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Petitioner: Messrs MUSTAFA IMPEX, KARACHI and others VS Respondent: The GOVERNMENT OF JUDGMENT
Court Name: Supreme Court of Pakistan Judge(s): Mian Saqib Nisar, Iqbal Hameed-ur-Rehman, Maqbool Baqar Title:Messrs MUSTAFA IMPEX, KARACHI and others vs The GOVERNMENT OF
JUDGMENT
Reported As: 2016 PTD 2269 Result: Appeals allowed Judgment JUDGMENT MIAN SAQIB NISAR, J.--These appeals with the leave of the Court entail the following facts:- the appellants are importers of cellular phones and textile goods. Earlier they enjoyed certain exemptions from sales tax granted by the Federal Government. Subsequently the exemptions were either withdrawn or the tax rates were modified vide notifications Nos.280(I)/2013, 460(1)/2013 (both relating to cellular phones) issued pursuant to Sections 3(2)(b), 3(6), 8(1)(b), 13(2)(a) and 71 of the Sales Tax Act, 1990 (the Act), and 682(1)/2013 (relating to textile goods) issued under Sections 4(c). 3(2)(b), 3(6), 8(1)(b) and 71 of the Act dated 4.4.2013, 30.5.2013 'and 26.7.2013 respectively. Aggrieved of this withdrawal and/or modification (in the rate) of sales tax, the appellants challenged the same through constitution petitions before the learned Islamabad High Court on the primary ground that such notifications had not been issued by the Federal Government in accordance with Section 3 of the Act. The petitions were dismissed by the learned High Court through a consolidated judgment. The Intra-Court Appeals (ICA) initiated by the appellants also failed (note:- some constitution petitions were decided through the impugned judgment in ICA) . Leave in these matters was granted to consider inter alia the following points:- "Learned counsel for the petitioners while attacking the impugned judgment of the learned Division Bench of the High Court affirming the judgment of the learned single Judge-in-Chambers submits that the petitioners have no cavil to the proposition that the Federal Government does have the power, jurisdiction and authority to issue the notification, however his argument is that
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the notifications in question dated 4.4.2013 and 30.5.2013 challenged in the constitution petitions were not issued by the Federal Government rather by the Additional Secretary who was not competent to do so. It is also submitted that to grant the exemption is only the privileged authority of the Cabinet as per the provisions of Article 90 of the Constitution of Islamic Republic of Pakistan, 1973 and even the Secretary or Advisor to the Prime Minister has no competence to issue such notifications and grant exemption. It is also submitted that the notification dated 4.4.2013 was issued before the approval was granted by the Advisor to the Prime Minister which was done ex- post facto. This again renders the said notification as nullity in the eyes of law. " Notice was also issued to the learned Attorney General for Pakistan in terms of Order XXVII-A of the Code of Civil Procedure, 1908 (C.P.C.); and in view of the importance of the matter Mr. Ali Zafar, learned ASC was appointed as an amicus curiae. 2. Learned counsel for the appellants has argued that only the Federal Government has the authority to issue notifications under Section 3(b) of the Act. Federal Government is not defined in the Act, but according to the provisions of Article 90 of the Constitution of the Islamic Republic of Pakistan, 1973 (the Constitution) the Prime Minister and the Ministers, i.e, the Cabinet as a whole, constitute the Federal Government for all intents and purposes. Neither the Prime Minister nor any Minister singularly has the authority to exercise the power(s) provided in Section 3 ibid. He submitted that as per Article 90 as it existed prior to the 18th Amendment, the President was to exercise the executive authority either directly or through the officers subordinate to him, but after the noted amendment such exercise can only be done by the Cabinet which has not been so done. He submitted that approval was sought from and granted by the Advisor to the Prime Minister on Finance, as has been conceded by the respondents in their comments (before the learned High Court), as opposed to the Cabinet which he (Advisor) was not authorized in law to give. Further, Rules 3 and 5 of the Rules of Business, 1973 (Rules of Business) only provide for the transaction and allocation of business, and there is nothing in the said Rules which empowers any individual to act or take decisions on behalf of the Federal Government, particularly with regard to levy of tax or grant of exemptions, etc. Learned counsel contended that there has been non-compliance with Rule 16(d) of the Rules of Business according to which proposals for levy/alteration of tax must be brought before the Cabinet. Learned counsel has relied upon Watan Party and another v. Federation of Pakistan and others (PLD 2011 SC 997) to support his concept of the executive. 3. On the other hand, the crux of the collective arguments of the learned counsel for the respondents is that the impugned notifications have been lawfully issued. According to them, the purport of Article 90 of the Constitution, as is made clear by sub-article (2), is that the Prime Minister or a Minister is empowered to exercise the executive authority, and not the Cabinet as a whole. According to Article 99 of the Constitution executive actions shall be taken by the Federal Government in the name of the President and pursuant to the article ibid the Rules of Business have been framed which specify the manner in which orders and instruments made and executed in the name of the President are to be authenticated, and also provides for the allocation of business. They submitted that Division has been defined in Rule 2(vi) of the Rules of Business as the administrative unit responsible for the conduct of business of the Federal Government. Rule 3(3) provides that the business of the government would be allocated to the Divisions in accordance with Schedule H, which in turn provides that tax policy and tax administration fall within the domain of the Revenue Division (Entries I and 2 of Clause 35 of Schedule II). Therefore the Chairman FBR, who is the ex-officio Secretary of the Revenue Division is duly empowered under Rule 4(2) read with Rule 3(3) to issue notifications pertaining to modification of tax which falls within the purview of tax policy and tax administration. Reference was also made to Rule 7(2) read with Schedule IV which allows the Secretary to authenticate by signature all orders and other instruments made and executed in the name of the President. It was further argued that despite the fact that the Secretary
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was competent to issue such notification under the Rules of Business, he sought approval of the Advisor by issuing the note for the Advisor to the Prime Minister on Finance dated 24.5.2013. They submitted that there is no requirement for matters pertaining to tax administration to be routed to and approved by the Cabinet. 4. The summary of the submissions of the learned Additional Attorney General is that:- (i) The Federal Government consists of the President and the Cabinet. The Federal Government conducts its business in accordance with the Rules of Business framed pursuant to Article 99(3) of the Constitution. (ii) The levy and exemption of tax is the function of Parliament under Article 77 of the Constitution and grant of exemption by the competent authority under the relevant law is in the nature of subordinate legislation. (iii) The power of exemption if given to the executive per se, would amount to the negation of the doctrine of parliamentary supremacy and the doctrine of separation of powers. (iv) If the proposition that exemption is not subordinate legislation is rejected and it is held that on the contrary it is an executive act, even then the Federal Government would conduct its business in accordance with the Rules of Business. (v) The impugned notification has been competently issued by the Secretary in exercise of the powers conferred upon him. ' Learned law officer stated at the very outset that Federal Government has not been defined, therefore the meaning of Federation, Federal Government, and executive authority of the Federation all need elucidation. In this context he gave us a broad view of the Constitution. Part III of the Constitution deals with the Federation which (part) consists of 3 chapters. Chapter 1 relates to the President, his term of office and his powers, etc. (Articles 41-49; particularly Article 48); Chapter 2 deals with the Parliament (Articles 50-89); and Chapter 3 pertains to the Federal Government (Articles 90-100). In the context of the matters at hand, he also made reference to Articles 7 (definition of the State) and 77 (deals with taxation power of the State which is to be "by or under the authority of law"). 5. In elucidating the meaning of "executive authority" the learned Additional Attorney General submitted that it was the residuary power after accounting for legislative and judicial power. The rationale behind this contention was that the earliest powers surrendered by the British Crown were the legislative and judicial powers, thus the only power left with the British Crown, and keeping in mind the fact that our Constitution is based upon the British Parliamentary form of government with modifications according to our needs, was the executive power which was two-fold - prerogative powers and powers vesting in the Crown. With a written constitution such as ours the only powers are those which are provided in the Constitution and there are no inherent powers. Therefore according to him the source of the executive authority of the Federation is the Constitution itself and the laws enacted by Parliament. With this background, he referred to the judgment reported as Rai Sahib Ram Jawaya Kapur and others v. The State of Punjab (AIR 1955 SC 549 at page 554 paragraph 7) in which the interpretation of Article 73 of the Indian Constitution was involved which (article) is pani materia to Article 90 of our Constitution except that the phrase "subject to the Constitution" was not present, and that the executive authority of the Federation "vests in the President". The ratio of the case of Rai Sahib (supra), that the executive authority in Article 73 ibid is the residue of the legislative and judicial authority has beei_ recently upheld in Pu Myllai Hlychho and others v. State of Mizoram and others (AIR 2005 SC 1537) and Satya Narain Shukla v. Union of India and others [(2006) 9 SCC 69]. He stated that there is a similar provision in the Australian Constitution and the Australian High Court has defined "executive authority" in the case reported as The State of Victoria and another and The Commonwealth of Australia and Hayden [(1975) 134 CLR 338]. Further, Article 2 of the US Constitution provides that the "executive1
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power" shall vest in the President, however according to the learned law officer, power and authority can be used interchangeably. The judgment from the US jurisdiction cited in this regard is the seminal case of Lois P. Myers, Adninistratix of Frank S. Myers, Appt. V. United States [272 U.S. 52 (1926) at 128 and 1291. 6. As regards the definition of "Federal Government", he submitted that the President is the Head of the State (Article 41 of the Constitution), exercising the sovereign power of the State. According to Article 48(2) of the Constitution the President is to act upon the advice of the Cabinet, which could mean two things:- one is the Cabinet itself, the other is in Article 90 which very specifically refers to the Prime Minister and Federal Ministers. Article 91 defines the Cabinet as including the Ministers of State (Article 92), who have been deliberately omitted from Article 90. Therefore according to him, the Federal Government is the President along with the Cabinet headed by the Prime Minister. The Federal Government conducts its business in accordance with the Rules of Business framed pursuant to Article 99(2) of the Constitution. The word "business" has been defined in Rule 2(iii) of the Rules of Business as all work done by the Federal Government, which he submits includes both executive and legislative work. When the Federal Government conducts its business which includes the business which has been conferred on it pursuant to an Act of Parliament (reference was made to Article 77 whereby the Parliament is empowered to levy tax), that Act or law becomes relevant. The Sales Tax Act, 1990 provides that the grant of exemption is to be made by the Federal Government. Therefore this is not the executive, but legislative business. Levy of tax (which includes exemption from tax) is a legislative business, and accordingly the grant of exemption itself is a part of subordinate legislation. To conduct the business of subordinate legislation, the Federal Government has allocated this business to the Divisions concerned, in this case the Revenue Division. In this regard he relied upon the judgment reported as Tanveer A. Qureshi v. President of Pakistan, President House, Islamabad and 3 others (PLD 1997 Lahore 263). In support of the above contention he referred to the Pakistan Telecommunication (Re-Organization) Act, 1996 which defines "Federal Government" as the Ministry of Information Technology and Telecommunication Division. By making reference to Article 97 of the Constitution, he submitted that once a law made by Parliament occupies the field then the authority is to be exercised in the manner provided by the law itself. While referring to Article 99(3) of the Constitution, he stated that granting exemption from tax is in the nature of subordinate legislation, therefore Article 90 which pertains to the exercise of executive authority, would not be relevant. 7. In Article 90, the phrase "officers subordinate" was replaced by "Prime Minister and Federal Ministers". He referred to Emperor v. Sibnath Banerji and others (AIR 1945 PC 156) and The Crown v. Muhammad Afzal Ban gash (PLD 1956 FC 1). He submitted that though the phrase "officers subordinate" as opposed to "Prime Minister and Federal Ministers" was used in our previous constitutions, the former phrase still included Ministers. He submitted that rationale behind the insertion of the words "subject to the Constitution" in Article 90, as in other articles of the Constitution beginning with the same phrase, was to differentiate the extent of the executive authority of the Federation in those situations from what was provided in Article 99. Article 90 of the Constitution starts with "subject to the Constitution", which is a departure from the corresponding articles in the previous constitutions and the Indian Constitution. This phrase was never used earlier. Therefore the Federal Government constitutes the President along with the Cabinet headed by the Prime Minister and the business of the Federal Government is to be conducted in the manner provided and mandated by the Constitution in Article 99. As far as exemption is concerned, that falls under the power to levy tax which is dealt with by Article 77 and such power vests with Parliament, thus it is Parliament which will determine the manner in which such power is to be exercised. Since, according to him, the grant of exemption from sales tax is subordinate legislation it falls within the business of the executive which is to be exercised in the manner
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provided in the Rules of Business. Ministers have been accorded protection in terms of Article 248 of the Constitution. Finally while referring to Rules 4(2), 3(3), Schedule II, Rules 5(8) and 5(9) of the Rules of Business, learned law officer submitted that the business pertaining to tax has been allocated to the Revenue Division whose official head is the Secretary. In support of his contentions, he referred to the judgments reported as M. Afzal & Son and others v. Federal Government of Pakistan and another (PLD 1977 Lah. 1327 at 1330 paragraph 7), Collector of Customs, Sales Tax and Central Excise etc. v. M/s San ghar Sugar Mills Ltd., Karachi etc. (PLD 2007 SC 517 = 2007 PTD 1902), Principles of Statutory Interpretation (14th Ed.) by Justice G. P. Singh, Indian Express Newspapers (Bombay) P. Ltd. And others v. Union of India and others (AIR 1986 SC 515), Union of India v. Paliwal Electricals (P) Ltd. And another (AIR 1996 SC 3106), British India Corporation Ltd. v. Collector of Central Excise, Allahabad and others (AIR 1963 SC 104), A. Sanjeevi Naidu etc., etc. v. State of Madras and another (AIR 1970 SC 1102 at paragraphs 10 and 11), Islamic Republic of Pakistan through the Secretary, Ministry of Defence, Government of Pakistan, Rawalpindi and another v. Amjad Ali Mirza (PLD 1977 SC 182 at page 192), Aman Ullah Khan and others v. The Federal Government of Pakistan through Secretary, Ministry of Finance, Islamabad and others (PLD 1990 SC 1092), Mohtarma Benazir Bhutto v. The President of Pakistan through the Secretary to the President (PLD 1992 SC 492 at page 516). 8. The learned amicus stated at the very outset that the State is like a ship and the Government its crew. The State has to be run by natural persons. The impugned notifications were purportedly issued under the provisions of the Act and have been challenged on the ground that the decision to issue them was not taken by the Federal Government i.e, the Prime Minister and the Cabinet. In this context the questions which require resolution are, first, who is the Federal Government/who are the natural persons who will run the State; secondly, what is the business that these persons, i.e, the Federal Government, are to run/what is their executive authority/what is the extent or limit of that authority; and thirdly, how does the Federal Government conduct this business/how does it exercise the power to decide and how does it then implement the law and the decision. 9. The learned amicus submitted that in a Parliamentary system, the Federal Government consists of the Prime Minister and Cabinet who are elected under the Constitution and they run the business of the State. In doing so, they have to exercise executive authority. Within the realm of such executive authority they may also be called upon by law to exercise legislative functions also known as delegated legislation and quasi-judicial functions as well. All such functions fall within the business of the State which they have to perform. The issuance of notifications and grant of exemptions pertaining to tax are an executive function given to the government as delegated legislation. 10. After tracing a brief history of executive authority in Pakistan, learned amicus submitted that the position presently is that the executive authority no longer vests in the President although it is to be exercised in his name, but it is now to be exercised directly by the Federal Government which consists of the Prime Minister and Federal Ministers. This Federal Government is to act through the Prime Minister who is the Chief Executive. Therefore direct executive authority has been given to the Federal Government. However he very candidly stated that whether the executive authority vests in the President or in the Prime Minister and Cabinet is not relevant for the decision of the third question (identified hereinabove) which is how that executive authority is to be exercised. 11. The framers of the Constitution envisaged that if every decision were to be taken by the President himself or the Cabinet as a whole, the business of the government would fail. Thus the Constitution provides for making of rules for allocation of business. These rules create a cascading hierarchy of authority with the Prime Minister and the Cabinet at the top, then Ministers, under whom there are Ministries, then Divisions which have a Secretary in charge with officers subordinate to the Secretary and each Division is given a business. Every Division is divided into
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sections with an officer and such sections also have businesses allocated thereto. Finally there are departments. The most important binding force according to the learned amicus is the concept of collective responsibility, enshrined in our Constitution. The scheme whereby, for example, a Minister is responsible for the acts of his Ministry; this is not delegation of power, but acting on behalf of. 12. The learned amicus referred to the Wotan Party case (supra) (at paragraph 108) and Mian Muhammad Nawaz Sharif v. President of Pakistan and others (PLD 1993 SC 473) to elucidate the meaning of executive authority. According to him, executive authority is the administration of the government in accordance with law. There is no inherent executive authority and such authority has to be as provided for , in the Constitution or the law, as held by Kaikaus, J. In Mian Jamal Shah v. (1) The Member Election Commission, Government of Pakistan, Lahore (2) The Returning Officer, Constituency of the National Assembly of Pakistan No, NW-H, Peshawar II and (3) Khan Nasrullah Khan (PLD 1966 SC 1). Further, delegated legislation of exemption from tax or modification of rates under the umbrella of the general law is permissible. In this regard he referred to Zaibtun Textile Mills Ltd. v. Central Board of Revenue and others (PLD 1983 SC 358) and Messrs Sh. Abdur Rahim, Allah Ditta v. Federation of Pakistan and others (PLD 1988 SC 670). 13. The learned amicus made extensive reference to Articles 90, 91, 92, 97 98, 99, 41 and 48 of the Constitution and the relevant Rules of Business (as amended up to 16.1.2016). According to him, Article 90 provides that:- (i) executive authority is to be exercised in the name of the President (as he is the head of the State as per Article 41); (ii) executive authority is to be exercised by the Federal Government through the Prime Minister and the Federal Ministers; and (iii) the Federal Government shall act through the Prime Minister who shall be the Chief Executive of the Federation. He stated that the corresponding Article 39(1) of the Constitution of 1956 used to provide that:- (i) executive authority shall vest in the President; (ii) executive authority shall be exercised by the President; and (iii) that he may do so directly or through officers subordinate to him. Previously there was no concept of Federal Government. Article 31 in the Constitution of 1962 corresponded to the current Article 90; in which the position was the same as Article 39(1) of the Constitution of 1956. The same position was reflected in the Constitution of 1972. However, in the Constitution of 1973 (as originally enacted) the scheme was the same as it is today. In the Constitutional Amendment of 1985, the old 1956 provision(s) was brought back. Article 53 of the Indian Constitution corresponds with and reflects the position at the time of our Constitution of 1956. However learned amicus submits that the issue as to how the President (when the power previously vested in him), or the Prime Minister and/or the Cabinet is to exercise that power (when the power is to be exercised by them) will remain the same. The jurisprudence may change as to who is to exercise decision making powers but the concept of allocation of powers will not change. 14. He then referred to Article 91 of the Constitution which also reflects the concept that executive authority would be exercised, by the Prime Minister and the Cabinet. Article 91(6)-provides for the concept of collective responsibility, which was there in Article 37(1) and (5) id the Constitution of 1956, but interestingly was absent in the Constitution of 1973 as originally enacted, rather it was reintroduced in the Constitutional amendment of 1985. Article 74 of the Indian Constitution is more or less the same as Article 91 of our current Constitution. Going further, our Constitution also defines the limits of executive authority in Article 97; the same is restricted to the items contained in the Federal Legislative List. 15. He then moved on to the question of how the executive authority i's to be exercised for which he referred to Article 99 of which sub-.Article (3) is the most important and relevant according to which framers of the Constitution deemed it fit to empower the Federal Government to make rules for the allocation and transaction of business. However in the Constitution of 1973 (as originally enacted) the language was slightly different and rather clearer according to him which provided that the Federal Government was empowered to delegate its functions to officers or authorities. In2
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1985, the article was shortened, empowering the President to make such rules, but such powers were then given to the Federal Government through the 18th Amendment. Therefore the concept of delegation contained in the original' Constitution of 1973 does not exist anymore and this departure is most relevant. Now the officers exercise executive authority on behalf of the Federal Government as opposed to…
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