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Petitioner: PAKISTAN TOBACCO COMPANY LTD. and others VS Respondent: GOVERNMENT OF N.-W.F.P. JUDGMENT
Court Name: Supreme Court of Pakistan Judge(s): Iftikhar Muhammad Chaudhry, Hamid Ali Mirza, Mian Muhammad Ajmal Title:PAKISTAN TOBACCO COMPANY LTD. and others vs GOVERNMENT OF N.-W.F.P.
JUDGMENT
Reported As: PLD 2002 Supreme Court 460 Result: Order accordingly Judgment JUDGMENT IFTIKHAR MUHAMMAD CHAUDHRY, J.--These appeals with leave of this Court are directed against the judgment of Peshawar High Court, dated 20th October, 1997 passed in appeals filed by Pakistan Tobacco Company Ltd. Etc. And N.-W.F.P. Through Secretary Law and others, which are being disposed of by this common judgment as identical questions of law for interpretation by this Court are involved. 2. It is not necessary to note facts of each case in detail except that private appellants deal in 'Tobacco' business and they have established their Factories for this purpose in different Provinces of country except the Province of Balochistan. It is a known fact that the Province of N.-W.F.P. Is a major grower of Tobacco crop, therefore, appellants dealing with such business purchase Tobacco from this Province to cater their requirements. As such, Tobacco is transported from the Province of N-W.F.P. Down in the other Province including Punjab and Sindh. The movement of Tobacco towards other Provinces takes place from Districts Haripur, Mansehra, Abbottabad, Nowshera, Kohat, Laki Marwat and D.I. Khan of N.-W.F.P. In view of movement of Tobacco to other Provinces, in the year of 1996, by means section 11 of North-West Frontier Province Finance Act of 1996 (hereinafter referred to as "the Act"), N.-W.F.P. Government levied "Tobacco Development Cess", which reads as under:-- "11. 'Tobacco Development Cess'.--There shall belevied and collected a development cess on Tobacco at the rate of one rupee per kilogram at the District Council exit points of the Districts of Haripur, Mansehra, Abbottabad, Nowshera, Kohat, Lakki Marwat and D.I. Khan. The cess will be collected by the concerned District Councils and credited into Government Treasury."
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3. Subsequently, in 1997, above section 11 was re-constructed by means of Finance Act, 1997 .Which reads as under:-- "11. 'Tabocco Development Cess'.--There shall be levied and collected a development cess on tobacco at the rate as Government may, from time to time, by Notification in the Official Gazette, specify. The cess shall be collected at the District Council exit points of the Districts of Haripur, Mansehra, Abbottabad, Nowshera, Kohat, Lakki Marwat and D.I. Khan by the concerned District Councils and credited into Government Treasury." 4. Appellants challenged vires of above provision of the Finance Act, 1997 (hereinafter referred to as the Act) by invoking Constitutional jurisdiction of Peshawar High Court, Peshawar seeking relief to the effect that section 11 of the Act and all actions consequent thereto including levy and collection of so-called "development cess" be declared to be ultra vires, un-Constitutional, without jurisdiction, unlawful and also of no legal effect. 5. A leaned Division. Bench of Peshawar High Court vide impugned judgment, dated 20th October, 1997 disposed of the writ petitions in following terms:-- "18. The upshot of what has been discussed above is that Writ Petition Nos.653/96. 654/96, 655/96, 728/96, 1239/96, 1371/96 and 1372/96 are hereby dismissed while Writ Petitions Nos.1448/97 and 1449/97 are accepted to the extent only that 25 paisas per kilogram of tax imposed by the Executive is void, unlawful and without jurisdiction. Barring the enhancement of 25 paisas per kilogram of tax, section 11 of the Finance Acts of 1996 and 1997 are held to be lawful and not ultra vires the Constitution." 6. Against the afore-noted judgment, leave to appeal was granted in view of order passed by this Court in the case of Messrs Habib Sugar Mills v. Government of Sindh (1996 SCMR 1409). It is noteworthy that appeals arising out of these Petitions, bearing No,260 and 261 of 1995, have been decided vide judgment, dated 30th June, 2001 whereby cases were remanded to the Secretary to Government of Sindh Housing, Town Planning, Local Government and Rural Development, without dilating upon the points on which leave to appeal was granted. Therefore, in the instant appeals question regarding interpretation of Article 151(3) of the Constitution of Islamic Republic of Pakistan (hereinafter referred to as "the Constitution") will be decided independently. 7. Syed Ali Zafar learned Advocate Supreme Court contended that under Article 151 of the Constitution, the Provincial Legislature is not competent to promulgate law, imposing "Tobacco Development Cess" recoverable by the District Councils on the exit points of various Districts leading towards other Provinces because on account of this provision of law restriction has been imposed upon the free trade and commerce in between different Provinces. He stated that Provincial Legislature has in fact imposed cess tax on the movement of Tobacco in order to prohibit or restrict its export from the Province of N.-W.F.P. To other Provinces, therefore, section 11 of the Act is ultra vires the Constitution. In support of his arguments, he referred to number of cases decided by superior judiciary of the country as well as from Indian jurisdiction. 8. Mr. Sardar Khan, learned council adopted the arguments advanced by Syed Ali Zafar, Advocate Supreme Court. However, he added that 99% Tobacco for consumption and use throughout the country is grown in the Province of N.-W.F.P. But as far as the names of Districts which find mention in section 11 of the Act, their rate of growth of Tobacco is comparatively low but they have been included into section 11 of the Act for collecting cess/tax on the movement of Tobacco which is transported to the other Provinces and in this manner, restriction is imposed on the movement of Tobacco by imposing cess under the garb of Tobacco Development against the spirit of Article 151 (3) (a) (b) of the Constitution. 9. Barrister Jehanzeb Rahim, Advocate Surpeme Court has appeared on behalf of official respondents and admitted that "Tobacco Development Cess" is not being recovered by the District Councils, where growth of Tobacco is more than the Districts, names of which find mention in
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section 11 of the Act. He further made statement at the bar that "Tobacco Development Cess" is being recovered on the movement of Tobacco and purpose was not to allow flow of Tobacco towards Punjab without paying nominal development cess because except such of recovery of development tax, Government is not getting anything in this behalf despite providing facilities to the purchasers and transporters etc. He stated that recovery of "Tobacco Development Cess" cannot be construed as prohibition or restriction on the trade and commerce between the Province of N.-W.F.P. And Provinces. Therefore, section 11 of the Act is not violative of the provision of Article 151 (3) of the Constitution. 10. Mr. Rashid-ul-Haq Kazi, learned Advocate-General, N.-W.F.P., fully subscribed to the arguments of Barrister Jehanzeb Rahim as far as it relates to interpretation of Article 151 of the Constitution is concerned. Besides it he independently addressed arguments in support of appeals filed by the Provincial Government of N.-W.F.P. Against the impugned judgment to the extent whereby delegation of powers under section 11 of the Act to executive to fix the rate of cess/tax has been declared as un-Constitutional being excessive delegation by the Provincial Legislature to the executive Government is concerned. He contended that executive authorities have enhanced the "Tobacco Development Cess" from Re.1 per kg. To Rs,1.25 per kg. And as increase in the cess in reasonable, therefore, learned Division Bench of High Court may have not declared latter portion of section 11 of the Act as excessive delegation of powers by the Legislature to executive Government. 11. As in instant case constitutionality of section 11 of the Act has to be determined at the touchstone of Article 151 of the Constitution, therefore, latter is reproduced hereinbelow in extenso:-- "151 . --(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 intercourse 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 (b) 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 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 of morality, or for the purpose of protecting animals or plants from disease or preventing or alleviating any serious shortage in the Province of an essential commodity shall not, if it was made with the consent of the President, be invalid." 12. By now it is well-settled that while interpreting the Constitutional provisions, approach of the Court should be dynamic, progressive, and liberal. Keeping in view the changed situation, which is intended to be catered by existing provision of the Constitution or by new legislation. Reference may be made to Pir Sabir Shah v. Shad Muhammad Khan, Member. Provincial Assembly, N.-W.F.P. And another (PLD 1995 SC 66) wherein Ajmal Mian. J. (as then he was) in his separate note has reiterated above universally recognized principle. Reaffirmed in number of judgments of this Court. Therefore, same is being adhered to in this case as well. 13. A perusal of sub-Article (1) of Article 151 of the Constitution indicates that it does not provide absolutely free trade, commerce and intercourse throughout Pakistan i,e, inter-Provincial trade because under sub-Article (2) of Article 151 of Constitution. Majlis-e-Shoora (Parliament) has been empowered to impose such restriction on freedom of trade and commerce or intercourse between one Province and another or within any part of Pakistan, as may be required in public interest. For example if on account of shortage of food grains in any part of Pakistan or Province and to
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prevent/control its flow. Majlis-e-Shoora can impose such restriction, in the public interest. But presently we are not confronted with this proposition as we have noted hereinabove that according to view-point of learned counsel appearing for respondents "Tobacco Development Cess" is being charged on the exit point of those Districts which have their outlet in other Provinces including Punjab, Balochistan and Azad Jammu and Kashmir. Therefore, under sub-Article (3) of Article 151 of the Constitution, proposition for consideration would be "whether by levying/collecting of development cess on Tobacco, Provincial Government of N.-W.F.P has violated these Constitutional provisions". A study of sub-Article (3) reveals that in terms of its clause (a). The Provincial Assembly or Provincial Government has been divested from making any law or to 'take any executive action prohibiting or restraining the entry into or the export from the Province, of goods of any class or description. Plain reading of the words employed in this sub-Article would indicate that authority of promulgating a law would be of a Province, in order to ensure free trade. Commerce and intercourse throughout Pakistan under Article 151(1) would not be available if such law has prohibited or restrained or hindered activities of the trade commerce etc. Clause (a) of sub-Article (3) of Article 151 of the Constitution will be examined with reference to definition of phrase "prohibiting or restraining" used therein in ordinary dictionary meaning. As per Black's Law Dictionary (5th Edition), the origin of the word 'prohibition' is 'prohibit' which means to 'forbid by law: to prevent: etc.'. Similarly in the World Book Dictionary by Scoot Fetzer Company, Chicago, word 'prohibit' has been defined as to forbid by law or authority: to prohibit the sale of alcoholic beverages: picking flowers in this park is prohibited: to prevent: hinder.' With reference to these definitions the word 'prohibition' has been used as the act of prohibiting or forbidding: ,prohibition against swimming in the city's reservoirs: a law or laws against making or selling alcoholic liquors:' etc. The meaning of phrase 'prohibition' defined hereinabove in two dictionaries persuades us to infer with reference to the scheme of section 11 of the Act that if the Government of N.-W.F.P. Had placed a ban on the export of Tobacco to the other Provinces then the appellants could have presented successfully the case of complete violation of the Constitution. Next important phrase used in clause (a) of sub-Article (3) of Article 151 of the Constitution is ' restriction'. It has been defined in Black's Law Dictionary (5th Edition) to be 'a limitation often imposed in a deed or lease respecting the use to which the property may be put' Whereas according to World Book Dictionary 'restriction' means 'something that restricts: limiting condition or rules: the restriction on the use of the playground: no fighting: no damaging property: the act or fact of restricting or the condition of being restricted:' In view of the definition of the word 'restriction' defined hereinabove, it would be seen whether section 11 of the Act has completely restricted export of Tobacco to the other Provinces or the restriction on its export is of such a nature which can be removed by making nominal token payment of "Tobacco Development Cess", being charged by a Government which is providing facilities on the movement of the goods including roads, bridges, security, etc. At this juncture it is to be noted that Province of N.-W.F.P. Is rich in growing Tobacco and it has lead/edge in this field over the other Provinces. Before proceeding ahead, it is also to be borne in mind that in the N.- W.F.P. Finance Act, 1996, cess on Tobacco was collected at the rate of Re.1 per kg. Subsequently, by means of the Act of 1997, the executive Authorities in exercise of their delegated power enhanced it to Rs,1.25 per kg. 13. Now it would be examined whether the provision of section 11 of the Act violates the Constitutional provision embodied in clause (a) of sub-Article (3) of Article 151 of the Constitution. This Article of the Constitution remained under consideration before High Courts of Karachi and Lahore with reference to Provincial Laws applicable over there. In pursuance of which the tax was
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being levied under different nomenclatures. Some of the judgments cited in this behalf by Syed Ali Zafar, learned counsel for the appellants are being discussed hereinbelow:-- 1. Kotri Association of Trade & Industry v. Government of Sindh and another (1982 CLC 1252) Name of Provision of Law examined in view of Article 151 of the Constitution.--(i) Section 60 (1) of Sindh Local Government Ordinance (XII of 1979) (ii) Sindh Council (Imposition of Taxes) Rules, 1979. Contention(s).--In-this case one of the contentions was that export tax levied by some councils on the export simpliciter of goods from the limits of these councils. (Local Councils) tantamount to a restraint on the free movement of goods and as such it is violative of Article 151 of the 1973 Constitution. Conclusion.--Article 151 (1) read with the other three sub-Articles of Article 151 leads to the conclusion that Article 151 (1) does not restrict a Provincial Legislature to impose restriction or taxes on movement of goods within the province. Export tax cannot be struck down on the plea that it violates Article 151 of the 1973 Constitution as in our view it is not violative of the said Constitutional provision. 2. M/s Khyber Electric Lamps Manufacturing, Ltd. And others v. Chairman, District Council, Peshawar and another (1986 CLC 533) Name of Provision of Law examined in view of Article 151 of the Constitution.--Section 134 of North- West Frontier Province Local Government Ordinance (IV of 1979). Contention(s).--These are writ petitions filed by petitioners before Peshawar High Court, calling in question the Notification, dated 31st December, 1980 issued by the Chairman, District Council, imposing export tax on goods being transported out of the province throughout in the country. It was contended on behalf of the petitioner that Article 151 of the Constitution had guaranteed the trade, commerce and intercourse through Pakistan shall be free but by levying export tax the respondent had violated this provision inasmuch as free movement of goods had been restricted by unwarranted act of taxation. It was also contended that per se was tantamount to restriction on the freedom of trade and such a restriction could not be imposed at all. Conclusion.--It was held that impugned notifications were not violative of any provision of law or statutory rules. The writ petitions were dismissed with costs. 3. Arshad Akram & Co. And 8 others v. Divisional Superintendent, Pakistan Railways, Rawalpindi and 5 others (PLD 1982 Lahore 109) Name of provision of Law examined in view of Article 151 of the Constitution.--West Pakistan Foodstuffs (Control) Act (XX of 1958) read with Punjab Government Notification No SOF-II (484) B/79, dated 3rd October, 1979. Contentions(s).--In this petition, the petitioners have called in question the validity of the communications issued by the Railway and Food Departments, banning the dispatch of consignments of rice from Rawalpindi to N.-W.F.P. And their action in this respect, is sought to be declared without lawful authority. It was contended on behalf of the petitioners that under Article 151 of the Constitution, inter-provincial trade and commerce and intercourse throughout Pakistan is free and only the Parliament or the Federal Legislature can impose such restrictions on the freedom of trade and Movement of goods from one province to another as may be required in the public interest, therefore, if under the notification, a ban was intended to be imposed on the movement of rice, from the Punjab Province to other Province, it would be violative of Article 151 rendering the notification liable to be struck down.
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Conclusion.--The correct legal position thus appears to be that it is not within the competence of the Provincial Government to pass an order, which may hamper the inter-Provincial trade, commerce and intercourse or interfere with the movement of goods from this province to other provinces. Any such restriction on the movement of rice, would obviously be hit by Article 151 unless it is saved by sub-Article (4). Thus the Provincial Government can only control intra-Province and not inter-Province movement of rice. 4.Mirpurkhas Sugar Mills Ltd. v. District Council Tharparkar and 2 others (1990 MLD 317) Name of Provision of Law examined in view of Article 151 of the Constitution.--Section 62 (2) of Sindh Local Government Ordinance (XII of 1979) Contention(s).--In these cases, petitioners asserted the action of the District Council, Tharparkar and Khairpur in imposing export tax and/or toll on petitioners' produce namely sugar, leaving the physical limits of the relevant District Councils and meant for delivery on destinations in the other provinces in the Islamic Republic of Pakistan. In view of the provision of Article 151 of the Constitution, which guarantees trade, commerce and intercourse throughout Pakistan to be free, subject, however, to the power of Parliament to impose, by law, such restrictions on the freedom of trade; commerce or intercourse between one province and another, or within any part of Pakistan, as may be required in public interest. Conclusion.--Issue invoked was found to be complex. As far insofar as Rawangi Mehsool/export tax and/or toll are introduced with a view to generate revenues for the relevant councils, in the context of various public works entrusted to them and chargeable on points of exit, from the relevant geographical limits, are concerned there can hardly be any exception. However, it was observed that contravention would, however, occur one goods produced or manufactured in one province are intended and proposed to be taken beyond such province into one or more other provinces in the federation. In that specific context such measures of taxation are, positively, prohibited by the Constitution. But, then, who is to be determined and how is it to be determined that goods manufactured or produced within the limits of a particular council, or other local authority functioning under the Sindh Local Government Ordinance, 1979, sought to be taken within Pakistan but beyond the limits of the Province of Sindh itself ? Next, once such determination is made how are evasions of due incidents of the tax within the province to be guarded against unscrupulous traders? ... .. ...Learned counsel from both sides agreed and conceded that there are no such or similar rules in relation to the goods produced and manufactured in this province and intended to be taken out beyond the provincial limits for consumption or use in other parts or provinces of the federation.. On the basis of the observation made in the judgment, the Government of Sindh was directed to issue necessary directives or to frame due rules with a view to give effect to the conclusions reached in these petitions. 5. Sayphire Textile Mills Ltd. And 9 others v. Government of Sindh and others (PLD 1990 Karachi 402) "Name of Provision of Law examined in view of Article 151 of the Constitution.--Sections 60, 64 and 120 of Sindh Local Government Ordinance (XII of 1979) read with People's District Councils Export Tax Rules, 1976 and Sindh Local Councils (Validation of Taxes) Ordinance (VIII of 1982). Contention(s).--As per the facts of this case petitioners carry on the business of manufacture of goods of various kinds. They are aggrieved by the levy, assessment and collection of export tax or Rawangi Mehsool' by the District Council, Dadu. It was contended that export tax, in any form it takes, cannot be levied, assessed or collected by any authority in Pakistan, except the Federal Government. Reliance is placed in this behalf on Article 70 and the Fourth Schedule of the Constitution, incorporating, inter alia, the Federal Legislative List and, in particular, on Entries Nos. 43
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and 49 in Part-I of such List, pertaining respectively, to the 'Duties of Customs, including export duties' and 'Tax on the sales and purchases of goods imported, exported, produced, manufactured or consumed' ." Conclusion.--It was held that while Export Tax or 'Rawangi Mahsool' on the inter-provincial movement of goods as also on goods exported from Pakistan is found to be unconstitutional, bad and without lawful authority. Export Tax or 'Rawangi Mehsool' on intra-Provincial movement of goods is found to be valid. 6. Star Flour Mills v. Province of Punjab and others (PLD 1996 Lahore 687) Name of Provision of Law examined in view of Article 151 of the Constitution.--Section 3 of West Pakistan Foodstuffs (Control) Act (XX of 1958) read with Notification, dated 12th June, 1996. Contention(s).--In this case Notification dated 12th June, 1996, issued by the Government of Punjab was challenged, whereby it was directed that no person shall carry or transport Wheat/Atta, Suji, Maida from any place in the Punjab to a place outside the Punjab Province. Therefore, with reference to proposition under consideration, it was argued that the notification on being ultra vires the Article 151 of the Constitution, 1973 is equally valid (invalid). Conclusion.--The Provincial Government in no circumstances has any authority to issue any order or notification which impede the flow of trade and commerce between the different Provinces or create hurdles in the movement of the goods of any sort from one Province to another, therefore, the. Notification is plainly contrary to the Constitutional provision." A perusal of above judgments indicates that except in the case of Arshad Akram & Co. (ibid) and Star Flour Mills (ibid) no complete restriction was imposed on the movement of goods from one Province to other. 14. It is important to note that the Indian Constitution under Article 301 had also guaranteed trade, commerce and intercourse free throughout the territory of India, however subject to other provisions. But despite of such provision some of the States out of union of…
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