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Petitioner: Ayaz Texile Mills Ltd. VS Respondent: Federation Of Pakistan Through Secretary
Court Name: Lahore High Court Judge(s): Mian Nazir Akhtar Title:Ayaz Texile Mills Ltd. vs Federation Of Pakistan Through Secretary
JUDGMENT
Reported As: PTCL 1993 CL. 746 Result: Petitions accepted. Judgment JUDGMENT MIAN NAZIR AKHTAR, J.--1. This judgment will dispose of Writ Petitions Nos. 961 and 1060 of 1990, as well as Writ Petitions Nos. 917, 918, 919, 920 of 1990, 378/1991, CL. 759 385/1991, 431/1991, 432/1991, 475/1991, 485/1991, 492/1991, 493/1991, 517/1991, 519/1991, 526/1991, 527/1991, 530/1991, 531/1991, 539/1991, 540/1991, 586/1991, 595/1991, 606/1991, 610/1991, 611/1991, 659/1991, 663/1991, 664/1991, 676/1991, 677/1991, 681/1991, 772/1991, 773/1991, 774/1991, 786/1991, 824/1991, 825/1991, 826/1991, 852/1991, 890/1991, 891/1991, 919/1991, 920/1991, 921/1991, 923/1991, 928/1991, 965/1991, 967/1991, 973/1991, 974/1991, 981/1991, 998/1991, 1001/1991, 1018/1991, 1020/1991, 1031/1991, 1057/1991 and 1201/1991 in which common questions of law and facts are involved. 2. The petitioner, a public limited company was conceived to set up a Textile Weaving Mill at Mauza Nandka Takia, Kasur, Kot Radha Kishan Road, District Kasur. The petitioner started the preliminary arrangements and claimed to have entered into agreements with foreign investors for availing of the benefits of the Rural Industrial Development Incentive Scheme which, inter alia, allowed exemption from customs duties, sales tax, income-tax and licence-i.e. The petitioner applied for grant of import licence without payment of licence i.e but by means of the impugned order he was required to deposit 6% licence i.e for issuance of the Import Licence. 3. The petitioner's learned counsel contended that in order to provide incentive to rural industries, the Government of Pakistan had announced various incentives through notification dated 13th September, 1990. Acting upon the promises and incentives contained in the notification, the
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petitioner took effective steps for setting up the Industrial Unit, procured land in the rural area, negotiated with foreign suppliers and then applied for grant of import licence without payment of licence i.e but the same was illegally withheld and an uncalled for demand of licence i.e at the rate of 6% ad valorem was made. He submitted that the petitioner had acquired a vested right to the grant of licence without payment of licence-i.e as he had acted on the promise of total exemption made by the Government. He further submitted that the i.e levied legally amounted to a tax as it had no nexus with the services rendered by the respondent in the matter of issuance of the Import Licence. In support of his contentions he placed reliance on the following judgments:- (1) Pakistan and another v. Hussain Ali Shah A. Fazlani PLD 1960 SC 310. (2) Mian Fazal Din v. Lahore Improvement Trust, Lahore and another PLD 1969 SC 223. (3) Federation of Pakistan and others v. Ch. Muhammad Aslam and others 1986 SCMR 916. (4) Mahbooh Yar Khan and another v. Municipal Committee, Mian Channu and 2 others PLD 1975 Lahore 748. (5) M/s. Lever Brothers (Pakistan) Ltd., Karachi v. Market Committee, Rahimyarkhan through its Chairman and another PLD 1980 Baghdad-ul- Jadid 23. (6) Noon Sugar Mills Ltd. v. Market Committee and others (PLD 1989 SC 449). (7) Rahimullah Khan and 65 others v. Government of N.-W.F.P, through Secretary, Agricultural Forest and Cooperation Department, Peshawar and 5 others 1990 CLC 550. (8) Sindh Glass Industries Ltd. v. Chief Controller of Import and Export, Islamabad and 2 others 1990 CLC 538. (9) Sh. Muhammad Ismail & Co. Ltd., Lahore v. The Chief Cotton Inspector, Multan Division, Multan and others PLD 1966 SC 388. (10) Hirjina Salt Chemicals (Pak.) Ltd. v. Union Council, Gharo and others 1982 SCMK 522; and (11) Robertson v. Minister of Pensions (All England Law Reports (1948) 767). 4. Mr. Umar Ata Bandial, learned counsel for the petitioner in W.P. No. 385/91 etc. Urged that there was no distinction in old and new units in the matter of grant of Import Licence. He submitted that the levy of i.e for grant of licence is permissible under para. 3 of the Licence and Permit Fee Order, 1979 but under the garb of the licence-i.e, the Government had levied a tax without legislation. He submitted that the total expenditure on the office of the Chief Controller of Import and Export does not exceed rupees 10 crore while the revenue collected from the licence-i.e exceeded hundred Crores. The surplus amount is accumulating year after year because the recovery far exceeds the expenditure on services rendered through the office of Import and Export. He pointed out that during a short period of 5 years the licence-i.e was increased from 2% to 4% and finally to 6% which was arbitrary, unreasonable and unjustified. 5. M/s. Tariq Javaid and Ashtar Yusaf Ali, Advocates who appeared for some of the petitioners
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urged that on satisfying the condition for grant of licence, the licence had to be issued by the authorities in accordance with the law. Hence, grant of licence, in a sense, is right of the citizens. They added that after announcement of the incentives to allow import licence without payment of licence-i.e, the Government could not retrace its steps particularly when the petitioners had taken effective steps for the purpose of setting up of the Industrial Units and grant of licence. They emphasised that the charge, though terms as i.e, amounted to a tax. Lastly, all the learned counsel for the petitioners prayed that if the basic arguments on the petitioners' side that they were entitled to total exemption and that the i.e imposed was a tax, were not accepted then licence-i.e at the rate of Rs. 2% being reasonable was acceptable to them. They pointed out that in the recent Notification 154(I)/92 dated 2nd March, 1992 the Government had reduced the licence-i.e to 2%. They pointed out that it was done on the representations and protests of the petitioners and the Government could no longer insist that licence-i.e at the higher rate of 4 or 6 per cent, was justifiable. According to them, the recent notification will take effect from It December, 1990 by virtue of the provisions of earlier Circular No. 6(12)/90 dated 17th December, 1990, in all the cases in which import licence was applied for after It December, 1990. They urged that the distinction in the old and new units was put an end to and licence-i.e at the rate of Rs. 2% ad valorem was prescribed for new units as well as for expansion, balancing modernization and replacement of machinery. 6. Kh. Muhammad Akram, Advocate who appeared for petitioners in Writ Petitions Nos. 917 to 920 of 1990, urged that under the provisions of section 3 of the Act, the Government can levy i.e only in respect of an appeal, review or revision petition filed under the Act and not for grant of licence. He laid emphasis that the expression, "charging of fees in respect of any such matter" occurring in section 3 was confined to i.e for appeals, review or revision petitions. He added that if it was held that i.e could be charged for import licence, even then the i.e levied by the Government was liable to be struck down as it amounted to a tax. Lastly he urged that licence i.e in excess of 2% was illegal being unreasonable and exorbitant. 7. On the other had, Mr. Mansoor Ahmad and Mr. Mumtaz Ali Mirza, learned Standing Counsel urged that the Government had lawfully levied the licence-i.e of 6% ad valorem which did not amount to a tax. They submitted that the question of services rendered alone was not sufficient to judge the validity of the i.e imposed and that grant of import licence was a privilege and the Government, in its own discretion, could fix a reasonable amount for granting the privilege to citizens. Mr. Mumtaz Ali Mirza, learned Standing Counsel particularly emphasised that in the absence of permission to import certain goods if the same are imported in the country it would amount to the offence of smuggling. They submitted that the 6% licence i.e was justified being a charge for the privilege granted plus the services rendered for the said purpose. They also submitted that all the petitioners were not entitled to the benefit of the incentives announced for promoting the industrial activity in the rural areas. They submitted that the 'incentives were available only to new Industries set up in rural areas and not the old units. They pointed out that the following writ petitions pertained to licence for replacement of machinery and not for new industrial units. Writ Petitions Nos. 431, 432, 475, 493, 530, 539, 540, 586, 606, 663, 664, 677, 772, 773, 774, 786, 890, 891, 921 and 1001. They submitted that the only case of new Industry was that of Ayaz Textile Mills Ltd. (W.P. 961/1990). They further submitted that the concession of free import licence was denied in case of Writ
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Petitions Nos. 385, 431, 432, 475, 526 and 527 because the machinery intended to be imported was locally manufactured. 8. In reply to the above contentions of the learned Standing Counsel, the petitioners' learned counsel submitted that the respondent never filed any written statement to controvert the averments made in the writ petitions (except W.P. 961/1990) which can be presumed to be correct. They particularly pointed out that it was mentioned in each writ petition that the industrial unit was set up or was to be established in a rural area and that the machinery sought to be imported was not locally manufactured. These facts were not controverted by the respondents by filing their written statements. At any rate, they added that the said facts could be ascertained by the competent authority while considering the applications for grant of licence. They further submitted that the enhancement of licence i.e from 2% to 6% was unreasonable and clearly amounted to a tax. In this connection they pointed out that under the garb of i.e the Government had collected revenue which was normally done by the Government through the mode of taxation. They further submitted that condition of new unit was waived in the circular dated 17th December, 1990. However, in the cases of Ayaz Textile Mills Ltd. (Writ Petition No. 961/90) and Mandiwal (Writ Petition No. 1201/1991) the earlier notification dated 13th September, 1990 applied which provided total exemption from licence fee. 9. Arguments in the case were again heard at the principal seat and the petitioners' learned counsel reiterated the above referred arguments. On behalf of the respondents Mr. Faqir Muhammad Khokhar the learned Deputy Attorney-General appeared and urged that the import of machinery was a concession or privilege which could be regulated by law by virtue of the provisions of Article 18 of the Constitution of Pakistan. For the said purpose, the Government can competently levy i.e for grant of the privilege and services rendered. According to him, the field of import and export involved multifaced activities encompassing the following:-- (1) Policy formulation in the context of over all economic and sociol-political scenario. (2) Implementation of Import and Export Policy. (3) Establishment of trade links with the rest of the world. (4) Trade promotional activity organised by Commercial Sections of the Pakistani Embassies abroad. (5) Training of personnel both within the country and abroad. (6) Export promotional activity undertaken by Export Promotion Bureau of the Government of Pakistan. (7) Registration of Importers and Exporters. (8) Grant of Import/Export licences and permits in pursuance of the import and export policies. He submitted that the import and export activity was not merely confined to run the office of Chief Controller of Imports and Exports but. Covered expenditure for the Ministry of Industries, the National Tariff Commission a number of trade offices, Export Promotion Bureau, Trade Marks
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Registry, Department of Insurance and Foreign Trade Institute of Pakistan, provision of facilities for foreign exchange and services at sea and airport. He further submitted that in the circumstances of the case, respondents may not be penalised for the failure of the law officer at Rawalpindi to i.e written statements on behalf of the respondents. He prayed that the question of eligibility for grant of import licence and other factual matters may be left to be decided by the concerned authorities. 10. The first question which arises is as to what is the true meaning and connotation of the word "i.e". This word has neither been defined under the Imports and Exports Act, 1950 nor under the Licence and Permit Fee Order, 1979. Hence, we have to fall back upon the ordinary dictionary meaning of the word. According to the Webster's New International Dictionary, Volume 1, page 928 the word 'i.e' means "the charge fixed by law for the services of a public officer or for the use of privilege under the control of the Government. According to Funk and Wagnalls Encyclopedic College Dictionary, page 487 i.e is a charge, compensation or payment for something, especially for something not strictly computable in terms of money (b). The same charge for some privilege: membership i.e. Thus "fees" may be of various kinds, for example i.e for admission to a college, university, a club or a society or for professional and skilful services rendered by a Doctor, Lawyer, an Engineer or for services of public functionaries. It may be a payment settled through private contract or fixed by or under the law. It is a charge for something, may be a privilege conferred or services rendered, which cannot be accurately computed in terms of money and is left to be decided either through agreement or by the law or the statutory authorities in their discretion. When i.e is fixed by law or under the authority of law it is also compulsory exaction like a tax because there is an element of compulsion in such levies. Generally an element of quid pro quo is present in case of a i.e but absent in that of a tax. 11. The citizens enjoy the right to enter upon any lawful profession or occupation and conduct any lawful trade or business but the same can be regulated by a licensing system as provided under Article 18 of the Constitution of Pakistan, 1973. Similar provisions were embodied in Articles 12 and 6 of the Constitutions of 1956 and 1962, respectively. The import and export activity is regulated through the Imports and Exports (Control) Act, 1950. Section 3 of the Act reads as under:-- "3.; Powers to prohibit or restrict imports and exports.-(1) The Federal Government may, by order published in the official Gazette and subject to such conditions and exceptions as may be made by or under the order, prohibit, restrict or otherwise control the import or generally all practices (including trade practices) and procedure connected with the import or export of such goods, and such order may provide for applications for licences under this Act, the grant, use, transfer, sale or cancellation of such licences and the form and manner in which and the period within which appeals and applications for review or revision may be preferred and disposed of, and the charging of i.e in respect of any such matter as may be provided in such order. (2) No goods of the specified description shall be imported or exported except in accordance with the conditions of a licence to be issued by the Chief Controller or any other officer authorised in this behalf by the Federal Government. (3) All goods to which any order under sub-section (1) applies shall be deemed to be goods of which the import or export has been prohibited or restricted under section 16 of the Customs Act, 1969 (IV of 1969), and all the provisions of that Act shall have effect accordingly.
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(4) Notwithstanding anything contained in the aforesaid Act Federal Government may, by order published in the official Gazette, prohibit, restrict or impose conditions on the clearance whether for home consumption (or warehousing) or shipment abroad of any imported goods or class of goods." Thus the Government enjoys the powers to prohibit, restrict or otherwise control import and export of goods or allow it subject to regulations relating to trade practices or grant of licences. 12. Before proceeding further I may advert to the arguments raised by Kh. Muhammad Akram, Advocate. His contention- that the expression, "and the charging of fees in respect of any such matter as may be provided in such order" occurring at the end of sub-section (1) of section 3 of the Act was relatable only to appeals, review or revision petitions, has no force. It covers all matters figuring in section 3 including orders to prohibit, restrict or control the import or export of goods or to regulate all practices and procedures connected with the import or export or such goods as well as provisions for applications for grant of licences under the Act, the manner and the period within which an appeal, review or revision can be filed and levy of i.e thereon. Thus fees can be levied for grant of licences under the Act or in respect of the appeals, review or revision petitions arising out of the orders passed on applications for grant of Import Licence. 13. By virtue of the authority vested in the Government, the Ministry of Commerce, Government of Pakistan or the Chief Controller of Imports and Exports has been issuing various orders and notifications etc including the Import Policy Orders, Import Trade Control Order, Export Trade Control Order, Quality Control Order, Registration of Importers and Exporters Orders, Appeal, Review and Revision Order, Import Licences and Permit Fees Orders etc Under the Import Policy. Order, 1990 it was provided in para. 2.1 (Chapter II) that no import under this Order shall be made except on the authority of the import licences (which shall be valid for Sea, Air or Land route) issued by the licensing authority. Subject to the prohibitions and conditions contained in the Order which applied to a limited number of items, all other items were freely importable. The Textile machinery was also one of the prohibited items and could be imported only under the authority of a licence and subject to the conditions prescribed therein.. The import licence is granted on the payment of the prescribed licence i.e. Initially the licence i.e required under the orders issued in pursuance of the provisions of section 3 of the Act was only 1%. In the year 1979 it was raised to 2%. Thereafter in the year 1987 it was raised to 4% through S.R.O. No. 487(I)/87 dated 13th June, 1987. Again in June, 1989 it was raised to 5% through S.R.O. No. 570(I)/89 dated 4th June, 1989. Finally, through S.R.O. No. 590(I)/90 dated 7th June, 1990 it was raised to 6% ad valorem. 14. On 4th June, 1990 the Government issued Policy Letter No. 6(12)/90-E dated 4th June, 1990 with the declared objective of encouraging and promoting Industrial growth in the rural areas. It was noted with concern that the industrial development tended to concentrate in and around the metropolitan areas which resulted in migration of large population from rural to urban areas creating sociol-economic and administrative problems. Hence, it was thought necessary to offer some incentive to the investors for preferring rural areas for installing new industries. The policy letter applied to all new industries in rural areas and embodied a number of concessions including tax holiday for 8 years, transmission of technology to the rural entrepreneurs on nominal rates, etc. Specific package of incentives included the following benefit: "Imported machinery for rural industries would be totally exempted from the payment of customs duty, sales tax and licence i.e provided such machinery was not manufactured in Pakistan. Iqra, and import surcharge would continue to levy on imported machinery."
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15. Thereafter, the second industrial policy Circular No. 6(12)/90 was issued on 31st July, 1990. It clearly defined the "rural area" and excluded certain areas specified therein. It also talked of new industries in rural areas. The third Circular No. 6(12)/90-Policy was issued by the Ministry of Industries on 13th September, 1990 which revised the definition of "rural areas" and the scope of the Industries to be benefited under the scheme. The circular excluded the industries relating to fertilizer, cement, assembly of automobiles, oil refineries and Sugar Mills. It may be mentioned that earlier the scheme was known as the Rural Industry Scheme but through the third circular its name was changed to Rural Industrial Development Incentives. It was stated in the circular that the areas/industries qualifying for concessions under package (B) of the Incentives would be notified shortly under the Scheme, there was no reference to new or old units. It further said that the imported machinery for rural areas would be totally exempted from the payment of customs duty, sales tax and licence i.e provided that such machinery was not manufactured in Pakistan. In para. 4 of the third policy letter it was stated as under:-- "Necessary notification/S.R.O. To implement the Rural Industrial Development Incentives in the light of the above decision of the Government shall be issued by the Ministry of Finance and Central Board of Revenue." The fourth Circular No. 6(12)/90-Policy was issued on 17th December, 1990. It abolished the restriction on the industries relating to fertilizer, cement, automobiles, oil refineries and sugar mills and made them eligible for the fiscal concession announced by the Government. It embodied the following incentives approved by the Government. (i) Five years income-tax holiday will be available to all industries set up in rural areas provided such industries are set up between It December, 1990 to 30th June, 1995. These concessions will be applicable only to income generated from that particular industry. (ii) Imported machinery for Rural Industries would be totally exempted from the payment of customs duty, sales tax and import surcharge provided such machinery is not manufactured locally. Import Licence i.e has also been reduced from 6% to 2% for all such industries established in the rural areas. (iii) Government institutions will acquire necessary technology from abroad for its transmission to the rural entrepreneurs on nominal rates. These institutions will provide required technical assistance and marketing expertise for rural industrial projects. (iv) No question would be asked about the source of investment, provided L/Cs are established or contracts for local plant and machinery are signed by 30th June, 1992. Debt Equity Ratio for all industrial units has been fixed at 70:30 instead of 60:40, in case of projects based on imported machinery. For projects involving local machinery the Debt Equity Ratio of 80:20 has been fixed. (v) Creation of power generation by the entrepreneurs of such industries individually or collectively will be encouraged and in case where there is excess of electricity after meeting own demands WAPDA will purchase the same. 16. It was mentioned in para. 4 of the above policy letter that necessary notification/S.R.O. To implement the rural industrial development incentives in the light of the above decision of the Government had been issued by the Ministry of Finance and Economic affairs. Thus the incentives announced through fourth policy letter dated 17th December, 1990 were enforced through the necessary notification/SRO.
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17. The tax holiday was admissible for the industries set up in rural areas between It of December, 1990 to 30th of June, 1995. The licence i.e for all such industries was reduced from 6% to 2%. Thus, practically the policy had to take effect from It of December, 1990. Lastly, the Government issued S.R.O. No. 1317(I)/90, dated 22nd December, 1990 which amended the Licences and Permits Fee Order, 1979 by introducing the following proviso therein;-- "Provided that the rate of i.e on import licences or import permits required for import of machinery not manufactured in Pakistan and intended to be installed in Rural Areas as defined in Ministry of Industries Circular No. 6(12)/90-Policy dated 17th December, 1990 shall be 2% ad valorem." 18. Thus, the earlier policy of allowing complete exemption from payment of licence i.e was not given effect to by the Government. The argument that the Government was estopped from backing out of its earlier assurances/ commitments of allowing complete exemption, has no force. It was the statutory authority of the Federal Government to impose the licence i.e and it had levied licence i.e which at the relevant time was 6% ad valorem. The principle of promissory estoppel cannot be invoked against the statute. Instead of allowing complete exemption, the Government allowed a number of other concessions to the industries established in the rural areas and also…
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