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Petitioner: Murree Brewery Company Limited VS Respondent: Province of Punjab through its Chief Secretary & others
Court Name: Lahore High Court Judge(s): Shahid Karim Title:Murree Brewery Company Limited vs Province of Punjab through its Chief
Secretary & others Case No.: W.P No.24811 of 2015 Date of Judgment:2016-06-26 Reported As: 2016 LHC 2044 Result: Appeal Accepted Judgment Shahid Karim, J:- This petition under Article 199 of the Constitution of Islamic Republic of Pakistan, 1973 (Constitution) lays a challenge to the Notification No.SO(E&M)/2-3/2011 dated 24.06.2015 (impugned Notification) issued by the Secretary Excise & Taxation, Government of the Punjab, Excise & Taxation Department, upon the powers having been exercised by the Governor of the Punjab in terms of sections 31 and 32 of the Punjab Excise Act, 1914 (Act, 1914). 2.The impugned Notification reads as under: "No.SO(E&M)/2-3/2011 (P-II).In exercise of the powers conferred under sections 31 and 32 of the Punjab Excise Act, 1914 (I of 1914), Governor of the Punjab is pleased to discontinue the application of the administrative policy of "duty follows consumption" and is further pleased to direct that Still Head Duty at the rates notified by the Excise & Taxation Department vide NotificationNo.SO(EXCIE) (E&T)2-3/2005 dated 30.06.2005 shall be levied and recovered on all Pakistan Made Foreign Liquor and Beer meant for consumption outside Province of the Punjab as well. 2.This Notification shall come into force on and from 01st July, 2015." 3.It is clear from a reading of the impugned Notification that the Notification extends the application of an earlier Notification dated 30.06.2005 to all Pakistan Made Foreign Liquor and Beer meant for consumption outside Province of Punjab as well.In terms of the earlier Notification dated 30.06.2005, still head duty at certain rates had been notified by the Governor of Punjab. It seems that previously those rates, as notified in the Notification dated 30.06.2005, were not levied and recoverable on the goods mentioned in the impugned Notification. This has given a cause of action to the petitioners who, in a nub, contend that the imposition by the impugned Notification is tantamount to the levy of export duty on the goods being manufactured by the petitioners and
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consumed outside the Province of Punjab. 4.This judgment shall decide a connected petition W.P No.21927 of 2015, which has been brought by Sindh Wine Merchant Welfare Association through its President and which has called in question the impugned Notification as well on substantially the same grounds as in the instant petition. 5.The learned counsel for the petitioners Mr. Shahid Hamid, Advocate briefly alluded to the history of the present litigation. According to him, on 20.10.1997 a Notification was issued by the Government of the Punjab which was attacked by filing a constitutional petition by the petitioner, and which Notification was struck down by this Court in a judgment reported as 2001 CLC 42. Under the Notification of 20.10.1997, in exercise of the powers conferred by Section 31 of the Punjab Excise Act, 1914 (Act, 1914), the Governor of Punjab was pleased to direct the levy and recovery of export duty at the rate stated in the said Notification on Pakistan Made Foreign Liquor (PMFL) and Beer meant for export to other provinces. Primarily relying upon Article 151 of the Constitution, it was held by this Court that: "7. It will be seen that Article 151(1) lays done that subject to clause (2), trade, commerce and intercourse throughout Pakistan shall be free. Article 151(2) empowers the Parliament to impose restriction on the above freedom as may be required in the public interest. Article 151(3) is in negative from and prohibits the Provincial Assembly or a Provincial Government to do the things mentioned in clauses (a) and (b). For the case, the relevant provision is that Provincial Government shall not have power to impose a tax, which, as between the goods manufactured or produced in the Province and similar goods manufactured or produced in any area in Pakistan, tends to discriminate is in favour of the former. In other words by imposing the impugned duty the respondent-Government has discriminated between the goods produced by the petitioner and the goods produced by the rivals in Sindh and Balochistan. However, this discrimination does not seem to be, in favour of the petitioner and as such may not be hit by Article 151(3)(b) the impugned levy impinges upon the freedom, as enshrined in Article 151(1). Reliance of Mrs. Nasira, Advocate on Mirpurkhas Sugar Mills Ltd. v. District Council, Tharparkar and 2 others 1990 M LD 317, Sayphire Textile Mills Ltd. and 9 others v. Government of Sindh and others PLD 1990 Kar. 402 is correct. In the first case the export tax imposed by Zila Council on the Sugar produced by the petitioners therein was declared as violative of the Constitutional provisions. In the second case also the export duty imposed upon the products of the petitioners-Mills was not upheld on the touchstone of Article 151 of the Constitution. Learned counsel also relied on Atiabari Tea Co. Ltd. v. The State of Assam and others AIR 1961 SC 232 and on perusal of the judgment the reliance again seems to be correct. I, therefore, hold that impugned imposition of export duty is violative of Article 151(1) of the Constitution. 6.It can be seen from a reading of the portion of the judgment reproduced above that the Lahore High Court was of the opinion that the impugned levy impinges upon the freedom as enshrined in Article 151 (1) of the Constitution. It was thus held to be violative of free trade clause in Article 151 of the Constitution. 7.The learned counsel for the petitioners have made a frontal attack on the Still head duty whose operation has been extended by the impugned Notification to PMFL and Beer consumed outside the Province of Punjab to submit that it is in pith and substance the export duty which was struck down by this Court in the precedent cited above. According to him, the Government of the Punjab has sought to achieve indirectly what it could not achieve directly and the effect would be virtually the same. The learned counsel has drawn the attention of this Court to paragraphs 9, 10 and 12 of the petition in order to substantiate the oral arguments made in this behalf and to bring home the submission regarding the discrimination to have been meted out to the petitioner in this regard. It has been averred that by the impugned Notification Still head duty has been extended to PMFL and Beer when it is consumed outside the Province of Punjab and which has the effect of rendering the
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petitioners as uncompetitive in the markets of Province of Sindh to which 75% of the petitioner's exports relate. In accordance with the policy of duty follows consumption" as spelt out in the Punjab Excise Manual, Vol. III, the petitioners were not liable to pay still head excise duty levied by the Government of the Punjab and were only liable to pay the duty imposed by the Government of Sindh under the Sindh Abkari Act, 1878. This had the effect of keeping the price of the petitioners' PMFL products competitive and commercially viable in the Province of Sindh. This has been described as an Administrative policy in the impugned Notification and in simple terms meant that the duty levied at the place of actual consumption ought to be paid irrespective the place of its manufacture. A chart, which has been prepared and brought forth in paragraph 10 of the petition, underscores the contention raised by the learned counsels for the petitioners. That chart depicts that: A.PMFL Products: Ex-Distillery priceRs.1,000/-Per L.P. gallon Sindh Excise Duty (inclusive of Vend Fee)Rs.2,160/-Per L.P. gallon Sales Tax @ 17%Rs.537/-Per L.P. gallon Sub-total:Rs.3,697/-Per L.P. gallon B.Beer: Ex-Brewery priceRs.177/-Per liter Sindh Excise Duty (inclusive of Vend FeeRs.76/-Per liter Sales Tax @ 17%Rs.43/-Per liter Sub-total:Rs.296/-Per liter 8.By the impugned Notification, the learned counsel for the petitioners passionately submit that the administrative policy of "duty follows consumption" has been thrown to the winds and instead still head duty has been levied and held payable on all PMFL products and Beer exported outside the Province of Punjab as well w.e.f. 01.07.2015. The consequences which flow from the imposition and compulsory exaction under the impugned Notification have been brought forth in paragraph 12 in the following terms: "As a consequence of the impugned notification the prices of the petitioner's PMFL products and beer in Sindh (Karachi) with effect from 01.07.2015 will be/become as under: A.PMFL Products: Ex-Distillery priceRs.1,000/- Per L.P. gallon Punjab Still Head Excise DutyRs.600/Per L.P. gallon Sindh Abkari Act Excise Duty(inclusive of Vend Fee)Rs.2160/Per L.P. gallon Sales Tax @ 17%Rs.639/-Per L.P. gallon Total:Rs.4,399/- Per L.P. gallon B.Beer: Ex-Brewery priceRs.177/-Per liter Punjab Still Head Excise DutyRs.12/-Per liter Sindh Abkari Act Excise Duty(inclusive
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of Vend Fee)Rs.76/-Per liter Sales Tax @ 17%Rs.45/-Per liter Total:Rs.310/-Per liter 9.It indubitably follows that an amount of Rs.600/- per L.P. Gallon has been added to the price of the PMFL products and Rs.12/- to Beer consumption over and above the price at which these products were being sold and consumed in the Province of Sindh prior to the promulgation of the impugned Notification. 10. The learned counsel for the petitioners has made a frontal attack on the imposition of still head duty by the impugned Notification and his entire reliance is on the free trade provision embodied in Article 151 of the Constitution. This Article reads as under: 151. Inter-Provincial trade.--(1) Subject to clause (2), trade, commerce and intercourse throughout Pakistan shall be free. (2)[Majlis-e-Shoora (Parliament)] may by law impose such restrictions on the freedom of trade, commerce or inter-course between one Province and another or within any part of Pakistan as may be required in the public interest. (3)A Provincial Assembly or a Provincial Government shall not have power to-- (a)make any law, or take any executive action, prohibiting or restricting the entry into, or the export from, the Province of goods of any class or description, or impose a tax which, as between goods manufactured or produced in the Province and similar goods not so manufactured or produced, discriminates in favour of the former goods or which, in the case of goods manufactured or produced outside the Province discriminates between goods manufactured or produced in any area in Pakistan and similar goods manufactured or produced in any other area in Pakistan. (4) An Act of a Provincial Assembly which imposes any reasonable restriction in the interest of public health, public order or morality, or for the purpose of protecting animals or plants from disease or preventing or alleviating any serious shortage in the Province of any essential commodity shall not, if it was made with the consent of the President, be invalid. 11. The learned Assistant Advocate General on behalf of the Government of the Punjab controverts the submissions made by the learned counsel for the petitioners. She submits that the Government of the Punjab is empowered and has the constitutional basis of levying duties of excise in terms of Item No.44 of the Federal Legislative List contained in 4th Schedule of the Constitution according to which the legislative domain of the Parliament does not include duties of excise of alcoholic liquor, opium and other narcotics. According to the A.A.G., there is no warrant for the proposition that the still head duty under the impugned Notification could not have been extended to the products of the petitioner as they are manufactured in the Province of Punjab and have been validly and lawfully imposed. She has also argued that neither any provision of law nor the Constitution bars the Government of the Punjab from the levy of the duty of excise. The still head duty which has been extended to the PMFL and Beer products is a valid piece of legislation under the delegated powers conferred by law. Historical Perspective: 12. The provenance of the power to impose a levy in the nature of duty of excise can be traced to Item No.44 of the Federal Legislative List, 4th Schedule of the Constitution. The learned counsel for the parties are on common ground that the duties on alcoholic liquor, opium and other narcotics is within the legislative domain of the Provincial Assembly. It is also not in dispute that the Still head duty under challenge is a duty of excise. The Act, 1914 is the law which empowers the Province of the Punjab to impose a levy the duty of excise. By section 16(a) of the Act, 1914, no intoxicant shall
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be imported, exported or transported except after payment of any duty to which it may be liable under the Act. Section 31 grants to the Provincial Government to impose a duty on any excisable articles at such rate or rates as may be determined. The duty may be imposed on any excisable article which is imported, exported or transported,manufactured or cultivated or manufactured in any distillery established or any distillery or brewery under section 21. 13.The administrative policy embodying the rule "duty follows consumption" is derived from clause 3.22 of Vol. III in the Punjab Excise Manual. In its preface of Punjab Excise Manual is given the extent and scope underlying the Manual. According to the preface, the Volume contains the important executive instructions of the financial commissioner and supersedes all such instructions given in Vol. III of the Punjab Excise Manual, 1934. Clause 3.22 is reproduced as under: "3.22 The Conference of the Finance Members of all the provinces in British India held at Celhi in November, 1928, to consider the regulation of all transactions relating to the inter provincial export and import of excisable articles laid down the principle that "duty should follow consumption." 14.The learned A.A.G has made a reference to letter dated 29.11.1997 in order to complete the historical narrative in the present petitions. The letter had been written by the Secretary Excise & Taxation, Punjab and is addressed to the Secretary Excise & Taxation Department of the other Provinces. It has been stated in the letter that: "Presently the principle of "Duty Follows Consumption" is being followed while exporting liquor to other provinces. Same principle applies to the liquor imported into Punjab from other provinces, manufactured there. For the liquor and Beer manufactured in Murree Brewery Company the Duty is recovered in Punjab at the time of manufacture and at the rates prescribed by the importing province and it is later on refunded to the province of consumption as laid down in Section 3.22 of the Punjab Excise Manual (Vol-III). There arose a dispute when the province of Sindh unilaterally started issuing duty paid permits and ultimately the release of export of liquor and Beer form Punjab was refused by the province of Punjab. As a result, the Muree Brewery Company approached the Supreme Court of Pakistan through a Constitutional petition and the August Court in a settlement order of the dispute also directed that the issues may be settled with negotiations among the provinces. "4. In the light of the above deliberations, a Summary was submitted to the Chief Minister, Punjab with the following: i. That the Excise and Taxation Department may be allowed to charge Excise Duty (Export Duty) at the following rates on the liquor being exported to other provinces :- a)Beer @ Rs-1/-per litre. b)P.M.F.L. @ Rs.40/- per gallon. (The levy of above export Duty is in line with the provisions of Section 31 & 32 of the Punjab Excise Act, 1914) ii. The Punjab Government may agree to allow the Government of Sindh and otherprovincial Governments to recover still head Duty on their own in order to avoid accumulations of payable on this account by the Punjab Government. 5. The Chief Minister, Punjab vide his order, dated 11.10.1997 has agreed with the above proposals and issued directions for the implementation of proposal at para 4 above. 15.This letter seems to be the precursor to the Notification which was impugned in the judgment reported as (2001 CLC 1842).It refers to a dispute having arisen between the Province of Sindh and Province of Punjab, which was taken to the Supreme Court of Pakistan and by whose orders negotiations took place between the Provinces and as a result the letter dated 29.11.1997 was issued. It will also be noticed that the letter recommends the imposition of an export duty as a duty of excise and which had the approval of the Chief Minister, Punjab vide order dated 11.10.1997. 16.Article 151 of the Constitution has a legal pedigree to which reference has been made by Mr.
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Nasar Ahmad, D.A.G. According to him, the Article has its source in section 297 of the Government of India Act, 1931. It read as under: "297.--(1) No Provincial Legislature or Government shall-- a)by virtue of the entry in the Provincial Legislative List relating to trade and commerce within the Province, or the entry in that list relating to the production, supply, and distribution of commodities, have power to pass any law or take any executive action prohibiting or restricting the entry into, or export from, the Province of goods of any class or description; or b)by virtue of anything in this Act have power to impose any tax, cess, toll, or due which, as between goods manufactured or produced in the Province and similar goods not so manufactured or produced, discriminates in favour of the former, or which, in the case of goods manufactured or produced outside the Province, discriminates between goods manufactured or produced in one locality and similar goods manufactured or produced in another locality. (2)Any law passed in contravention of this section shall, to the extent of the contravention, be invalid." 17. The Constitution of 1956 contained Article 119 relating to Inter Provincial Trade and was to the following effect: "119. Inter-Provincial trade. -No Provincial Legislature or Provincial Government shall have power-- (a)to pass any law, or take any executive action, prohibiting or restricting the entry into, or export from the Province of goods of any class or description ; or (b)to impose any taxes, cesses, tolls or dues which, as between goods manufactured or produced in the Province and similar goods not manufactured or produced, discriminate in favour of the former, or which in the case of goods manufactured or produced outside the Province discriminate between goods manufactured or produced in any locality and similar goods produced in any other locality : Provided that no Act of a Provincial Legislature which imposes any reasonable restriction in the interest of public health, public order or morality shall be invalid under this Article if it is otherwise valid under the Constitution ; but any Bill for this purpose passed by the Provincial Assembly shall be reserved for the assent of the President, and shall not become law unless the President assents thereto. 18. Similarly, the 1962 Constitution gave expression to the concept by inserting Article 142, which read as under: "142. Inter-Provincial trade.--(1) Subject to clause (2) of this Article, the Legislature of a Province shall not have power-- (a)to make any law prohibiting or restricting the entry into, or the export from, the Province of any goods : or (b)to impose a tax which, as between goods manufactured or produced in the Province and similar goods not to manufactured or produced, discriminates in favour of the former goods or which in the case of goods manufactured or produced outside the Province, discriminates between goods manufactured or produced in any locality in Pakistan and similar goods produced in any other locality in Pakistan. (2) No Provincial Law which imposes any reasonable restriction in the interest of the public health, public order or morality or for the purpose of protecting animals or plants from disease or preventing or alleviating any serious shortage in the Province of any essential commodity shall, if it was made with the consent of the President, be invalid by reason of this Article. 19. It will be seen that section 297 of the Government of India Act, 1935 is couched in the same terms as clause 3 of Article 151 of the Constitution whereas Article 119 of the 1956 Constitution is based on section 297 of the Government of India Act, 1935. Clause (1) of Article 151 with which we are concerned here is only subject to clause (2) of Article 151. Clauses (1) and (2) of Article 151 were
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an original contribution to the doctrine of Inter-Provincial trade and significantly alters the periphery of that doctrine in the context of our Constitution. At first blush, it does two things; one, it firmly grounds the right of freedom of Inter-Provincial trade in emphatic terms; second, the power to make law to impose restriction on that right has been reposed in the Parliament and that too in the public interest only. The precise tenor and sweep of Article 151 shall be dilated upon in the proceeding paragraphs of this judgment. 20. The learned D.A.G also placed on record the legislative debates which took place in the National Assembly of Pakistan during the course of Constitution making. The debates relating to Article 151 of the Constitution are contained in an official report published on March 26, 1973. Mr. Abdul Hafeez Pirzada, the mover of the Article had this to say regarding the scope of the Article: "Mr. Abdul Hafeez Pirzada : *sir, this is an extremely important Article. We were guilty of certain omissions in a similar Article under the Interim Constitution which resulted in some very serious troubles between the Provinces. Goods manufactured in one Province were put at disadvantage by imposition of takes so as to destroy the market for those goods in a particular Province. It makes the price so high and incompetetive that people would refrain from buying those goods. In one country, with one economic system and with one economy, this Article is absolutely necessary, and I am glad to see that there is no serious resistance to this Article inasmuch as mere nominal amendments have been suggested by one or two persons, a few amendments which were not even moved. Now here, Sir, I consider it appropriate because this has been an important matter and a very important matter dealing with the Federation--Provinces relationship and also the distribution of power and check authority that is to be exercised by the Federation over the Provinces. I would like to read from paragraph 9 of the Charter of Demands submitted by Prof. Ghafoor Ahmad on behalf of the so-called United Democratic Front to the President of Pakistan, and I would like this to go on record, because Opposition are failing in their duty to come and participate in the task of Constitution-making and in their absence, it is my duty to inform the House what the Opposition, or certain members of the National Assembly sitting across the floor, think about these provisions and what their so-called supporters, political supporters outside the House, under the name of the so-called United Democratic Front also think. This is all that has been said in respect of the relations between the Centre and the Provinces in the Charter of Demands, and I would not have made in public, but since they have themselves made it public in their press conference on the 24th, I will be justified in reading out before this august House, .. "No change in the Legislative List both Federal and Concurrent is desired". This is the stand taken by them. Only minor procedural adjustments are suggested. That is all that they have to say with regard to the distribution of power and division of subjects between the Centre and the provinces and inter- Provincial or Federation-Provinces relationship. They have only suggested very very minor amendments of procedure and legislation and that particular Article has been deferred and no discussion has taken place. Therefore, if no amendments are coming forward on this part of the Constitution, it is understandable because only deduction that we can draw is that no one has any serious objection on this very tricky and sensitive part. 21. The learned D.A.G premised his arguments on the judgment of Chief Justice Marshall of the U.S Supreme Court in Brown v. State of Maryland, 25 U.S 419 (1827). This judgment is the foundational judgment on the commerce clause as embodied in Article 1, section 8 of the U.S Constitution and which regulates commerce with foreign Nations and among the several States. American lawyers and judges typically refer to these words as the "commerce clause". 22.In all interpretation, and in particular the Constitution, we have to look to the enacted…
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