions underpinning those EPOs within the fold of the Act so as to charge them with stamp duty under Section of the Act (the ―Charging Section‖) read with Article 15(b) of Schedule I thereof, the Petitioners have preferred the captioned Petitions under Article 199 of the Constitution impugning such action.
Suffice it to say, electronic transactions and documents were not in contemplation at the time of promulgation of the Act.
However, a step to update the statute in view of technological advances was taken in 2006, when the definition of instrument was firstly amended vide the Sind Finance Act of that year, and when a subsequent step in the same vein was taken by substitution of the term through the Sindh Finance Act 2020 (the ―2020 Act‖).
Apparently, after inspecting the Petitioners records and financial statements, the functionaries of the BOR assessed a deficit of stamp duty on the total quantum of purchases reflected over the period under scrutiny in each of their cases, on the basis of the ad-valorem duty prescribed under Article 15(b), albeit that the transactions were undertaken through EPOs and no physical document/instrument was detected or identified.
In CP No. 6520/18, it was pointed out that a payment of Rs.10,868,167/- had been made under protest against an assessment made on the basis of a system generated spreadsheet listing the purchase transactions through EPO ‘s from January 2014 to December 2018.
Succinctly, the case set up by the Petitioners is that prior to the definition of the term ‗instrument ‘being amended vide the 2020 Act, EPOs did not fall within the ambit of the Charging Section.
Per learned counsel, whilst there was no cavil that a Purchase Order reduced to writing in paper form would attract stamp duty upon its execution as per the Charging Section read with Article 15(b) of Schedule I, they contended that this was not so with an EPO, which, being neither a bill of exchange nor promissory note, would attract stamp duty only if the necessary ingredients of Clauses (a) and/or (c) of the Charging Section were satisfied.
In view of the foregoing, it is apparent that an EPO (i.e. a purchase order purely in electronic form) is not a document in the sense that the word was used in the 2006 Adaptation and does not fall within the definition of ‗instrument ‘in terms thereof.
Furthermore, the Respondents have not argued let alone demonstrated for purpose of advancing their case that the EPOs sought to be subjected to duty were ‗executed‘in the sense of the term as per Section 2 (12).
On the contrary, the amendments introduced through the 2020 Act appear clearly designed to address those omissions in the Act, as it stood at the time.
That being so, such EPOs as were generated during the subsistence of the 2006 Adaptation did not fall within the ambit and purview of the Charging Section under that legislative framework on a reasonable interpretation of the law and cannot be inducted through a strained construction thereof, contrary to the principles elucidated in the case law referred to herein above.
Accordingly, the captioned Petitions stand allowed to the extent of it being declared that EPOs generated prior to or during the subsistence of the 2006 Adaptation were not covered by the Charging Section so as to be chargeable with stamp duty. Needless to say, the Petitioners may approach the Respondents for refund/adjustment of any sums paid in that regard”.
