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Official Citation: 2024 PTD 1360
Court / Jurisdiction: Sindh High Court
Year of Decision: 2023
Decision Date: 2023-12-31
Parties: Ibrahim Fibres Limited through Company Secretary vs Province of Sindh JUDGMENT
Ruling Summary: This decision was rendered by the Sindh High Court on 2023-12-31, officially reported as 2024 PTD 1360. In this matter between Ibrahim Fibres Limited through Company Secretary and Province of Sindh JUDGMENT, the court adjudicated key questions of statutory construction, procedural regularity, and legal precedent under Pakistani law.
Core Holding: The honorable bench evaluated governing statutory provisions and judicial authorities to establish the rights of the parties, delivering the binding reasoning set out below.
Case cited as 2024 PTD 1360
Court Name: Sindh High Court Judge(s): Muhammad Junaid Ghaffar, Agha Faisal Title:Ibrahim Fibres Limited through Company Secretary vs Province of Sindh
JUDGMENT
Reported As: 2024 PTD 1360 Result: Order Accordingly Judgment
JUDGMENT MUHAMMAD JUNAID GHAFFAR, J. This Petition along with Petitions as mentioned in Annexure "A" to this Judgment involve an identical legal issue and are therefore, being decided through this common Judgment. The Petitioners have impugned a levy known as Infrastructure fee/Cess imposed by the Province of Sindh through Sindh Finance Act, 1994 and its subsequent versions including the final version i.e. Sindh Development and Maintenance of Infrastructure Cess Act, 2017, on the ground that it is ultra vires to the Constitution and beyond the competence of the Provincial Legislature. All Petitioners before us are Importers of various goods and are aggrieved with the impugned levy being demanded and collected on such goods before their release from the Customs jurisdiction either at Sea Port(s) or Airport. 2. Learned Counsel for the Petitioners[1] have contended that the impugned levy is beyond the legislative competence of the Provincial legislature as it has no authority under the Constitution to levy a fee or cess on imports and exports into the Province from or for outside the country; that in all (7) seven versions of the law, the instance of the impugned levy is on goods entering or leaving the Province from or for outside the country through Air or Sea, whereas, after three versions while enacting the fourth version, the law was changed by insertion of additional purpose of the levy through insertion of words, "the smooth and safer movement of goods", however, it still remains a levy on the import and export of goods which falls within the legislative competence of the Federal Legislature; that the nature and character of the impugned levy is to be determined on the basis of the taxable event which in the instant matter is the import and export of the goods into the and out
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of the Province from outside the country; that this taxable event is directly covered through Entries 24,[2] 27,[3] and 43[4] of the Federal Legislative List under the Fourth Schedule to the Constitution; hence, the Province does not have any authority to impose this levy; that in accordance with the Article 142 of the Constitution, it is only the Federation which has the exclusive legislative competence in respect of the matters enumerated in these Entries; that Customs Duties have been levied through the Customs Act, 1969 on the import and export of the goods into and outside the country; hence, the impugned levy is beyond the competence of the Provincial legislature as it amounts to encroaching upon the legislative competence of the Federation; that it is settled law that entries in the legislative list are to be construed in a widest possible manner and not in a narrow, restricted or pedantic manner; that the Province of Baluchistan had also imposed a similar Infra-structure Cess through Balochistan Infrastructure Development Cess Act, 2019 which has been declared ultra vires[5]; that the impugned levy is nothing but a Customs duty which is confirmed by way and in the manner, in which it has been levied and is calculated i.e. on the value of goods as assessed by the Customs Authorities; that insertion of additional levy of 1 paisa per kilometer through subsequent versions is irrelevant and is an attempt to cure an unconstitutional imposition of the levy; that it is a colorable exercise of legislation and impinges upon the powers of the Federation; that it is settled law that measure of levy imposed has a nexus with the nature of levy; that even otherwise, the impugned levy discriminates between locally manufactured goods as against the Petitioners imported and exported goods; that as to various attempts of re- validating the earlier versions. it is settled law that such an attempt cannot nullify the judgments of this Court without removing the defects in law pointed out by the Court in its earlier judgments; that the subsequent Acts/Ordinances do not remove any of the defects pointed out by this Hon'ble Court including that the cess is still imposed on the import and export of the goods; that it is still calculated primarily on the value of the goods which has no nexus with the nature and character of the levy; that even if it is assumed that this cess was a fee, no services are being provided in return; that the subsequent amendments including the 2017 Act, cannot be given retrospective effect as the charging section does not provides for any such effect; that without prejudice, as to the first four versions of law, it is a matter of past and closed transaction which cannot be reopened as this Court has already declared the first four versions of the impugned levy as ultra vires against which the Appeal before the Hon'ble Supreme Court stands withdrawn, and therefore, to that extent the demand of the impugned levy on the basis of the first four versions of the law is illegal and beyond the power and authority of the Province. They have relied upon numerous reported cases[6] in support of their plea. 3. Mr. Farooq H. Naek Advocate appearing on behalf of Excise and Taxation Department due to his illness has not been able to argue in person; but has filed written arguments, copies of which were also supplied to the Petitioner's Counsel. According to him, the Petitions are not maintainable as the Petitioners have not challenged the vires of law in question as being violative of any provision of the Constitution; that the Province of Sindh has the prerogative to levy tax, duty, fee and cess for the benefit of its infrastructure which is within the legislative competence of the Province and neither it is violative of any rights guaranteed under the Constitution; nor transgresses the limitation imposed by Article 155 of the Constitution; that even otherwise, the bar as contained in Article 151 ibid is also not attracted as imposition of tax in itself is not a restriction on freedom of trade and commerce between the Provinces, whereas, the impugned levy is for the betterment of the infrastructure of the Province as a whole and would contribute to the efficiency of trade and commerce; that the subject of impugned legislation (all versions) is not covered or hit by any item either in the Federal or in the Concurrent Legislative List; that the Provincial legislature enjoys exclusive legislative authority on the subject matter in terms of Article 142 (c) of the Constitution; that it is neither a customs duty which is levied by the Federation under entry 43.of Pin 1 of the
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Federal Legislative List; nor the levy. in question is a tax on import or export and in fact it is a levy on imported goods which are being transported within the country by road using infrastructure of the Province; that reliance on entry No. 24 of the Federal Legislative List is misconceived as it is about carriage of goods by sea or air, and does not include carriage of goods by road; hence, levy of infrastructure cess on carriage of goods by road is a Provincial subject and within the competence of the Provincial legislature; that notwithstanding the judgments of this Court in respect of earlier versions, subsequently, the law has been amended and lastly through Sindh Finance Act, 2009 and the 2017 Act, which has given retrospective effect to all such amendments; hence, the defect, if any, also stands cured; that levy of this cess is not discriminatory as it is charged on standard basis pursuant to a Schedule annexed with the Act and is applicable on a certain class i.e. importers and exporters. He has sought support from various reported cases[7]. 4. Learned Advocate General on Court notice issued in terms of Order 27A of the Civil Procedure Code has argued that judgment of the Appellate Court in Sanofi Aventis[8] to the extent of first four versions of law is no more in field after promulgation of subsequent Ordinances and Act retrospectively, and as a consequence-thereof, the judgment in Quetta Textile[9] is still in field through which the impugned law/levy was held to be intra vires, whereas, Entry 24 of the Federal Legislative List does not cover the word "Road"; hence, the Province is competent to legislate on this subject. 5. We have heard all the learned Counsel as well as learned Advocate General Sindh and have perused the record. It appears that the impugned levy was introduced for the first time by the Province of Sindh in the year 1994 through Sections 9 and 10 of the Sindh Finance Act, 1994 which came into effect from 01.07.1994 (first version)[10] and pursuant to this Act on 22.08.1994 Sindh Development and Maintenance of Infrastructure Fee Rules, 1994 were notified, which provided the rates[11], quantification, assessm ent, appeal and revision. Subsequently, through Section 5 of the Sindh Finance Act, 1996, Section 9 of the 1994 Act was substituted (second version)[12]. 6. The above levy was then challenged by a number of aggrieved parties through Constitutional Petitions as well as Civil Suits. A learned Single Judge of this Court in the case reported as H. A. Rahim (Pvt.) Ltd. (supra) was pleased to decree the Suits by declaring the infrastructure fee as unconstitutional and ultra vires. The said judgment was then impugned through a time barred High Court Appeal No. 33/2001 by the Province of Sindh and during its pendency Sindh Finance (Amendment) Ordinance, 2001 dated 24.02.2001 was promulgated and an attempt was made to annul the judgment of the learned Single Judge by changing the nomenclature of the impugned levy from infrastructure fee to infrastructure cess with addition of a revalidation clause. The pending Petitions were then dismissed as infructuous in view of promulgation of the Sindh Finance (Amendment) Ordinance, 2001 (third version) as above, by permitting the aggrieved parties to challenge or impugn the validity of the same by filing fresh cases. Insofar as High Court Appeal No. 33/2001 was concerned, the delay in filing of the same was though condoned; but the Advocate General filed a statement to the effect that in view of Amendment Ordinance, 2001 his Appeal has become infructuous and he no longer wishes to press the same. On such statement, the Appeal was disposed of. Thereafter, in this backdrop various Suits were filed in this Court on the Original Side challenging the vires of Sindh Finance (Amendment) Ordinance, 2001[13]. Thereafter when these Suits were pending, fourth version of the law was introduced through Sindh Finance (Second Amendment) Ordinance, 2001 on 15.05.2001 which was made effective retrospectively from 24.02.2001 through which various amendments were made in the Sindh Finance Act, 1994[14]. 7. At this point of time, there were in effect four versions of the impugned levy/law which were in field and the pending Suits were then heard and decided by a learned Single Judge of this Court whereby, all the Suits were dismissed in the case of Quetta Textile (Supra). The said judgment was impugned by way of High Court Appeals and a learned Division Bench of this Court in Sanofi
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Aventis (Supra) decided the Appeals in favour of the litigants to the extent that the first three versions of the law were in fact an imposition on the import and export and for that the Province of Sindh had no authority or jurisdiction; hence, it was ultra vires and unconstitutional. It was further held that insofar as the fourth version is concerned, it had no nexus with the nature and character of the levy and was also struck down; however, during pendency of the Appeals, a fifth version was also promulgated by way of Sindh Finance (Amendment) Ordinance 2006[15] on 29.12.2006 and notwithstanding that it was never under challenge, either in the original Suits (in fact it Could not have been as the Suit were much earlier in time) nor in the Appeals by way of any formal amendment of the pleadings; but at the request and consent of the Counsel for the Province of Sindh, was permitted to be challenged through verbal arguments. The learned Division Bench while deciding Sanofi Aventis to the extent of the fifth version, came to the conclusion that it was intra vires to the Constitution and the previous shortcomings and defects in the legislation in respect of discrimination and the measurement of the levy had been cured, and therefore, it was upheld. It may also be of relevance to observe that though in Sanofi Aventis the fifth version was upheld; but it had been re-enacted through Sindh Finance (Amendment) Act, 2007 on 24.10.2007 made effective from 28.3.2007; however, the judgment deals with the Ordinance, 2006, with a categorical finding that it is neither retrospective in nature nor it is applicable to past and closed transactions and section 1(2) of 2006 Ordinance confirms that it shall be enforceable at once, i.e. from the date of its promulgation, being prospective and not retrospective[16]. 8. The Province of Sindh as well as the litigants being aggrieved preferred Appeals before the Hon'ble Supreme Court. The litigants impugned the judgment to the extent of the findings in relation to the fifth version, whereas, the Province impugned the same to the extent of the judgment in respect of the first four versions. On 17.05.2011 the Counsel for the Province of Sindh withdrew the Appeals on the ground that he has been instructed by the Government of Sindh not to press these Appeals as subsequent amendments have been made which are retrospectively applicable, and therefore, the entire case of the Government of Sindh would be dependent upon the result of the Appeals of the private persons. The said order passed by the Hon'ble Supreme Court on 17.05.2011 reads as under:- "Iftikhar Muhammad Choudhry, C.J. Mr. Fakhar-ud-Din G. Ibrahim, learned Sr. ASC states that he has been instructed by the Government of Sindh not to press the above listed appeals. Further that the Sindh Finance (Amendment) Ordinance, 2006 ratified into the Sindh Finance Act (Act No. II of 2007), was further amended by the Sindh Finance Act, 2009 to make the same retrospectively applicable. And therefore the entire case of Government of Sindh would depend upon the result of the appeals of the private persons arising out of the impugned judgment wherein following operative para of the judgment has been challenged:- "(b) the fifth version of law i.e. the Sindh Finance (Amendment) Ordinance, 2006 is valid and hence the levy imposed and collected from the effective date of the fifth version i.e. 28.12.2006 is valid and all imposition and collection before such date are declared to be invalid;" 2. In view of the above prayer of the learned Sr. ASC appearing for Government of Sindh, the above listed appeals are dismissed as not pressed." 9. Similarly, insofar as the Appeals filed by the private parties were concerned, though they were argued on certain dates; however, on 20.05.2011 pursuant to a joint statement filed by the respective Counsel for the contesting parties the said Appeals were also disposed of in the following terms: - "Iftikhar Muhammad Choudhry, C.J. Learned Counsel for the parties after having addressed arguments at length were enquired/required to satisfy that in absence of specific challenge to 5th version of the Sindh Finance (Amendment) Ordinance, 2006. (Sindh Ordinance No. XXXVIII of 2006), re-enacted through Sindh Finance (Amendment) Ordinance, 2007 (No. XX of 2007) and then
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ratified through Sindh Finances Amendment Act, 2007 (No. II of 2007) whether it was legally possible for the learned High Court to decide the appeals arising out of the judgment dated 28.10.2003 passed by a learned Single Judge whereby civil suits filed by the parties were disposed of. 2. It is to be noted that instant proceedings have arisen out of a civil suit instituted by the appellants wherein the first, second, third and fourth version of the law mentioned hereinabove were challenged, but so far fifth version is concerned, it was promulgated when the appeals before the High Court were pending, therefore, it had become necessary to amend the pleadings and challenged the same because of a number of differences in the earlier versions and re-enacted through Sindh Finance (Amendment) Ordinance, 2007 (No. XX of 2007) and then ratified through Sindh Finances Amendment Act, 2007 (No. II of 2007). Had the matter arisen between the parties out of petition under Article 199 or any other relevant provisions, perhaps, the High Court may have allowed the parties to argue their case as to the developments taking place during pendency of the lis, but when there was a suit on the basis of pleadings, in our considered opinion amendment of the pleadings was necessary and if any concessional statement on the issue was given by the learned counsel for the respondents the same was not admissible under the law. On this learned counsel for the parties discussed the said issue and filed the following joint statement: "Joint statement By consent the subject appeals may be disposed of in the following terms: 1. The subject appeals all challenge inter alia the judgments of the learned single judge as well as the division bench of the Honorable High Court of Sindh at Karachi whereby the fifth version of the impugned law in question introduced vide Sindh Finance (Amendment) Ordinance, 2006, (No. XXXVIII of 2006), re-enacted through Sindh Finance (Amendment) Ordinance, 2007 (No. XX of 2007) and then ratified through Sindh Finances Amendment Act, 2007 (No. II of 2007) was upheld and the fourth version of the impugned law in question introduced vide the Sindh Finance (Second Amendment) Ordinance, 2001 (XVI of 2001) was upheld to the extent of legislative competence. 2. That notwithstanding the concessional statement to the effect that no formal challenge would be required having been made by the then learned counsel appearing then for the Government of Sindh, this Honorable Court may kindly be pleased to set aside the impugned orders, judgments, decrees passed by the courts below to the extent noted above. (Emphasis supplied) 3. The appellants will be at liberty to challenge any/all versions of the levy on infrastructure with which the appellants are aggrieved. It is therefore, prayed that all the appeals be disposed of in the above terms." 3. Mr. Makhdoom Ali Khan, learned counsel for the appellant's states that Mr. Khalid Anwar, learned Sr. ASC, who is not available today in Islamabad, has instructed him to file statement on his behalf and that such instructions have been taken on telephone. 4. As a result of above Joint Statement (Arrangement between the parties) the impugned judgments along with the interim order already passed on 27.10.2008, etc. whereby the parties were directed to maintain status quo, are set aside with all the legal consequences legally to be followed after vacating the said order. The appellants in terms of above arrangement, however, shall be free to challenge any or all versions of levy on infrastructure with which they feel aggrieved save in accordance with law. 5. All the appeals are disposed of in the above terms. Parties are left to bear their own costs." 10. Insofar as the case of the present Petitioners is concerned, it has been argued that since the Government of Sindh had withdrawn its Appeals and the said withdrawal was dependent upon the outcome of the Appeals filed by the private parties which were then disposed of through a joint statement which was only to the extent of the fourth version (only the legislative competence) and the fifth version; therefore, insofar as the judgment in the case of Sanofi Aventis is concerned, the
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same is now a case of past and closed transaction, whereby, the first four versions of the impugned levy were struck down. On the other hand, the case of Province of Sindh is that since the subsequent Amending Ordinance i.e. Sindh Finance (Amendment) Ordinance, 2006, (No. XXXVIII of 2006), re-enacted through Sindh Finance (Amendment) Ordinance, 2007 (No. XX of 2007) and then ratified through Sindh Finance Amendment Act, 2007 (No. II of 2007) and Sindh Finance Act, 2009 were made applicable retrospectively, whereas, a revalidation clause was also promulgated; therefore, the effect of the judgment in the case of Sanofi Aventis is no more in field. On perusal of the record and the 'orders passed by the Hon'ble Supreme Court in the respective Appeals of the parties, we are of the considered view that the stance of the present Petitioners appears to be correct to a certain extent. It is to be noted that it was the Province of Sindh which first withdrew its Appeals, and the said order very clearly reflects that it is being done on the instructions of the Government of Sindh i.e. not to press the Appeals. It has been recorded that the entire case of the Government of Sindh would be dependent upon the result of the Appeals of the private persons, whereas, despite a statement of their Counsel regarding enactment of subsequent legislation retrospectively, the final order of the Hon'ble Supreme Court is only a simplicitor withdrawal of the Appeals filed by the Province. It pin observed that in view of above prayer of the learned Senior Advocate appearing for the Government of Sindh the Appeals are dismissed as not pressed. It has neither remanded the matter nor has asked the Appellate Court to decide it afresh after examining the Re-validation clause and retrospective effect of the enactments as contended by their Counsel. Admittedly the private parties had only challenged the judgment in the case of Sanofi Aventis to the extent of the fourth version in respect of legislative competence, and the entire fifth version of the law. On the other hand, the Appeals of the aggrieved parties were disposed of on the basis of a joint statement which was only in respect of the fourth version (partly) and the fifth version of the law. In our considered view, the entire case of the Province to the extent of their Appeals before the Hon'ble Supreme Court was (i) that it withdrew its Appeals merely on the ground that subsequent legislation had been made or enacted, and that satisfies them to withdraw their Appeals; and (ii) it was also dependent on the outcome of the Appeals of the private persons. When the two orders as above are read in juxtaposition to arrive at a fair conclusion, it appears that insofar as the subsequent Amending Ordinance of 2006, The 2007 Act and the 2009 Act, and its retrospective applicability is concerned, it was never touched upon by the Hon'ble Supreme Court; nor was it remanded to the Appellate Court for any adjudication. It was just merely a statement of the learned Advocate for the Province of Sindh; but in effect, there was no conclusive finding by the Hon'ble Supreme Court that as to what would be the effect of these Amending Ordinance Act through which the same were purportedly made applicable retrospectively. The aggrieved party was left to challenge it (i.e. the fifth version or any other version) and naturally they would only challenge what is against them. At that point of time it was only the fifth version which they could have challenged and not the first four versions in respect of which Sanofi Aventis had decided it in their favor (barring the legislative competence in respect of the fourth version). Similarly, when the joint statement filed in the Appeals of the private parties is examined, it appears to be filed by consent and it clearly reflects that it was only to the effect of setting aside the impugned judgment in the case of Sanofi Aventis to the extent of the fourth version in respect of its legislative competence and the fifth version. And this arrangement was apparently arrived at because before the High Court the fifth version was permitted to be impugned on a verbal concession of the Counsel then appearing for the Province of Sindh without a formal amendment of the pleadings. It was also observed by the Hon'ble Supreme Court in the order date 20.5.2011 that these proceedings had arisen out of a civil suit instituted by the appellants wherein the first, second, third and fourth version of the law mentioned hereinabove were challenged, but so far the fifth version is concerned, it was promulgated when the Appeals before
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the High Court were pending, therefore, it had become necessary to amend the pleadings and challenge the same because of a number of differences in the earlier versions and re-enactment through Sindh Finance (Amendment) Ordinance, 2007 (No. XX of 2007) and then ratified through Sindh Finances Amendment Act, 2007 (No. II of 2007). It was further observed that had the matter arisen between the parties out of petition under Article 199 or any other relevant provisions, perhaps, the High Court may have…
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