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Petitioner: Premier Systems (Pvt.) Ltd. and Others VS Respondent: Federation of Pakistan and JUDGMENT
Court Name: Sindh High Court Judge(s): Omar Sial, Munib Akhtar Title:Premier Systems (Pvt.) Ltd. and Others vs Federation of Pakistan and
JUDGMENT
Reported As: 2018 PTD 861, PTCL 2018 CL. 206 Result: Order accordingly Judgment JUDGMENT: MR. JUSTICE MUNIB AKHTAR.--(1). By this judgment, we intend disposing off the petitions identified and described in para 29 below. The issue raised in these petitions is the vires of an amendment made by the Finance Act, 2017 in s. 18(3) of the Customs Act, 1969, in light of the seminal judgment of the Supreme Court in Mustafa Impex and others v. Government of Pakistan and others PTCL 2017 CL. 456 ("Mustafa Impex"). As is well known, s. 18(3) allows for the imposition of regulatory duty on goods imported or exported. Prior to the amendment, this power vested in the Federal Government. By the Finance Act, 2017, s. 18(3) was amended such that for "Federal Government" the words "Board, with approval of Federal Minister-in-charge" were substituted. (Board of course means the Federal Board of Revenue or "FBR".) This amendment was clearly a response to the judgment of the Supreme Court. The question is whether it is constitutionally valid in light of the law enunciated in Mustafa Impex. The immediate context in which the issue arises is that on 16.10.2017 regulatory duty was imposed by FBR, with the approval of the Federal Minister-in-charge (being the Finance Minister) by means of notification SRO 1035(1)/2017 ("SRO 1035"). The regulatory duty was imposed on a wide range of imports. The Petitioners are importers of some of those goods and hence aggrieved by the imposition. Their case is that the amendment cannot survive constitutional scrutiny when tested on the anvil of Mustafa Impex. The respondents of course strongly contest this claim, submitting that the amendment is intra vires and does not violate any constitutional provision or principle, including the law laid down in Mustafa Impex. During the course of the hearing a company, the Organization for Advancement and Safeguard of Industrial Sector (being an entity registered under s. 42 of the Companies Ordinance, 1984) sought permission to intervene
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on the side of the respondents. The intervener is a trade body whose objectives are to safeguard the interests of local industry. The intervener fully supported the imposition of the regulatory duty and pleaded in favor of the vices of the amendment. Learned counsel for the intervener was also heard. 2. Mr. Khalid Jawed Khan, learned counsel in CP D-7159/2017 opened the case for the petitioners. Learned counsel referred to SRO 1035 and the amendment made in s. 18(3) by the Finance Act, 2017. Learned counsel referred to subsection (5) of the same section whereby an additional duty, over and above the regulatory duty, can also be imposed drawing attention to the fact that there the previous position continued to prevail and the power was to be exercised by the Federal Government. Thus, learned counsel submitted, the statute expressly recognized the distinction between the Federal Government on the one hand and "Federal Minister-in-charge" on the other. Learned counsel submitted that it was well-settled that the Constitution recognized the trichotomy of powers. In terms of Article 90 executive authority was to be exercised by the Federal Government comprising of the Prime Minister and Federal Ministers and learned counsel referred to Article 92 in terms whereof Federal Ministers are appointed. It was submitted that the Federal Ministers when acting together as the Cabinet were collectively responsible to Parliament, and reference was made to Article 91(6). It was submitted that a Minister, acting individually, could not take those decisions that were required to be taken by the Federal Government/Cabinet. Referring to Mustafa Impex learned counsel submitted that the Supreme Court had now put it beyond all doubt that the executive authority of the Federation was to be exercised by the Cabinet and not by the Prime Minister or any individual Minister. Reference was also made to Article 97. Learned counsel submitted that a combined effect of all these Articles when read in light of Mustafa Impex was that any matter relating to levy of the customs duty could only be taken up and decided upon by the Cabinet acting as a whole. It was submitted that every statute had necessarily to properly reflect this constitutional mandate and that, therefore, s. 18(3) could only empower the Federal Government as understood in light of Mustafa Impex and not otherwise. It was submitted that no entity other than the Federal Government could be empowered to levy any tax such as a customs duty in the form of regulatory duty. Learned counsel argued that the amendment made to s. 18(3) was nothing but an attempt to nullify the judgment in Mustafa Impex and to obviate the requirements imposed by the decision. However, the judgment could not be nullified as it explained the correct constitutional position which had to be given effect to. It was submitted that the amendment sought to alter a constitutional rule laid down by the Supreme Court and this was impermissible. 3. Learned counsel also referred to the status of the FBR, referring to the Federal Board of Revenue Act, 2007. Referring to s. 3 learned counsel submitted that the FBR was not a body corporate and it was certainly not the Federal Government. Thus the attempt to empower the FBR by means of the amendment was clearly unconstitutional. Reference was made to paras 79 to 81 of Mustafa Impex and to the conclusions spelt out by the Supreme Court in para 84. Reliance was placed in particular on clauses (iii) and (iv) of para 84 and learned counsel submitted that these were fully applicable to the issue at hand. Thus, learned counsel submitted, the power to levy regulatory duty could not be conferred on a body subordinate to the Federal Government, which was the position of the FBR. Referring to Article 98, learned counsel submitted that the legislative power of Parliament as spelt out therein had to be exercised within the limits of the constitutional mandate and, therefore, the FBR could not be conferred the power to impose regulatory duty even by statute. In this context learned counsel sought to draw a distinction between those functions which were constitutionally required to be performed only by the Federal Government and those in respect of which the power could be conferred upon bodies or officers subordinate to the Federal Government. By way of example learned counsel referred to s. 219 of the Customs Act whereby the
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FBR is empowered to make rules for purposes of the statute. It was submitted that this last conferment was unexceptionable. However, s. 18(3) stood in a different category altogether since it related to the imposition of a tax and here, as set out by the Supreme Court, it was only the Federal Government (meaning thereby the Federal Cabinet) that could be empowered. In the context of taxation, learned counsel further submitted that the power of granting exemption, which in the case of Customs Act is contained in s. 19, could be conferred on the Board. It may be noted that earlier this section had also empowered the Federal Government but by the Finance Act, 2017 a like amendment has been made in this section as well. Learned counsel took no issue with this amendment but emphasized that the position of imposing a tax was entirely different, which was of course the issue at hand. 4. Continuing with his submissions learned counsel relied in particular on paras 63 and 65 of Mustafa Impex, especially in the context of Article 98 of the Constitution. Learned counsel submitted that the power to impose regulatory duty as conferred by s. 18(3) was not a mere ministerial act or function. It was, in fact, quasi-legislative power and could only be conferred on the Federal Government (meaning always the Cabinet) and not otherwise. 5. In addition to the foregoing learned counsel made an alternate submission with regard to vires of the amendment. The Finance Act, 2017 had been passed as a Money Bill. Learned counsel submitted that at least to the extent of the amendment made in s. 18(3) the matter did not fall within any of the clauses of Article 73(2) and, therefore, the provision could not have been amended by adopting the procedure of a Money Bill. It was, therefore, according to learned counsel, ultra vires the Constitution on this basis as well. Other learned counsel appearing in the various petitions adopted the submissions made by Mr. Khalid Jawed Khan. 6. Mr. Kamal Azfar, Senior Advocate, sought permission to make submissions before the Court. The learned senior advocate explained that he was not instructed as counsel in any of the petitions being heard but he was counsel in certain other petitions also pending in the High Court. Those petitions arose under the Sales Tax Act, 1990 in which parallel amendments, to the same effect as the amendment now under challenge, had been made by means of the Finance Act, 2017, and were assailed on the same basis as now before the Court. The learned Additional Attorney General graciously did not oppose the request made by Mr. Kamal Azfar and so we gave permission to the learned senior advocate to address the Court. Learned counsel referred to Articles 90, 91, 98 and 99 of the Constitution and also to the Rules of Business of the Federal Government. With reference to Article 98, it was submitted that it had to be read and understood in light of what was set out in the Rules of Business and in this regard specific reference was made to Rules 4, 6 and 16. Referring to Rule 17(1)(c) learned counsel submitted that the relevant provisos were mandatory and a notification issued in violation thereof was a nullity. Referring to the concept of the collective responsibility of the Federal Cabinet learned counsel submitted that there had been an excessive delegation by means of the amendment brought about by the Finance Act, 2017. As regards Mustafa Impex, learned counsel read out several passages from the judgment, referring in particular to paras 27, 28 and 37 to 40. Learned counsel also placed reliance on para 84. 7. The case for the respondents was opened by Mr. Salman Talibuddin, the learned Additional Attorney General. It was submitted that in fact Article 90 was not at all engaged in the present dispute as the matter was not with regard to the exercise of executive authority by the Federation. Thus, according to the learned AAG, the reliance sought to be placed on Mustafa Impex by the petitioners was somewhat misplaced. The learned AAG submitted that Parliament was well within its legislative powers if it chose to confer the power of levying any tax or duty on an entity other than the Federal Government, being in the present case the FBR. The learned AAG referred to several statutes where, according to him, this position could be found and relied on the Pakistan Civil Aviation Authority Ordinance, 1960 (s. 16(3)), the Regulation of Generation, Transmission and
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Distribution of Electric Power Act, 1997 (NEPRA) (s. 46) and the Oil and Gas Regulatory Authority Ordinance, 2002 (OGRA) (s. 18). Thus, according to the learned AAG, if Parliament chose to empower the FBR in terms of s. 18(3) that was its business and that was all that there was to it. But, the learned AAG continued, Parliament had specifically chosen to limit the exercise of this power by the Board, subjecting it to the approval of the Minister-in-charge. As to why this has been done, the learned AAG referred to various well-known judgments with regard to the delegation of legislative power and in particular the power to impose regulatory duty through this device. Reference was made to the Zaibtun litigation, being the decision on this Court and, on appeal, in the Supreme Court in Zaibtun Textile Mills Ltd. v. Central Board of Revenue and others PTCL 1983 CL. 23(. With reference to regulatory duty, the learned AAG referred to the leading case of Abdul Rahim, Allah Ditta v. Federation of Pakistan and others PTCL 1999 CL. 493 and read out several passages from the decision to explain both the need to delegate legislative power in this regard and also the reason why, according to him, Parliament had expressly provided that the FBR could only impose regulatory duty with the approval of the Federal Minister-in-charge. 8. The learned AAG submitted that Articles 90 and 99 of the Constitution, which was at the forefront of consideration by the Supreme Court in Mustafa Impex, related to the executive authority of the Federal Government. The case of the amendment at hand was relatable to Article 98. The learned AAG, referring to this Article, submitted that the Finance Act, 2017 had been approved by the Federal Government before being presented as a Bill before the National Assembly and the Act had, therefore, been passed on the recommendation of the Federal Government as required. The Federal Government had asked the National Assembly to amend the law and this request has been acceded to. Insofar as SRO 1035 itself was concerned, the learned AAG referred to the parawise comments and other documents/material placed on record on behalf of the respondents and emphasized that when the proposals for imposition of regulatory duty had been put up by the FBR, the decision to approve the same had been taken by the Federal Minister-in- charge (i,e,, the Finance Minister) himself as required by the amended provision. It was not a decision of the Federal Cabinet or taken at the behest or on the dictation thereof, or of any of its committees, including in particular the Economic Coordination Committee of the Cabinet ("ECC"). 9. Referring to Article 90, the learned AAG submitted that it contemplated a certain hierarchy which, according to him, moved from the President to the Federal Government to a Federal Minister, in that order. It was submitted that a Federal Minister did have an independent existence separate and distinct from his position as a member of the Federal Cabinet. Reliance was placed on certain entries in Black's Law Dictionary and King-Emperor v. Sibnath Banerji AIR 1945 PC 156. It was submitted that a Federal Minister was very much within the meaning and scope of expression "officers or authorities subordinate to the Federal Government" and that, therefore, in terms and by reason of Article 98 the amendment made to s. 18(3) was constitutionally valid. Insofar as the alternate submission was concerned, the learned AAG submitted that it had no merit. The Finance Act, 2017, when passed and enacted as a Money Bill, was regular and constitutional in all its respects and aspects, including the amendment made to s. 18(3) 10. Mr. Kafil Ahmed Abbasi, learned counsel who appeared for the Department, referred to subsections (1) and (3) of s. 18 as well as to s. 19. Learned counsel submitted that the amendment made to s. 18(3) was well within the scope of Article 98 and hence constitutionally valid. Learned counsel referred to various case law in support of his submissions. Referring to Mustafa Impex and to the concluding propositions laid down in para 84, learned counsel submitted that there had been no violation of any of the same and, therefore, the case sought to be made out on behalf of the petitioners was misconceived. 11. As noted above, Mr. Mustafa Sherpao, learned counsel for the intervener company, was also heard. The primary case put forward by learned counsel was based on Article 77 of the
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Constitution. Learned counsel submitted that this provision had to be broadly construed, understood and applied and it fully empowered Parliament to delegate any power on any authority, officer or body. Since the imposition of regulatory duty was legislative in nature, Parliament could so empower any body or authority and in this regard learned counsel placed strong emphasis on the words "under the authority" to be found in Article 77. Thus, according to learned counsel, Article 77, when read with s. 18(3) of the Customs Act and s. 4 of the FBR Act, fully covered the situation and there could be no cavil to the grant or the exercise of this legislative power. Learned counsel referred to certain case law in support of his case. As regards Mustafa Impex, learned counsel in particular referred to paras 62 to 64 as also para 66(vii) and para 72. Learned counsel submitted that in terms of Article 98, a Federal Minister could be empowered by statute as an officer subordinate to the Federal Government. Learned Counsel submitted that a Federal Minister acted in different capacities and could wear different heads being, as appropriate according to context, a Member of the Cabinet and a Minister-in-charge. Learned counsel submitted that Article 77, on which he placed strong and primary reliance, had not at all being considered in Mustafa Impex. Referring to Article 99(2) as originally to be found in the Constitution, and drawing attention to the latter part thereof, learned counsel submitted that that provision had expressly spoken of a "delegation" by the Federal Government to officers and authorities subordinate to it. However, the present case, where the amendment had been made by statute, was not a matter of delegation of authority by the Federal Government. Rather it was a case of express "conferment" of statutory power on FBR to act with the approval of the Federal Minister-in- charge. Referring to Article 90 in its original form and as subsequently amended from time to time, learned counsel submitted that the changes did not at all affect the position of Article 98, which fully empowered Parliament to make the change now in question. Learned counsel referred to and read out several passages from Mustafa Impex in support of his submissions and also to certain other case law. Insofar as the alternate submission was concerned, learned counsel submitted that the Money Bill as passed, when enacted as the Finance Act, 2017, was intra vires the Constitution in its entirety. 12. Dr. Muhammad Tariq Masood, the Member (Legal) FBR also sought permission to address the Court. Given the importance of the issue involved, we granted permission and he was heard accordingly. The learned Member referred in some detail, supporting his submissions by relevant case law, to the concept of, and need for, delegated legislation, with specific and particular reference to the imposition of regulatory duty. The learned Member, inter alia, relied on the leading case which had already been referred to by the learned AAG and read out the relevant passages from the same. With specific reference to SRO 1035, the learned Member placed before us various material and documents, setting out the position of imports in tabular form for comparative purposes. The learned Member submitted that on a year-to-year basis, imports had registered a consistent upsurge and spike in the months leading up to issuance of SRO 1035, which was unsustainable. The learned Member emphasized that the Supreme Court had recognized a large margin of discretion with regard to imposition of regulatory duty and thus, in light of alarming macroeconomic trends and figures and also the balance of payments situation, a decision was taken by the Board to propose the imposition of regulatory duty in terms of the power newly conferred upon it by the amendment made in s. 18(3). The matter was then put up before the Federal Minister-in-charge as required by statute who, barring a few adjustments (which were incorporated) accepted the proposal and it was in such circumstances that SRO 1035 came to be issued. Insofar as Mustafa Impex was concerned, the learned Member submitted that the focus there was on Articles 90 and 99 in relation to the Federal Government. The learned Member submitted that prior to the amendment made by the Finance Act, 2017 the de facto position was that the power of the Federal Government was being exercised by the Finance Minister, although
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de jure the power of course vested in the former. The position was altered by Parliament in valid exercise of its legislative competence so as to align the de facto and the de jure positions. The learned Member accepted that the amendment made to s. 18(3) was a legislative response to Mustafa Impex. The learned Member referred to several passages from the judgment Reference was made in particular para 63 which according to him had to be read in light of the preceding paras 58 to 62. It was submitted that para 63 could not be read alone but the observations made therein had to be understood in the context of the judgment as a whole. Reference was also made to certain case law as also the position in India. 13. Mr. Khalid Jawed Khan exercised the right of reply. Learned counsel submitted that the ratio decidendi of Mustafa Impex could be regarded and understood as having three aspects which according to him were as follows: (i) That where a power is conferred by statue on the "Federal Government" then such power can only be exercised by the Federal Cabinet and no one else. (ii) That if at all certain types of power are to be conferred on the executive by statue then some of those powers can only be conferred on the Federal Government and on no one else, not even any officer or authority subordinate to the Federal Government. Thus, according to learned counsel, what has been held in Mustafa Impex is that each and every type of power or function that can be conferred by statute need not to be delegated to the Federal government, but (and this was the key point for present purposes) a certain class of functions or powers necessarily have to be so conferred. The premier example of this subset according to learned counsel was the power to impose or levy a tax, and that included the levy of regulatory duty. (iii) If in respect of a function or power that could only be conferred on the Federal Government, a statue either directly or indirectly sought to confer the same on any other body, authority or officer (whether by way of direct grant or in substitution of the Federal Government), then such a statutory provision would be unconstitutional and liable to be struck down as such. Referring to Article 98, learned counsel questioned whether a Federal Minister could at all by regarded as an authority or officer subordinate to the Federal Government within the meaning and for the purposes of the said Article. Learned counsel emphasized that this could not be so as it would, inter alia, run contrary to the fundamental constitutional principle of collective responsibility. Learned counsel submitted that the Privy Council decision relied upon by the learned AAG had been given in the context of the Government of India Act, 1935 where the position was substantively different and other considerations prevailed. 14. Referring to s. 18(3) as amended, learned counsel submitted that the change violated the second and third aspects of the ratio decidendi of Mustafa Impex, as highlighted by him, as well as the principle of collective responsibility inasmuch as the amendment chose to supplant and replace the Federal Cabinet with a sole member thereof. It was submitted that a Federal Minister was part of a composite body and could not be divorced or separated from the same. Learned counsel contended that the key observations made by the Supreme Court in Mustafa Impex would effectively have to be disregarded and ignored if the submissions made on behalf of the Respondents were to be accepted. In support of his submissions learned counsel again referred to and read out several passages from Mustafa Impex. 15. We have heard learned counsel as above, and considered the case law and the material and record relied upon. The entire issue revolves around a proper understanding and application of the principles enunciated in Mustafa Impex. As noted above, learned counsel for both the sides, as also the learned senior advocate and the learned Member read out several passages and paragraphs from the judgment. Many were read more than once and subjected to close and careful analysis and discussion. We will respectfully refrain from reproducing here the passages and paragraphs read out and relied upon, as that will serve only to lengthen this judgment. However what does
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need to be set out is the factual and legal matrix in which the Supreme Court gave judgment. That is stated in the following terms in the decision (pg. 819; emphasis in original): "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 No,280(I)/2013, 460(1)/2013 (both relating to cellular phones) issued…
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