Al Wakeelo
Your Digital Lawyer, Always on Duty
Initializing Secure Chambers
Your Digital Lawyer, Always on Duty
Initializing Secure Chambers
Official Citation: 2024 SCMR 1656
Court / Jurisdiction: Supreme Court of Pakistan
Year of Decision: 2023
Decision Date: 2023-12-31
Parties: Shahtaj Sugar Mills Ltd. and others vs Govt. of Pakistan thr. Secretary JUDGMENT
Ruling Summary: This decision was rendered by the Supreme Court of Pakistan on 2023-12-31, officially reported as 2024 SCMR 1656. In this matter between Shahtaj Sugar Mills Ltd. and others and Govt. of Pakistan thr. Secretary JUDGMENT, the court adjudicated key questions of statutory construction, procedural regularity, and legal precedent under Pakistani law.
Core Holding: The honorable bench evaluated governing statutory provisions and judicial authorities to establish the rights of the parties, delivering the binding reasoning set out below.
Case cited as 2024 SCMR 1656
Court Name: Supreme Court of Pakistan Judge(s): Amin-Ud-Din Khan, Athar Minallah, Qazi Faez Isa (C.J) Title:Shahtaj Sugar Mills Ltd. and others vs Govt. of Pakistan thr. Secretary
JUDGMENT
Reported As: 2024 SCP 244, 2024 SCMR 1656, PTCL 2024 CL. 785 Result: Order Accordingly Judgment
JUDGMENT Athar Minallah, J. These appeals before us involve common questions of law and, therefore, we shall decide them through this consolidated judgment. The petitions were converted into appeals pursuant to grant of leave vide order dated 27-06-2013. 2. All the appeals, except one, have arisen from the judgment of the High Court of Sindh, dated 22- 02-2013, while the latter assails the consolidated judgment passed by the Lahore High Court. The constitutional petitions filed before the High Court of Sindh were allowed and the department has challenged the consolidated judgment, while the petitions filed before the Lahore High Court were dismissed. As will be explained later, the consolidated judgment of the Lahore High Court was upheld by this Court and thus it has attained finality. 3. The dispute was regarding the vires of section 3A of the Federal Excise Act 2005 ('Act of 2005') and the notification issued by the Federal Government in exercise of powers conferred there under. A Bill was introduced in the National Assembly of the Majlis-e-Shoora (Parliament) and it was passed on 22.6.2007. The object was to amend the Act of 2005 by inserting of a new provision i.e. section 3A. It received the assent of the President on 30-06-2007. The Finance Act 2007 was thereafter published in the official gazette and the insertion of section 3A took effect on 01-07-2007. Section 3A, which was inserted through the Finance Act 2007, had empowered the Federal Government to levy and collect, subject to such conditions, limitations or restrictions as it may
---
## Page 2
deem fit to impose, special excise duty on goods produced or manufactured in Pakistan and goods imported into Pakistan. The exercise of this power was through the publication of a notification in the official gazette. The legislature had expressly fixed the rate of the levy and collection as one percent of the value of the specified goods. Subsequently, the rate was increased to two and half percent of the value through the Federal Excise (Amendment) Ordinance, 2011. It is noted that section 3A was omitted through the Finance Act 2011 which was assented on 29.06.2011. The Federal Government had issued a notification i.e. S.R.O. 655(I)/2007, dated 29.6.2007 ('Notification'), specifying the goods for the purposes of levy and collection of the special excise duty under section 3A of the Act of 2005. It was explicitly stated in the notification that it shall take effect on 01.07.2007. The Notification was assailed before the Lahore High Court by several aggrieved persons but they had not questioned the vires of section 3A of the Act of 2005. The petitions were dismissed by a Single Judge vide judgment dated 30.5.2011 and the Intra Court Appeals heard by a Division Bench were also dismissed vide judgment dated 27.6.2011. The said judgment was assailed before this Court by seeking leave under Article 185(3) of the Constitution. A Bench, consisting of three Judges of this Court, refused to grant leave and consequently dismissed the petitions vide judgment dated 18.10.2011.[1] This Court had observed that no prejudice or injustice was caused because the notification was acted upon after 01.07.2007 when insertion of section 3A had also taken effect. It is not disputed that the judgment of the Lahore High Court had attained finality. However, one of the petitions, i.e. CPLA No.1625-L of 2011, which had also assailed the consolidated judgment of the Lahore High Court, could not be fixed with the other petitions. This petition came up for hearing much later and it was converted into an appeal i.e. CA 749 of 2013, pursuant to leave having been granted vide order dated 27.6.2013. The petition was fixed and heard along with multiple petitions that had assailed the judgment of the High Court of Sindh. We have observed that the crucial fact regarding the dismissal of several petitions and upholding the judgment of the Lahore High Court by this Court was not brought to the attention of the Bench which appears to have led to grant of leave. Nonetheless, the consolidated judgment of the Lahore High Court, which had sustained the vires of the Notification, had already attained finality since leave was refused and all the petitions, except the aforementioned petition, filed under Article 185(3) of the Constitution were dismissed. The vires of section 3A and the Notification had also been assailed by aggrieved persons before the High Court of Sindh. The petitions were allowed through a consolidated judgment dated 22.02.2013 and consequently section 3A was declared void ab initio, a nullity in law and of no legal effect. The Notification was likewise declared a nullity and of no legal effect. The High Court had held that section 3A, inserted in the Act of 2005, was hit by the doctrine of impermissible and excessive delegation of legislative power to the delegatee i.e. Federal Government and therefore, it was struck down on this sole ground. 4. We have heard the learned counsels for the parties at great length and their written submissions have been carefully perused. 5. The controversy before us is regarding the vires of section 3A of the Act of 2005 and the Notification. The Notification was challenged before the Lahore High Court without questioning the vires of section 3A of the Act of 2005. The grievance was solely confined to the legality of the Notification. The High Court had dismissed the petitions and leave was refused by this Court. This Court had observed that since the demand for recovery of the special excise duty was raised after section 3A of the Act of 2005 had taken effect, therefore, no prejudice or injustice was caused to the petitioners. The judgment of the Lahore High Court attained finality and, therefore, the vires of the Notification stood affirmed. The order dated 18.10.2011 of this Court, whereby the judgment of the Lahore High Court had been upheld, was published in one of the law reports. 6. The petitions filed before the High Court of Sindh in 2011 were decided in 2013. We have noted, and it is obvious from the impugned judgment that none of the parties before the High Court had
---
## Page 3
brought the judgment of this Court to the attention of the learned judge. It is also unexplained why one of the petitions challenging the judgment of the Lahore High was not fixed along with the other petitions. Moreover, at the leave granting stage the Bench was not informed that the judgment of the Lahore High Court had already been upheld and that all the petitions fixed for hearing were dismissed. As already noted, the question regarding the vires of the Notification had attained finality and since this Court had upheld the judgment of the Lahore High Court, therefore, it had become binding on the other courts. The Sind High Court, therefore, could not have decided a matter which had attained finality after it was adjudicated by this Court by upholding the sustainability of the vires of the Notification. Even otherwise, it was correctly observed while upholding the judgment of the Lahore High Court that no prejudice nor injustice was caused because the demand was raised after 01-07-2007 i.e when the insertion of section 3A had taken effect. The finality attained by the judgment of the Lahore High Court had a binding effect on the other High Courts to the extent of the legality and vires of the Notification. The Sindh High Court could not have taken a contrary view by declaring the Notification as illegal and thus striking it down. The Notification was, therefore, declared to be valid and effective by the Lahore High Court and the judgment was upheld by this Court. It had attained finality and thus the judgment of the Sindh High Court was not sustainable regarding the legality and vires of the Notification. 7. The question regarding the vires of section 3A was challenged before the Sindh High Court in addition to the legality of the Notification. The vires of section 3A inserted in the Act of 2005 had not been questioned before the Lahore High Court. The High Court of Sindh had struck down section 3A on the touchstone of the doctrine of impermissible and excessive delegation of legislative power. Before we examine whether section 3A attracted the doctrine, it would be beneficial to discover the legislature's intent in the imposition of the especial excise duty there under. Section 3 provides that there shall be levied and collected duties of excise on goods and services specified in clauses (a) to (e) of sub section 1 ibid. Sub section 3 empowers the Federal Board of Revenue to levy and collect duties subject to the fulfilment of the conditions expressly mentioned therein. The Federal Government has been vested with power and jurisdiction to charge, levy and collect a further duty at the rate of two percent of the value in addition to the specified rate. This power may be exercised by notification in the official gazette. The legislature, in the case of excise duties, has empowered the Board or the Federal Government, as the case may be, to levy and collect duties of excise and the conditions for exercising the powers have been specified. The legislature has manifestly expressed its intention to levy and collect duties of excise and has empowered the Board or the Federal Government to give effect to the levy and charge by fulfilling certain conditions. Such delegation of power by the legislature is not an unusual phenomenon. The legislature merely delegates the power to the Federal Government so as to enable it to work out certain details and exercise its discretion in order to achieve the object of the statute. The legislature, by no stretch of the imagination, abdicates its power and authority expressly provided under Article 77 of the Constitution. The delegation of powers under the respective sub sections of section 3 to the Federal Government or the Board, as the case may be, do not attract the mischief of the doctrine of impermissible and excessive delegation of legislative authority nor has it been declared as such by this Court. The purpose of referring to the delegation of powers to an outside authority was to show that it was not an unusual phenomenon. Such delegation of power to an outside entity has been made in other taxation statutes as well such as the Customs Act 1969 ('Act of 1969'). 8. Section 3A was inserted through the Finance Act, 2007. A plain reading of the section shows that the legislature had intended to levy a 'special excise duty' on two categories; all goods produced and manufactured in and goods imported into Pakistan. The Federal Government was empowered to identify and select goods or classes of goods from the two aforementioned categories for the
---
## Page 4
purposes of giving effect to the imposition of the special excise duty and such levy and collection was subject to conditions, limitations or restrictions as the Federal Government may deem appropriate. The power was exercisable by the Federal Government through the issuance and publication of a notification in the official gazette. The legislature had expressly fixed the rate of levy and collection of the special excise duty which was initially one percent and later it was increased to two and a half percent of the value of the specified goods. The levy of the special excise duty under section 3A was expressly declared by the legislature in addition to the duties of excise levied, charged and collected under section 3. It is obvious from the language of section 3 that the legislature had levied special excise duty on the two categories and goods but its collection was suspended and left to the discretion of the Federal Government. The rate of such levy and collection was fixed by the legislature itself. The policy of the imposition of special excise duty was implicit and the legislature itself had set forth the guidelines to be followed by the delegated authority. By no stretch of the imagination can it be construed that the legislature had delegated the essential legislative functions to the Federal Government. The legislature had merely delegated the ancillary and incidental functions to the Federal Government. The legislature had empowered the Federal Government to determine the goods for the purposes of collection of the special excise duty. Section 3A does not delegate unfettered power in the absence of standards set out by the legislature. The legislature has prescribed intelligible guiding principles to be applied while exercising the delegated authority. The question that is to be answered is; whether the High Court was justified in striking down section 3A on the touchstone of the doctrine of impermissible and excessive delegation of legislative authority. In order to answer this question it would be beneficial to examine the settled principles regarding striking down a statutory provision and the relevance of the doctrine of impermissible and excessive delegation of legislative authority. 9. The Constitution is based on the seminal principle of trichotomy of powers. The legislature makes the laws, the executive executes it while the judicial branch is entrusted with the duty to interpret it. Article 141 of the Constitution explicitly declares that, subject to the Constitution, the Majlis-e- Shoora (Parliament) may make laws, including laws having extra-territorial operation, for the whole or any part of Pakistan. Likewise, a Provincial Assembly may make laws for the respective province or any part thereof. Article 142 sets out the powers of the Majlis-e-Shoora (Parliament) to make laws. Article 77 expressly provides that no tax shall be levied for the purposes of the Federation except by or under the authority of an Act of the Majlis-e-Shoora (Parliament). The Constitution has clearly set out the limits for each organ of the State and crossing these limits amounts to encroaching upon the domain of the other and consequently breaching the provisions of the supreme law. As already noted, making the law falls exclusively within the domain of the legislature. The judicial branch has no jurisdiction to promulgate laws and, therefore, stringent rules and principles have been laid down in the context of the exercise of the power of judicial review, relating to examining the vires of a law promulgated by the legislature. The foundational rule of interpretation is a presumption in favour of constitutionality. The burden to prove that the promulgated law is invalid is on the person who challenges its vires. Based on the said rule, this Court has enunciated the principle that law should be saved rather than be destroyed and that courts must lean in favour of upholding the constitutionality of legislation.[2] The function of legislation is the exclusive prerogative of the legislature. The wisdom of the legislature to promulgate a law and to achieve a particular object and purpose cannot be questioned and, therefore, it is presumed that laws have been legally, validly and constitutionally promulgated on the basis of its competence. The courts have no jurisdiction or power to rewrite the laws and the Constitution. The promulgated laws or its provisions cannot be struck down lightly and it is the duty of the courts to make every possible effort to reconcile the statute to the Constitution and to strike it down when it becomes impossible to do so.[3] The courts are not empowered to strike down a
---
## Page 5
law or its provision on higher ethical notions or on the basis of philosophical concepts and no mala fide can be attributed to the legislature. It is the duty of the courts to give effect to the scheme of representative governance of the State which is the foundation and the edifice of the Constitution is built on it. This Court has, therefore, laid down stringent and narrow grounds in the context of striking down a law or a provision while exercising the power of judicial review. In Ms. Imrana Tiwana's case[4] this Court, after surveying its jurisprudence, has summarised the grounds for striking down a law and they are as follows;
(i) There is a presumption in favour of constitutionality and a law must not be declared unconstitutional unless the statute is placed next to the Constitution and no way can be found in reconciling the two; (ii) Where more than one interpretation is possible, one of which would make the law valid and the other void, the Court must prefer the interpretation which favours validity; (iii) A statute must never be declared unconstitutional unless its invalidity is beyond reasonable doubt. A reasonable doubt must be resolved in favour of the statute being valid; (iv) If a case can be decided on other or narrower grounds, the Court will abstain from deciding the constitutional question; (v) The Court will not decide a larger constitutional question than is necessary for the determination of the case; (vi) The Court will not declare a statute unconstitutional on the ground that it violates the spirit of the Constitution unless it also violates the letter of the Constitution; (vii) The Court is not concerned with the wisdom or prudence of the legislation but only with its constitutionality; (viii) The Court will not strike down statutes on principles of republican or democratic government unless those principles are placed beyond legislative encroachment by the Constitution. (ix) Mala fides will not be attributed to the Legislature 10. The Constitution does not expressly empower the Majilis-e-Shoora (Parliament) to delegate certain functions to an outside agency, authority or a person. However, this Court has consistently held that delegation of certain powers and functions is not an unusual phenomenon, rather it has become necessary in the present complex modern world to delegate certain functions in order to implement the object of a statute and to work out certain details.[5] But, simultaneously, it is settled law that since the Majilis-e-Shoora (Parliament) is a creation of the Constitution, therefore, it cannot exceed the boundaries expressly set out therein. The power to exercise legislative authority expressly provided under the Constitution cannot be abdicated by the legislature by way of delegation. The difficulty in discerning the exact limits within which the legislature may avail itself of delegating certain functions to an outside agency or authority has been recognised in the United States by the Supreme Court. Chief Justice Marshal, who had delivered the opinion of the Court, observed that 'maker of the law may commit something to the discretion of the other departments, and the precise boundary of this power is a subject of delicate and difficult inquiry, into which a Court will not enter unnecessarily.[6] 11. This Court, in Sirajul Haq Patwari's case[7] has cautioned that the doctrine of impermissible excessive delegation of legislative power must be exercised with greatest circumspection. Hamood-ur-Rehman, J., as he then was, has observed that before striking down a law a great amount of caution and care was necessary because it was bound to result, of necessity, in upsetting the legislative scheme. The cardinal principle of interpretation of the law should be to interpret it in such a manner that it should rather be saved than destroyed. The courts should lean in favour of upholding the constitutionality of the legislature and it is therefore incumbent upon the courts to be extremely reluctant to strike down laws as being unconstitutional. It was emphasized
---
## Page 6
that this power should be exercised only when absolutely necessary, for injudicious exercise of this power was likely to result in grave and serious consequences. 12. It is settled law that the essential legislative functions cannot be delegated beyond reasonable limits because doing so would be in violation of the Constitution. The legislature, being the creation of the Constitution, does not inherently possess absolute legislative power but the same can only be exercised in conformity with the powers granted by the Constitution. The legislature, therefore, determines the legislative policies and sets out the principles and standards for guidance of the delegated authority. The fundamental legislative responsibility, undoubtedly, cannot be delegated. The delegation must adhere to certain constraints. The general principles set out for exercising the power of legislation are met by the Majlis-e-Shoora (Parliament) and once that has been done, the delegation of the authority is confined to making subordinate legislation or to attend to other matters of administration and details. The primary functions expressly stated in the Constitution have to be fulfilled by the legislature itself while the latter may delegate ancillary and incidental functions to an outside agency or authority. This Court, in Shaukat Ali Mian's case[8] has drawn a distinction between a provision of a statute which may be ex facie discriminatory and the provisions which may be capable of pressing into service in an arbitrary and illegal manner. This Court has held that in case of the latter eventuality, the provisions cannot be struck down on the ground that it is capable of being used in a discriminatory manner. Any action taken pursuant to powers delegated under a provision will obviously be subject to the judicial review of the courts. In Mehram Ali's case[9], a statue had empowered the government to amend the schedule of the statute in order to add, modify or omit any entry by a notification. The argument raised before this Court that it attracted the doctrine of excessive delegation of legislative power and therefore it was ultra vires was not found to be persuasive. It was held that the delegation of such powers to the government by the legislature was not an unusual phenomenon. The delegation of legislative authority will be impermissible and excessive when the legislature has not laid down the policy of law, has failed to provide standards for guidance or when the essential legislative functions have been delegated to an outside entity in violation of the limits set out in the Constitution. As long the legislature has set out procedural safeguards and has prescribed the standards, the delegation cannot be construed as impermissible or excessive. Moreover, the doctrine may become relevant if the delegated legislative authority is unrestricted and uncontrolled. In order to strike down a law on the basis of the doctrine of impermissible and excessive delegation of legislative power, great care has to be exercised by the courts. In case of doubt, the question of vires must be resolved in favour of upholding the law and every effort must be made to sustain the validity. Apprehension that the law could be abused cannot be a ground for striking it down. 13. We have already discussed the nature and extent of delegation under section 3A of the Act of 2005. We have also carefully perused the reasoning of the High Court in support of striking down section 3A of the Act of 2005. The reasoning is based on presumptions, rather on the apprehension, that the power vested in the Federal Government could be abused. This ground is definitely in violation of the principles enunciated in the context of striking down a law promulgated by the legislature as highlighted above. The legislature had not abdicated its essential legislative functions, rather, incidental and ancillary functions were delegated to the Federal Government. The doctrine of impermissible excessive legislative authority was not attracted and, therefore, section 3A could not have been struck down in the circumstances. 14. Lastly, whether the High Court, while allowing the petitions, was justified to order refund of the special excise duty which was levied and collected under section 3A, the answer is in the negative. We have already held the declaration by the High Court regarding striking down of section 3A not to be sustainable. The respondents were not entitled to claim the refund. But assuming that a claim of refund was made out, even then the High Court was not competent to order the refund in
---
## Page 7
violation of the provisions of the Act of 2005. Section 44 of the Act of 2005 sets out the conditions and procedure for claiming refund. It is noted that duty of excise or special excise duty fall within the ambit of indirect taxes. The burden is transferred to the consumer. In the case of refund, a competent authority has to be satisfied that the burden has not been transferred to the consumer before allowing the claim. This becomes crucial in order to ensure that the claimant is not unjustly enriched. The claimant will not be entitled…
Read the unabridged text and precedent citation network on Al Wakeelo Legal Research Platform.