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Petitioner: M/s. Diamond Indus. (Pvt.), Ltd. VS Respondent: Govt of Pakistan and others
Court Name: Peshawar High Court Judge(s): Abdur Rehman Khan Title: M/s. Diamond Indus. (Pvt.), Ltd. vs Govt of Pakistan and others Case No.: W.P. No. 1265 of 1991 Date of Judgment:1994-05-15 Reported As: PTCL 1995 CL. 74 Result: Writ petitions dismissed to some extent.
JUDGMENT
JUDGMENT ABDUR REHMAN KHAN, J.--1. This judgment in W.P. No. 1265 of 1991 (M/s. Diamond Industries (Pvt.) Limited vs. Government of Pakistan and others) will also dispose of and conclude those other writ petitions which are listed along with it in the Cause List and which arise in similar factual background and present identical legal issues, for determination. The particulars of these writ petitions are us under:- 1 W.P, No. 1314/91 Qamar Zaman. vs.Govt, etc. 2 W.P. No. 1333/91. Al-Razak Synthetic.vs.Govt. etc. 3 W.P. No. 1347/91. M/s. Amazai Textile.vs.Govt. etc 4 W.P. No. 1354/91. M/s. Khyber Exlusion.vs.Govt. etc. 5 W.P. No. 1356/91. M/s. Gadoon Packing. vs Govt. etc. 6 W.P. No. 1357/91. M/s. Hayat Indus, vs. Govt, etc. 7 W.P. No. 1358/91. M/s. Khyber Agro Ltd. vs. Govt. Etc. 8 W.P. No. 1379/91. M/s. Khyber Plastic. vs. Govt. Etc. 9 W.P. No. 1381/91. M/s. Rafi Indus, vs. Govt, etc. 10W.P. No. 1382/91. M/s. Noor Aluminium, vs. Govt. Etc. 11W.P. No. 1468/91. Adil Poly Propylene. vs. Govt. Etc. 12W.P. No. 1509/91. M/s. Mehran Comforts, vs. Govt. Etc. 13W.P. No. 1589/91. M/s. Primer Alliance, vs. Govt. Etc. 14W.P. No. 1604/91. M/s. P .I Appliance, vs. Govt. Etc. 15W.P. No. 1627/91. M/s. Alpha Gama Indus, vs. Govt. Etc.
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16W.P. No. 1620/91. M/s. Turkistani Indus, vs. Govt. Etc. 17W.P. No. 1645/91. M/s. Crescent Indus, vs. Govt. Etc. 18W.P. No. 1646/91. M/s. Diamond Corporation. vs. Govt. Etc. 19W.P. No. 1718/91. M/s. Gandaf Steel Indus, vs. Govt. Etc. 20W.P. No. 1756/91. M/s. Gadoon Industries, vs. Govt. Etc. 21W.P. No. 1764/91. Industrial Chemicals, vs. Govt. Etc. 22W.P. No. 1797/91. M/s. Super Star Lorex. vs. Govt. Etc. 23W.P. No. 1790/91. M/s. Mushtaq Silk. vs. Govt. Etc. 24W.P. No. 1865/91. M/s. National Eng. vs. Govt. Etc. 25W.P. No; 1951/91. Yaqoob Industries. vs. Govt. Etc. 26W.P. No. 2022/91. Khyber Spinning, vs. Govt, etc. 27W.P. No. 2194/91. Multiwood & Metal Indus, vs. Govt. Etc. 28W.P. No. 21/92. M/s. Orient Polymera. vs. Govt. Etc. 29W.P. No. 32/92. M/s. Kaghan Mills. vs. Govt. Etc. 30W.P. No. 246/92. M/s. Ashraf Fabrics, vs. Govt. Etc. 31W.P. No. 317/92. M/s. M.B. Yes and Silk. vs. Govt. Etc. 32W.P. No. 375/92. M/s. Dye Chem Industries, vs. Govt. Etc. 33W.P. No. 401/92. M/s. Pak: Muslim Indus, vs. Govt. Etc. 34W.P. No. 485/92. M/s. Havelian Silk. vs. Govt. Etc. 35W.P. No. 525/92. M/s. Margala Packages. Vs. Govt. Etc. 36W.P. No. 620/92. Mairaj Industries, vs. Govt, etc. 37W.P. No. 745/92. M/s. Shiraz Industries. vs. Govt. Etc. 38W.P. No. 1078/92. M/s. Muhammad Shafiq, vs. Govt. Etc. 39W.P. No. 1097/92. M/s. Pak. Mineral W ater, vs. Govt. Etc. 40W.P. No. 1 182/92. Tawakkel Industries. vs. Govt. Etc. 41W.P. No. 41/93. Ice Land Electronics. vs. Govt. Etc. 42W.P. No. 189/93. M/s. Al-Rehman Steel. vs. Govt. Etc. 43W.P. No. 287/93. Abson Industries, vs. Govt, etc. 44W.P. No. 296/93. Alpha vinyl Indus, vs. Govt, etc. 45W.P. No. 393/93. Royal Textile Mills. vs.Govt. Et. 46W.P. No. 578/93. M.Y. Electronic, vs. Govt, etc. 47W.P. No. 830/93. Azad Petro Chemicals. vs. Govt. Etc. 48W.P. No. 915/93. M/s. United Multi Indus, vs. Govt. Etc. 49W.P. No. 1 197/93. M/s. S.S. Furance (Pvt.), vs. Govt. Etc. 50W.P. No. 175/94. M/s. Rana Enterprises, vs. Govt. Etc. 51W.P. No. 1 181/92. M/s. Tawakal Polyster . vs. Govt. Etc. 52W.P. No. 716/93. M/s. Bilal Indus, vs. Govt, etc. 53W.P. No. 661/93. M/s. Zeenat Manufacturers. vs. Govt. Etc. 2. The history of the events which led to the controversy enumerated in the instant writ petition No. 1265 of 1991 is that the inhabitants of the area called as 'Gadoon Amazia' in District Swabi previously cultivated 'Poppy' originally a source of intoxicant opium which was the only cash crop on which they entirely depended for their needs. However, with the introduction of heroin and its considerable and excessive use in Pakistan and in the Western countries and particularly in the U.S.A, the-Government of Pakistan was obliged to destroy the standing Poppy crops by force and to ban its future cultivation. This obviously resulted into total loss of income and jobs to the people of the area which rendered them complete destitute. It was, therefore, decided by the Government to
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set up an Industrial Estate in the said area so as to provide the people of the locality with job opportunities. In order to attract the investors to establish industries in this remote and backward area, a certain package of incentives in form of exemptions from payment of customs duties, sales tax on the machinery, raw materials and components were also provided. It is also stated in the writ petition that the petitioner-company was almost the first to respond to the call of the Government to install an industry in the area. The Chairman and Managing Director of the petitioner-company addressed a letter (annexed 'B') to the Central Board of Revenue to verify the factum of exemption over the raw material to be used in Industrial Estate of Gadoon Amazia and its reply by the C.B.R, was: "It is confirmed that customs duty, sales tax and Iqra shall be exempted on the raw material to be used in the Industrial Units after they are installed in Gadoon industrial area of Swabi." It was also mentioned in the letter that the procedure regulating exemption will be notified in due course. It was on 3.6.1989 that Notification No. SRO 517(I)/89 exempting raw material and components meant for the industries in Gadoon area from whole of customs duties and sales tax was issued. Petitioner was than able to obtain 'NOC' from the Government of N.W.F.P, for Foams and Plastic Goods etc. And after getting loan facilities at the concessional rate, obtained letter of credit and imported machineries and installed the same. The industries of the petitioner were operating in full swing that the impugned Notifications rescinding the earlier various exemptions granting Notifications, were issued. It has been maintained in the Writ Petition that inspire of assurance of the then Chief Minister and the Ministry of Law and Justice that the concessions would not be withdrawn, the impugned rescinding Notifications were still issued. The petitioner approached the Prime Minister and the Minister for Finance and Commerce, the Interior Minister and Chief Minister of N.W.F.P! For redress but with no success. It was stated that the unanimously passed Resolution of the N.W.F.P. Assembly dated 29th November, 1990 in support of continuance of the concession was not heeded to. The colossal financial loss to the industries, employees and all other affecters was further highlighted. In the writ petition the validity of the withdrawn Notification was challenged on these grounds:-- (1) The principle of locus Poenitentiae in law is available to the said respondent only till a decisive step is taken. But as effective steps had already been taken in the matter, therefore, no such power was available to them now. (2) provision of Section 21 of the General Clauses Act would not be attracted when vested rights had already accrued. (3) Promissory estoppel was pleaded against the respondents. (4) These Notifications would lead to undoing everything which has been done so far. (5) The impugned Notifications are mala i.e in nature. (6) Respondents No. 1 and 2 are bound in law and morality to the inhabitants of the locality to keep intact the Notifications as they had been given the undertaking that they shall be 'provided with alternative means of livelihood. (7) Unanimous resolution of the NWFP Assembly should have been honoured. (8) It is mentioned in condition No. 3 of SRO No. 517(I)/89 that when concession is claimed on components, "the manufacturer shall chalk out deletion programme spreading over a maximum period of i.e years within which period he shall achieve a minimum deletion to the extent of 15% of the C&F value of the inputs of the manufactured items, and the continued availability of the exemption under this notification shall be contingent upon (a) the achievement of progressive annual deletion as approved by the Central Board of Revenue or the Ministry of Industries as the case may be and (b) use of locally manufactured deleted items;". 3. Respondents 1, 3, 4 and 5 filed comments to the writ petition wherein they raised, interalia, the following preliminary objections:--
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(a) In view of the relevant law 'and authoritative judgments of the superior courts the power of the Government of Pakistan regarding withdrawal of the exemption could not be challenged; (b) the effect of the concession was to discriminate against all other identical units in other parts of the country. Moreover, similar industries in other area in Pakistan were operating in great disadvantageous position and the continuance of the concession would have resulted in their bankruptcy; (c) the concessions were mis-used to the disadvantage of the employees, other industries and the Government exchequer and that it was, therefore, in the larger interest of the public-at- large to withdraw the concession. In respect of the factual aspect of the writ petitions it was stated that the existing concessions are reasonably sufficient and that "the Government will continue to take measure to prevent the illegal cultivation of poppy and provide other beneficial scheme for the area from time to time." It was also averred that the mis-use of concession by the industrialists in every square and field of operation frustrated the very purpose of the concessions. 4. The learned Senior Advocate, Syed Sharifiddin Pirzada, while arguing in support of the view point at the outset referred to the aims and aspirations for the fulfilment of which the Industrial Estate of Gadoon Amazia was established. It was emphasized that the sole object for setting up this Industrial Estate was to compensate the poppy growers on account of ban on its cultivation and to achieve this goal the incentive, encouragement and goad in shape of various exemptions were provided to the Industrialists. He was of the view that no industrialist would have invested his capital because of the absence of infrastructure in the area and also on account of unattractive and remote nature of the area and that these concessions were the only driving force to prompt the entrepreneurs to set up industry. In this context he produced an advertisement which is marked 'AA' on behalf of Sarhad Development Authority in daily 'Nation' dated 15th November, 1987 titled as "A Land Mark in. The Industrial Development of N.W.F.P." wherein 15th November, 1987 was given as a date for laying foundation stone by the Chief Minister and which gives the details of the exemptions and incentive to the industrialists. Another advertisement in Daily 'Muslim' dated 24th November, 1987 was also placed on record marked 'BB' whereby applications from prospective enterprisingness for allotment of plots in Gadoon Amazia Industrial Estate were invited. This advertisement reiterates the exemptions as given in the document marked 'AA'. He contended that the above concessions were not considered enough by the investors till the Government has to issue SRO 517(I)/89 dated 3rd June, 1989 which in fact prompted the investors to make huge investments and that the development of the Industrial Estate Gadoon Amazia in fact commenced flourishing. He then referred in detail to the various Notifications whereby concessions were granted and by which these were withdrawn. It will be appropriate to give necessary particulars of those Notifications: Notifications granting concessions: Imported Machinery 1.Income Tax. Vide S.R.O. 658(I)/81 dated 25th June, 1981. 2.Import Surcharge. Vide S.R.O. 480(I)/88 dated 26th June, 1988. 3.Iqra Surcharge. Vide S.R.O. 481(I)/88 dated 26th June, 1988. 4.Customs Duty Vide S.R.O. 530(I)/90 dated 7th June, 1990. 5.Sales Tax. Vide S.R.O. 530(I)/90 dated 7th June, 1990. For raw material 1.Customs Duty Vide S.R.O. 517(I)/89 dated 3rd June, 1989. 2.Sales Tax. Vide S.R.O. 517(I)/89 dated 3rd June, 1989 3.Iqra Surcharge. Vide S.R.O. 677(I)/89 dated 28th June, 1989.
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4.Import Surcharge. Vide S.R.O. 678(I)/89 dated 28th June, 1989. Notifications withdrawing the concessions: (i) S.R.O. 419(I)/91, dated 9th May, 1991 whereby Notification No. 517(I)/89 dated 3rd June, 1989 was rescinded. (ii) S.R.O. No. 420(I)/91 of even date by which Notification No. 480(I)/88 dated 26th June, 1988 was amended. (iii) S.R.O. No. 421(I)/91 of even date whereby Notification No. 481(I)/88 dated 26th June, 1988 was modified. It was submitted that in order to confirm the factual position as appearing in the said two advertisements and the Notifications granting the exemptions the Chairman of the petitioner wrote a letter dated 13th February, 1988 to C.B.R, to get certain clarification. In reply dated 19th February, 1989 from the Second Secretary C.B.R. Islamabad Annexure 'B' the availability of these exemptions were confirmed. He submitted that keeping these assurances in view the petitioner-company was incorporated on 18th June, 1989, the machinery was imported in September, 1989 and the production was started in November of the same year. He submitted that industrialists of Karachi and Faisal Abad started protest against the concessions allowed to Gadoon Amazia Industrial Estates which induced the Government to issue rescinding Notifications detailed above. Syed Sharifiddin Pirzada learned counsel for the petitioners criticised the rescinding Notifications on the ground that these have impaired and demolished the vested rights which had accrued to the investors petitioners. He stressed that no one is competent to adversely affect the rights which becomes vested in someone either by process of law, passage of time or in any other legitimate and recognized manner. He further elaborated this point and argued that these vested rights are protected and to be kept intact by the principle of promissory estoppel. The first judgment which he relied in support of this doctrine was Federation of Pakistan and others v. Ch. Muhammad Aslam and others (1986 SCM R 916). It has been laid down in this judgment that if a contract is legally constituted one and which had given rise and liabilities enforceable by law then such contract created vested rights which are to be protected and' preserved by the aid of the principle of promisson Estienne. He then referred to Al-Samrez Enterprise v. The Federation of Pakistan (1986 SCMR) appearing in the same book on page 1917 whereby the same enunciation of law has been re-iterated and it has been laid down therein that vested rights which had accrued on account of binding contract could not be taken away and the Government is not empowered to do so under section 21 of the General Clauses Act. The learned counsel for the petitioner then referred to a case Pakistan through Secretary, Ministry of Commerce and 2 others v. Salahuddin and 3 others (P.L.D. 1991 S.C. 546) in support of his plea of promissory estoppel and pointed out that this doctrine is applicable against the Government in exercise of its executive, public or governmental actions and none of the limitations as laid down in certain judgments and also enunciated in this judgment were attracted so as to bar the applicability of this principle to the present case. He next referred to Messrs Army Welfare Sugar Mills Ltd. v. Federation of Pakistan and others (1992 SCM R 1652) and argued that it contains elaborate and comprehensive discussion on the doctrine of promissory estoppel and that numerous precedent cases have been referred so as to fully explain the circumstances under which this doctrine would be attracted and also those which. Would not attract its applicability. It has been laid down in the judgment that if an exemption from payment of excise duty or any other tax has been granted for a specified period on certain conditions and if a person fulfils those conditions, he acquires a vested right, he cannot be denied the exemption before the expiry of the specified period through an executive instrument like a notification but he can be denied his vested rights by a legislative provision. It was also held therein , that the doctrine of promissory
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estoppel is available in Pakistan against the Government and its functionaries, subjector, inter alia, following limitations:- (i) The doctrine of promissory estoppel cannot be invoked against the legislature or the laws framed by it because the legislature cannot make a representation; (ii) Promissory estoppel cannot be invoked for directing the doing of the thing which was against the law when the representation was made or the promise held out; (iii) No agency or authority can be held bound by a promise or representation not lawfully extended or given; (iv) The doctrine of promissory estoppel will not apply where no steps have been taken consequent to the representation or inducement so as to irrevocably commit the property or the reputation of the party invoking it; and (v) The party which has indulged in fraud or collusion for obtaining some benefits under the representation cannot be rewarded by the endorsement of the promise. The learned counsel again placed refinance on the following extract from Al-Samrez Enterprise case:-- "The subsequent notification impugned in this case was issued in exercise of statutory power and has the force of a statutory instrument. Accordingly the Rules of a statutory construction are attracted to the interpretation and determination of its legal effect. It is well settled that an enactment which prejudicially affected vested rights or the legality of past transactions, or impairs contracts cannot be given retrospective operation. Thus, Maxwell's interpretation of Statutes, 1962 Edition at page 206 observed: "Every statute, it has been said, which takes away or impairs vested rights acquired under existing laws or creates a new obligation, or imposes a new duty, or attached a new disability in respect of transactions or considerations already past, must be presumed, out of respect to the legislature, to be intended not to have a retrospective operation." Again., "We are, therefore, dearly of the opinion that if a binding contract was conduced between the appellants and the foreign exporter or steps were taken by the appellants creating a vested right to the then existing notification granting exemption, the same could not be taken away and destroyed in modification of the earlier one, on the ground that under section 21 of the General Clauses Ad, the Government could exercise the power of modification." The learned counsel further supported his view by a rule laid down in similar circumstances in a judgment of the Supreme Court of India reported as ALR. 1979 SC 621 (M/S Motilal Padampat Sugar Mills Co. Ltd. Vs. The State of Uttar Pardesh and others). In this judgment the original history of the gradual development of doctrine of promissory estoppel has been traced and finally the circumstances and - parameters which would and those which would not justify invaliding of this principle against the Government have been indicated. It so happened in that case that on appearance of news item in a certain News Paper therein it was stated that the State has decided to give exemptions from sales tax to new industries in the State so as to enable them to have a firm basis at the initial development stager,-prompted the appellant in that case to start an Hydrogenation plant for manufacture of "Vanaspati". The appellant also sought confirmation about the exemptions from the Director of Industries and the Chief Secretary and on their assurance about the concession he managed to get financial assistance and ultimately established the factory. The State Government, however, resiled from the assurance as initially promised concession and ultimately rescinded the concession in toto. The writ petition against the withdrawal of the exemptions failed before the High Court but the Supreme Court of India while allowing the appeal of the appellant found him entitled to the concession promised by the Government on the basis of the doctrine of promissory estoppel. The characteristic and bingling effect of the doctrine was explained in this manner:
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"It is elementary that in a republic governed by the rule of law, no one, howsoever high or low, is above the law. Every one is subject to the law as fully and completely as any other and the Government is no exception. It is indeed the pride of constitutional democracy and rule of law that the Government stands on the same footing as a private individual so far as the obligation of the law is concerned; the former is equally bound as the latter. It is indeed difficult to see on what principle can a Government committed to the rule of law, claim immunity from the doctrine of promissory estoppel? Can the Government say that it is under no obligation to Act in manner that is fair and just or that it is not bound by considerations of" honesty and good faith"? The learned counsel next claimed entitlement of the petitioner to the relief in the writ petition on the basis of the principle of reasonable expectations and in support of his submission on this point he referred to the judgments in all England Law Reports "Attorney General of Hong Kong v. Ng. Yuen Shiu (1983) 2 ALL ER 346". A brief resume of this decision in the context of the present case is that a person is entitled to a fair hearing before a decision adversely affecting his interest is made by a public official or body, if he has 'a legitimate expectation' of being accorded such a hearing. This principle was further clarified, 'The justification it is-primarily, that, when a public authority has promised to follow a certain procedure, it is in the interest of good administration that it would act fairly and should implement its promise, so long as implementation does not interfere with the statutory duty. The principle is also justified by the further consideration that, when the promise was made, the authority must have considered that it would be assisted in discharging its duty fairly by any representation from interested parties and as a general rule that is correct." It was, therefore, contended that the arbitrary and ex parte withdrawal by the Government of the concession offends against the doctrine of 'legitimate or reasonable expectations'. Last the doctrine of locus poenitentiae was highlighted in order to assert that the petitioner having been induced to act on the assurance and undertaking of the respondent and having actually acted in handling and operating the factory cannot be denied the benefit of the exemptions under this doctrine. Reliance for the proposition was placed on P.L.D. 1970 SC 439 (Collector of Central Excise etc v. Azizuddin Industries Limited). In this judgment too the rule of law that vested rights could not be taken away retrospectively by executive action has been reiterated. The other learned counsel who pleaded for the petitioner was Mr. Ijaz Hussain Batalvi who also adopted the points raised by Syed Sharifiddin Pirzada and he also commented on the backward nature of the area, cultivation of poppy and the necessity to ban its cultivation and to give incentive for setting up Industrial Estate. He was critical of the Government policy of withdrawal of the concession as according to him this treatment with the domestic investor would definitely discourage the foreign investors and would harm its credibility. 5. Mr. S.M. Zafar represented the respondents and while clarifying the factual position explained that by Notification No. 419 dated 9th May, 1991, the exemptions in customs duties and sales tax on raw materials and component granted by Notification No. 517 dated 3rd June, 1989 were withdrawn while by Notifications No. 420 and 421 dated 9th May, 1991 the concession of import surcharge and Iqra surcharge extended by Notification No. 517(I)/89 dated 3rd June, 1989 were rescinded. He also referred to the exemption of 50% in the electricity bill and the concessional rate of mark up by the State Bank and tax holiday for 10 years and some similar concessions. He wanted to show that those concessions which remained intact are sufficient to put the industries of this area in a better position at the initial stage of development than the industries in the other parts of the country. He also pointed out that no period has been fixed for exemption in any of the exempted Notification with obvious intention that the Government would be free to discontinue the exemption at any time. In this context it was argued that in absence of any specified period of exemption the…
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