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Petitioner: MONDI'S REFRESHMENT ROOM & BAR, KARACHI VS Respondent: ISLAMIC REPUBLIC OF JUDGMENT
Court Name: Sindh High Court Judge(s): Naimuddin Ahmed, Munawar Ali Khan Title:MONDI'S REFRESHMENT ROOM & BAR, KARACHI vs ISLAMIC REPUBLIC OF
JUDGMENT
Reported As: PLD 1983 Karachi 214 Result: Petitions dismissed Judgment JUDGMENT ' NMMUDDIN, J.-We propose to dispose of this constitution petition and Constitution Petitions Nos. D- 506/1970, D-92/1971, D-93/1971, D-94/1971, D-95/1971, D-129/1971, D-133/1971, D-383/1971, D-390/1971, D-26/1972, D-29/1972, D-220/1972, D-798/1974, D-299/1975, D-147/1976, D-523/1976, D-428/1976, D- 626/1976 and H. C. A. No, 71/1979, by this common judgment for in all the above-mentioned cases common question or questions of law are raised. 2. The Constitution Petition No, D-506/1970, is under Article 98 of the 1962 Constitution, read with Provisional Constitution Order of 1969 filed by Shaikh Habibullah against Pakistan, Central Board of Revenue, and Collector, Central Excise & Land Customs, Hyderabad. The Constitution Petitions filed in 1971 and some in 1972, are under Article 98 of the Constitution, 1962 and some are under Article 201 of the Interim Constitution, 1972. The Constitution Petitions filed in the year 1974 or thereafter, are under Article 199 of the Constitution of 1973 and the High Court Appeal is under section 3 of the Law Reforms Ordinance, 1972. 3. Since the main arguments were advanced in Constitution Petition No, 91 of 1971 by Mr. Iqbal Kazi Advocate, we would therefore, first give facts of this constitution petition. 4. The petitioners Mondi's Refreshment Room & Bar, a registered firm, were at the relevant time running a liquor bar at Dawood Pota Road, Saddar, Karachi, under the licence issued to them by the Collector & Director, Excise & Taxation, Karachi, under the provisions of the Sind Abkari Act, 1878. 5. The petitioners state in the petition that they sold liquor at the aforesaid premises under the licence but did not sell any food nor was any food prepared and sold at their instance at the said premises. According to them they did not render any services of any kind to the customers except
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the sale of the liquor which is authorised under the licence issued to them by the Provincial Government. 6. However, in the counter-affidavit by Mohiuddin Ahmed, Superintendent, Central Excise & Land Customs, Circle 'B', Karachi on behalf of respondents, he claimed that the petitioner served light refreshment in the premises and thus the services rendered by them in the premises were excisable services within the meaning of section 2(dd) of the Central Excises & Salt Act, 1944 (hereinafter called the Act) and therefore, came within the purview of provisions of section 3(1) of the Act and accordingly were liable to pay prescribed duties. Accordingly, the Superintendent, Central Excise & Land Customs, Circle 'B', claimed from the petitioners a sum of Rs, 17,414.82 as central excise duty on service charges calculated on the total sale of the petitioners from 29-6- 1970 to 31-12-1970. We may here reproduce the contents of the Notice of Demand verbatim. 'C. No, 32/35-CE/71 Messrs Mondi's Refreshment Room, Frere Street, Saddar, Karachi-3. Sub : Demand of Central Excise Duty On Restaurants & Bar. ' Whereas it has been reported to the undersigned that you are not paying Central Excise Duty on Service Charges levied vide Annual Budget of 1970-71 announced on 29th June 70 and subsequently revised under SRO. 166/70, dated 29th July, 1970. ' You are therefore asked to deposit Rs, 17,414.82 as Central Excise Duty on Service Charges calculated on your total sales from 29-6-1970 to 31-12-1970 within 10 days from the receipt of this notice, failing which action under rules 8, 10 & 11 of Central Excise Rules, 1944 will be taken against you." 7, The petitioners in reply to the notice denied their liability on the following grounds contained in their letter dated 1-3-1971, addressed to the Collector, Central Excise & Land Customs, Knrachi, respondent No, 3. (a) As aforesaid we do not supply any services or for that matter, services like lodging, catering, cabret and the like which are intended to be taxed therefore the question of applicability of this duty to our liquor Bars does not arise. (b) That we do not have the mainly affluent section of the Society as our customers. On the contrary the majority of the customers belong to lower and lower middle class. (c) That as aforesaid we only sell liquor and do not render any service to the customers. There are no cabrets, nor any food is supplied nor any lodging is permitted. (d) That our business of running a licensed Bar is not the expanding field of services which is rapidly claiming a growingly large share of Gross National Product. (e) That the licensed Bars of liquor are not the posh first class restaurants visited by the affluent sections of the Society. As a matter of fact the licensed Bars are not restaurants at all by any definition of the term. Nor do we hold any licence from any authority local or otherwise for running a restaurant. (f) The liquor Bars are governed by the provisions of a licence issued by the Collector & Director, Excise & Taxation, Karachi, under the Sind Abkari Act, 1878. (g) Entry into a Bar is restricted under the licence conditions to persons of and above 20 years age, whereas in case of a restaurant it is not so. (h) Entry of an insane and infirm person into a liquor Bar is prohibited under the licence conditions. (i) Unlike restaurants, the opening and closing hours of liquor Bars are prescribed by the Commissioner and Director of Excise & Taxation, Government of Sind. (j) Restaurants can be opened by any person in any locality, but number of liquor Bars is fixed by the Provincial Govt. And they can be run in the premises and localities approved by the Collector & Director, Excise & Taxation, Karachi under the Sind Abkari Act.
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(k) Liquor Bars remain closed on every Friday, Eid Holidays, Ten days of Moharrum and during the whole month of Holy Ramazan. (1) Liquor Bars cannot be sublet nor can liquor be sold on barter." 8. In his reply by letter C. No, 6/5-C E/71, dated the 1st of March, 1971 Collector of Central Excise and Land Customs, Karachi, respondent 3 asserted that bar is a restaurant as defined in the Part II of the First Schedule to the Central Excises and Salt Act, 1944 and all services rendered in a restaurant where alcoholic drinks are provided are liable to excise duty. 9. They have therefore sought the following reliefs in the petitions : (a) A declaration that the Finance Ordinance, 1970, amending the Central Excises and Salt Act, 1944 imposing excise duty on "services provided or rendered" is ultra vires. (b) Declaration that respondent No, 1 cannot in law levy, impose or collect any excise duty on the liquor sold by the petitioners under licence issued by the Director of Excise and Taxation on behalf of the Provincial Government and that the imposition against the petitioners was illegal, not according to the law and liable to be quashed. (e) Injunction restraining the respondents and all their subordinates from recovering any excise duty on the sale of liquor by the petitioners. 10. In Constitution Petition No, D-506 of 1970, the petitioner Shaikh Habibullah, states that he is running hotel and restaurant business in Hyderabad City, where he has been supplying food, beverages and refreshments, mostly on a retail basis. He has challenged the vires of the Notification No, S. R. 0. 166 (1/70), dated 29-7-1970, which has fixed the limit of exemptions from payment of excise duty on excisable services of Rs, 4 lacs in the cities of Lahore and Karachi and Rs, 2 lacs for other cities in Pakistan. 11. In Constitution Petition No, D-92 of 1971, the petitioners, a registered firm, state that they are running a Bar and Refreshment Room at their premises on Garden Road, under the licence issued to them by the Collector and Director of Excise and Taxation, Karachi under the provisions of the Sind Abkari Act, 1878. They have challenged the demand for payment of Rs, 14,468.32 as the Central Excise duty on services provided or rendered, calculated on their total sale from 29-6-1970 to 31-12- 1970, almost on same grounds as stated in Constitution Petition No, 91/71. 12. In Constitution Petition No, D-93 of 1971, the petitioners, Paris Refreshment Room & Bar, state that they are running a liquor bar at Preedy Street, Saddar, Karachi under the Licence issued to them by the Collector and Director of Excise & Taxation, Karachi. They are aggrieved by the demand for payment of Rs, 14,468.32 as the Central Excise duty on service charges calculated on their total sale from 29-6-1970 to 31-12-1970 on same grounds as stated in Constitution Petition No, 91 of 1971. 13. In Constitution Petition No, D-94 of 1971, the petitioners Jamshed Refreshment Room & Bar, state that they are running a liquor bar at Napier Street, Saddar, Karachi, under the licence issued to them by the Collector and Director of Excise & Taxation, Karachi. They are also aggrieved by the demand for payment of Rs, 10,025.02 contained in the notice dated 29-1-1971, issued to them by the Superintendent, Central Excise & Land Customs, 'B' Circle, Karachi on the same grounds as stated in Constitution Petition No, 91 of 1971. 14. In Constitution Petition No, D-95 of 1971, the petitioners, Hirjina & Co. (Pak.) Limited, state that they are running the following liquor bars in Karachi, under the licences issued to them by the Collector and Director of Excise & Taxation, Karachi. {{TABLE}} 1. Elphinstone Refreshment Room. 2. Majestic Refreshment Room. 3.Piccadilly Refreshment Room. . 4.New American Refreshment Room.
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5.Nelson Refreshment Room. 6.Merry Refreshment Room. 7. Metro Refreshment Room. g. Queens Refreshment Room. 9. CecilRefreshment Room. 10. Taj MahalRefreshment Room. 15. They have challenged the demand for payment of a total sum of Ra. 52,296.45, contained in several notices dated either 21-1-1971 or 12-2-1971 as detailed below: 1. Elphinstone Bar & Refreshment Room Rs. 8,272.12 2. Majestic Bar ...... 7,085.92 3. Piccadilly Bar ...... 398.82 4. New American Bar ...... 4,287.06 5. Nelson Refreshment Room ...... 11,180.24 6. Merry Bar & Refreshment Room ...... 7,185.69 7. Queens Refreshment Room ...... 8,635.58 8. Taj Mahal Bar & Refreshment Room6,251.21 Total Rs. 52,296.45 {{TABLE}} 16. The petitioners have inter alia, claimed that they do not provide or render any services on their aforesaid bars which claim is denied in the Counter Affidavit. The petitioners have therefore, prayed for declaration that- (a) the Finance Ordinance, 1970 amending the Central Excises & Salt Act, 1944 imposing excise duty on "services provided or rendered" is ultra vires ; (b) the respondent No, 1 cannot in law levy, impose or collect any excise duty on the liquor sold by the petitioners in their bars run by them under licences issued by the Director of Excise & Taxation on behalf of the Provincial Government and that the imposition against the petitioners is illegal, not according to the law and liable to be quashed ; (c) injunction against the respondents and all their subordinates from recovering any excise duty on the sale of liquor by the petitioners at their bars namely (1) Elphinstone Refreshment Room, (2) Majestic Refreshment Room, (3) Piccadilly Refreshment Room, (4) New American Refreshment Room, (5) Nelson Refreshment Room, (6) Merry Refreshment Room, (7) Metro Refreshment Room, (8) Queens Refreshment Room, (9) Cecil Refreshment Room and (10) Taj Mahal Refreshment Room. 17. In Constitution Petition No, D-129 of 1971, the petitioner Dhanji Minocher states that he is running a liquor bar at 118, Preedy Street & Mansfield Street, Corner, Saddar, Karachi in the name of Virgo Bar under the licence issued to him by the Collector and Director of Excise & Taxation, Karachi under the provisions of the Act. He has challenged the demand for payment of Rs, 3,792.58, contained in the notice dated 29-1-1971 on the same grounds as stated in the Constitution Petition No, 91 of 1971. 18. In Constitution Petition No, D-133 of 1971, the petitioner Irani Refreshment Room & Bar, a registered firm states that they are running a liquor bar at Nigar Cinema Building, Lawrence Road, Karachi, under the licence issued to them by the Collector and Director of the Excise and Taxation, Karachi, under the provisions of the Sind Akbari Act. They have also challenged the demand for payment of Rs, 7,270.73 as contained in the notice dated 12-2-1971, on the same grounds as stated in Constitution Petition No, D-91/71. 19. In Constitution Petition No, D-383 of 1971, the petitioner Beach Luxury Hotel Limited, states that it is carrying on business of residential Hotel, Refreshment Room, and liquor Bar under the licence issued to it by the Collector/Director, of Excise & Taxation, Karachi under the provisions of the Sind
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Abkari Act. It has questioned the levy of excise duty of 10 per cent on services provided or rendered by amending the Central Excises & Salt Act, 1944, Act through the Finance Ordinance, 1970 as illegal, ultra vires the Constitution, invalid, and ineffective on the grounds mentioned in the petition. 20. In Constitution Petition No, D-390 of 1971, the petitioners Sultan Ahmed and Muhammad Osman state that they are running restaurant business at Hyderabad, where they supply food and drinks on retail basis. They have questioned the legality and the vires of the amendment made in the Central Excises & Salt Act, 1944 by the Finance Ordinance, 1970, and have sought declaration to the effect that the exemption limit of Rs, 4 lacs for Lahore, Karachi and Dacca and Rs, 2 lacs for other cities in Pakistan is illegal and of no effect being discriminatory. 21. In Constitution Petition No, D-26 of 1972, the petitioners North Western Hotel, have stated that they are running a residential hotel, providing residence, and articles of food and drinks, alcoholic and otherwise, to the lodgers and other guests visiting the hotel for the purpose of lodging and eating etc. The hotel has also a licensed liquor bar and restaurant attached to it for the above purpose. The petitioner has generally challenged the vires of the levy of excise duty on excisable services and have also questioned the levy of excise duty on liquor. 22. In Constitution Petition No, D-29 of 1972 the petitioner, Taj Hotel (Pak.) Limited, states that it is running a residential hotel providing lodging and boarding, and attached to the hotel are a restaurant and Night Club, where articles of food and drinks both alcoholic and non-alcoholic are supplied. The hotel has a licensed bar. It has challenged the vires of amended provisions of the Central Excises & Salt Act, 1944 by the Finance Ordinance, 1970, whereby the excise duty on excisable services has been levied. 23. In Constitution Petition No, D-220 of 1972, the facts, as stated in the petition, are that prior to November, 1967, Palace Hotel Karachi Limited, which was a private limited company registered under the Companies Act, 1913 was carrying on business of residential Hotel under the name and style of Palace Hotel. The Palace Hotel was declared to be an enemy firm by the Government of Pakistan, Ministry of Communication, Islamabad by Notification No, S. R. 0. 200(R)/67, dated 7th November, 1967, issued under the Defence of Pakistan Rules and all its assets and properties were vested in the Custodian of Enemy Property for Pakistan. Subsequent to the vesting of the said property in the Custodian of Enemy Property for Pakistan, the Custodian took over possession of the property and the running business of the Palace Hotel and continued to manage the said property and business through his agent, Pakistan International Airlines Corporation, till 24th March, 1972. Thereafter by an agreement dated 19-11-1972, entered into between the petitioner and the Custodian of Enemy Property for Pakistan, the said Custodian in exercise of its powers under the Enemy Property (Custody and Registration) Order 1965, sold and transferred the entire business of Palace Hotel formerly belonging to Palace Hotel, Karachi Limited together with all rights, licences, assets, claims, moneys and outstandings to the petitioners with effect from 24th March, 1972. 24. The running business of Palace Hotel, which was taken over by the petitioner comprised of a residential hotel for boarding and lodging together with restaurant and Night Club, where food and drinks were supplied to the customers. Certain rooms of the said Palace Hotel were let out at a fixed monthly rent and to which no services or facilities were rendered by the hotel except the telephone bills which were paid by the persons in addition to the monthly rent. The petitioners have stated the names of the persons in occupation, of the rooms in the hotel with rent paid by them. These are as follows : "1. Baloch Art Centre Water & Electricity Rooms No. C-1. provided. Rs. 500.00 2.New Ceylon Art Jewellers Room C-3 -do- Rs. 800.00
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3. Pakistan Art Emporium Room C-4 and C-6. -do- Rs. 1,050.00 4. Wyne Carpets Room C-5. -do- Rs. 450.00 5. Miss Parveen Abbas Hairdresser. -do- Rs.500.00 6. Bonds Travel Bureau Room C-2. -do- Rs. 900.00 7. Trans Mediterranean Airways Rooms C-9 and C-10. -do-Rs.800.00 8. ZEB Publications Room C-13. -do- Rs. 700.00 9. Mabs Consultants Rooms C-11 and C-12 -do- Rs. 935.00 10. United Bank Limited, Room A-9. -do- Rs. 800.00 I1. Habib Bank Ltd. Room A-10. -do- Rs. 1,000.00 12. Lufthansa German Airlines Room M-20. -do- Rs. 2,100.00 13. Messrs R. C. A. Ltd.,Room C-35" -do- Rs. 660.00" ' In April, 1972 the Superintendent, Central Excise and Land Customs addressed a notice to Palace Hotel, Club Road, Karachi demanding Rs, 7,245 on account of Central Excise duty on excisable services rendered. The services allegedly rendered by Palace Hotel in respect of which the sum of Rs, 7,245 was demanded was the rent realised from the rooms amounting to Rs, 3,450 per month. The petitioner has therefore, challenged in this petition this demand. 25. These facts are not in controversy as no counter-affidavit has been filed in reply to the petition. 26. In Constitution Petition No, 798 of 1974, the petitioner Shaikh Tufail Muhammad, lessee of Hotel Excelsior, states that the Hotel is a residential hotel having rooms for lodgers and has also a liquor bar and restaurant. According to him the Hotel also sells eatables and liquor and drinks to lodgers as well as to other customers. The petitioner has generally challenged the vires of levy of excise duty on the excisable services on the ground that the levy is ultra vires the constitution and illegal. 27. In Constitution Petition No, 299 of 1975, the petitioners Messrs Jabees Limited are a limited liability company and are carrying on business of a residential hotel and restaurant and has generally challenged the levy of excise duty on excisable services, as being ultra vires the constitution and illegal. 28. In Constitution Petition No, 147 of 1976, the petitioners Salomi Refreshment Room & Bar, a firm, state that they are running a liquor bar under the licence issued to them by the Collector and Director of Excise & Taxation, Karachi under the provisions of the Sind Abkari Act, 1878. They have challenged the demand contained in the notice dated 12-2-1971, for payment of Rs, 3,762.75, as being ultra vires the constitution and illegal on the same ground as taken in Constitution Petition No, 91 of 1971. 29. In Constitution Petition No, 428 of 1976, the petitioners, R. B. Awari & Company Limited, state that they are running a liquor bar known as 'Winner Bar' at Frere Street, Saddar, Karachi under the licence issued to them by the Collector and Director of Excise & Taxation, Karachi, under the provisions of the Sind Abkari Act, 1878. The petitioners claim that they do not sell food or any other
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refreshment nor is the same prepared at their premises or sold. They further claim that they do not render any service of any kind whatsoever, except the sale of liquor which is authorised under the licence issued to them by the Provincial Government. They have questioned the vires of the Finance Ordinance, 1970, whereby the Central Excises & Salt Act, 1944 has been amended, imposing excise duty on Excisable Services, as being ultra vires the constitution and illegal and have prayed a declaration that the excise duty cannot be levied on liquor sold by them under the licence issued to them by the Director of Excise & Taxation on behalf of the Provincial Government. They have also prayed for an injunction restraining the Federal Government, respondent No, 1 and the Collector, Central Excise & Land Customs, Karachi, respondent No, 2, from recovering the excise duty on the sale of liquor by them. 30. In Constitution Petition No, D-519 of 1976, the petitioners, Hotel Marina, a regist.!Red firm, states that it is carrying on business of a lodging house in Karachi. According to it there are 10 rooms and few cubicles in the Hotel which are let to individuals who are using the same for their residence or as shops or offices. No food is served. It further claims that it does not do any catering in respect of the business in the said premises. According to it even the Kitchen has been let out on a monthly rent and it further claims that it has nothing to do with the service and catering. The petitioner, however, as stated in the petition runs a bar in a separate portion of the room under the licence granted to them under the provisions of the Sind Abkari Act. 31. The petitioner further states that on or about 31-7-1976, the Deputy Superintendent of Excises and Land Customs, Karachi, who is a subordinate to respondent No, 2 came to the office of the petitioner and directed it to charge 15 per cent. As duty of excise on all sales of liquor made in the bar and accordingly, it started charging the duty but according to it, its business had gone down considerably. It has therefore, challenged the vires of the levy of excise duty on services provided or rendered and also the legality of the levy of excise duty on liquor sold by them. It has further prayed to restrain the respondents from levying excise duty on the sale of liquor by the petitioner at its bar. 32. In Constitution Petition No, 523 of 1976, the petitioners, Messrs Cosmopolitan Bar & Refreshment Room, a registered partnership firm, state that they are holding licence to sell liquor and run a bar at a premises on Bunder Road, Karachi and that they are not running any refreshment nor do they any catering in respect of sale and supply of liquor nor render any services or catering. 33. In the counter-affidavit, filed by Sibte Haider Zaidi, Superintendent, Central Excise, Karachi, however, the claim that the petitioners are not running any refreshment room and bar is denied. It is asserted that they are rendering services, providing facilities and utilities to and for their customers, and snacks are provided to their customers. He has so stated on the basis of inspection made by the Superintendent of the Circle concerned. The petitioners have also stated that for some time the Collector, Central Excise and Land Customs, had been pressing the petitioners for payment of excise duty. They have therefore, challenged the vires of the amending provisions of the Finance Ordinance, 1970, whereby the excise duty has been levied on excisable services provided by amending the Sind Salt Act, 1944. They have further claimed that their sale never exceeded Rs, 4 lacs in a year and therefore, they were not liable to pay central excise duty even if it is found otherwise leviable. 34. In Constitution Petition No, D-626 of 1976, the petitioner K. M. Mondi, sole proprietor of Ritz Bar, Shahrah-i-Iraq, Karachi, states that he is running a liquor bar under the licence issued to him by the Collector, Excise and Taxation, Karachi under the provisions of Sind Abkari Act, 1878. He claims that he does not sell any food or refreshment nor is the same prepared at the premises. He also states that Assistant Collector, Central Excise and Land Customs, Karachi vide his notice dated 24- 7-1976, called upon him to produce books of accounts and documents specified in the notice for enquiry under the Excises & Salt Act, 1944 on 30-7-1976. Thereafter, the Superintendent, Central by
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the notice dated 20-8-1976, called upon the petitioner to apply for issue of L-7, licence. By another notice bearing No, C. No, 16/113-C. E/76, dated 10-9-1976, received by the petitioner on 5-10-1976. The said respondent calculated that the petitioner allegedly have evaded central excise duty to the extent of Rs, 3,23,438.43 and that the petitioner has contravened rules 174, 96-W and 226 of the Central Excise Rules, 1944. 35. The petitioner has therefore, questioned the demand of the Collector of Central Excise & Land Customs…
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