Legal Principle & Question Decided

Ruling Summary: This decision was rendered by the Lahore High Court (Honorable Mr. Justice Khalid Ishaq), officially reported as 2026 LHC 4650. In this matter between Naubahar Bottling Company Pvt. Ltd. through Abid Hussain and Federation of Pakistan etc, 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.

Full Judgment Text & Judicial Ruling

COURT: Lahore High Court (Honorable Mr. Justice Khalid Ishaq) DECISION DATE: 13-07-2026 TAGLINE: 1) Holdings Vs. Dicta, the subtle distinction between 'relevance' & 'irrelevance' (2) The purpose and essence behind following the ratio decidendi of judicial precedents is rooted in the principle that 'like cases should be decided alike' (3) The process of sorting 'Holdings' from 'Dictum' has been said to go "to the heart of business of judging" (4) The Ratio Decidendi/Holdings of "Naubahar Bottling Company (Pvt.) Ltd. and others v. Federation of Pakistan etc." (2022 SCMR 765) CASE DETAILS: Tax (Writ) 74201/24 ============================================================ Stereo. H C J D A 38. Judgment Sheet IN THE LAHORE HIGH COURT AT LAHORE. JUDICIAL DEPARTMENT

W.P. No. 74201 of 2024

M/s. Naubahar Bottling Co. Versus Federation of Pakistan etc. JUDGEMENT

Date of Hearing 04.12.2025, 27.04.2026, 19.06.2026 Appellants by: In instant petition and in W.P. No. 12374 of 2025 M/s. Raashid Anwer, Adil Umar Bandial, Sajjad Ali & Muhammad Adil Saeed, Advocates In W.P. No. 74928, 74926 of 2026 M/s. Ali Sibtain Fazali, Hasham Ahmad Khan, Abad-ur-Rehman, Muhammad Umar Tariq Gill & Isa Ahmad Jalil, Advocates Respondents by: For Federation of Pakistan in all cases Mirza Nasar Ahmad, Additional Attorney General For FBR in all cases Barrister Ahmad Pervaiz, Barrister Ahad Asif and Barrister Suleman Naseem Sheikh

KHALID ISHAQ, J. This judgment shall decide the captioned constitutional petition filed under Article 199 of the Constitution of Islamic Republic of Pakistan (the “Constitution”), as well as the following petitions, as common questions of law and facts are agitated in all these petitions: i. W.P. No. 12374 of 2025 ii. W.P. No. 74928 of 2024 iii. W.P. No. 74926 of 2024 For the purpose of this judgment, the facts of the present case shall suffice. 2. The challenge laid through this Constitutional Petition is directed against the issuance of Show Cause Notice dated 23.10.2024 (“SCN”) by W.P. No. 74201 of 2024 Page 2

Respondent No.3, whereby, it is alleged that the Petitioner has failed to include the amount of Federal Excise Duty (“FED”) while determining the value of supply/retail price for the purpose of payment of the amount of sales tax in terms of the provisions contained in Section 3, read with Sections 2(27), 2(46) of the Sales Tax Act, 1990 (“Act, 1990”). 3. Learned counsels for the Petitioners contend that the issue of inclusion of the amount of FED in the retail price for the purposes of determination of the amount of Sales Tax has already been settled by the Supreme Court of Pakistan in the Petitioner’s case, reported as Naubahar Bottling Company (Pvt.) Ltd. and others v. Federation of Pakistan etc. (2022 SCMR 765) [“Naubahar Judgment”]; adds that in essence, the Constitutional Petition in hand is in the nature of an implementation petition in terms of Article 187(2), read with Article 199 of the Constitution for enforcement of the law laid down in Naubahar Judgment; it is argued that the core question, which goes to the root of the issue in hand i.e. whether the ‘retail price’1 for determination of the amount of payable sales tax, includes the amount of FED, has already conclusively been determined by the Supreme Court of Pakistan, however, instead of giving effect to the said judgment, the respondents have sought to reopen the settled issue by the dint of SCN. Learned counsel submits that the Naubahar Judgment is the final outcome of a constitutional challenge, which was laid by the Petitioner before this Court, calling into question the effects and constitutional validity of the amendments brought about in Section 2(27) of the Act, 1990 and Section 12(4) of the Federal Excise Act, 2005(“Act, 2005”), by virtue of the Finance Act, 2007; per learned counsel for the Petitioner, the question laid for determination before the Supreme Court of Pakistan was essentially the same, as placed for determination before this Court i.e. whether the expression "retail price" contained in the aforesaid provisions includes the amount of FED for the purposes of levy of sales tax and excise duty. 4. It is contended that since it has categorically been held vide the Naubahar Judgment that FED can only be levied on the taxable incidents

1 See Section 2(27) of the Sales Tax Act, 1990 W.P. No. 74201 of 2024 Page 3

prescribed by law as the FED itself cannot constitute a taxable incident, thus, the FED cannot be included in the ‘retail price’; adds that the methodology sought to be advanced by the Department would result in an impermissible and endless cyclical computation of tax; further submits that there was no impediment for the respondents to enhance the tax liability, if so intended by it, as the respondent/FBR has competence to achieve the said purpose by amending the rate of tax, rather than resorting to the impugned interpretation, which is contrary to the statutory scheme. Learned counsel submits that the respondents' contention that the Naubahar Judgment does not determine the validity of the amendment made in Section 2(27) of the Act, 1990 is misconceived. It is argued that both provisions i.e. Section 2(27) of the Act, 1990 and Section 12(4) of the Act, 2005, were under challenge before the Supreme Court of Pakistan and as a natural corollary of appeal being allowed in favour of the Petitioner, leads to the only ineluctable conclusion that the amount of sales tax cannot be charged on the amount of FED being added to the price of the petitioners’ goods in issue. Finally, it is argued that the respondents' interpretation has no support either under the Constitution or the relevant fiscal Statutes, as it effectively seeks to levy sales tax on excise duty, artificially enhances the prescribed rate of sales tax through interpretation, assigns different meanings to identical expressions occurring in pari materia statutory provisions, creates practical impossibilities in determining and printing retail prices, and leads to an endless cycle of computation and re-computation of Sales Tax and FED, therefore, the impugned SCN is without lawful authority, contrary to the law declared by the Supreme Court of Pakistan, and, thus, liable to be declared as having no legal effect. 5. Learned counsel for the respondent Department, while referring to the leave granting order dated 09.11.2015 passed in C.P.L.A. No.3121 of 2015, contends that the entire question posed for determination before the Supreme Court of Pakistan in the case of Naubahar Bottling supra was confined to the questions relating to determination of the value of the goods for levying FED and no question relating to the imposition and determination of Sales Tax was involved in the Naubahar Judgment. In order to further substantiate W.P. No. 74201 of 2024 Page 4

his submissions, learned counsel for the respondent Department has explained the very genesis and distinction of the two regimes i.e. the FED and the Sales Tax, while arguing that it was the issue of notional value of the FED, which triggered the litigation, culminating into Naubahar Judgment. 6. Arguments heard. Record perused. 7. In the normal parlance, the challenge to a show cause notice issued by the Revenue is not permissible as it is well settled that resorting to filing the Constitutional Petition(s), by invoking the High Court’s jurisdiction of judicial review under Article 199 of the Constitution while bypassing the proper forum, is not to be allowed as a course, the same being contrary to the intention of Article 199(1), therefore, the Supreme Court of Pakistan has settled by catena of judgments that such practice must be deprecated by the High Courts.2 Constitutional Petition(s) being directly filed before the High Court against the matters emanating from and relating to Income Tax, Sales Tax, Customs etc. where High Court itself is the repository of the ultimate appellate/revisional/referral jurisdiction conferred by the relevant statutes, it is rare for the High Court to entertain a Constitutional Petition in such cases.3 8. Considering these settled principles, we have entertained this Constitutional Petition for determining the limited question as to whether the ratio decidendi of Naubahar Judgment is applicable and attracted against the issuance of the SCN as it is well settled that a judgment cannot be generalised beyond its context, it is only applicable to the situation at hand

2 “Indus Trading and Contracting Company v. Collector of Customs (Preventive) Karachi etc.” (2016 SCMR 842), “Province of Punjab through Secretary Communication and Works Department, Lahore v. Yasir Majeed Sheikh etc.” (2021 SCMR 624), “Khalilullah Kakar and others v. Provincial Police Officer, Balochistan etc.” (2021 SCMR 1168), “Federation of Pakistan through Secretary Establishment, Islamabad v. M. Y. Labib-ur-Rehman etc.” (2021 SCMR 1554), “Commissioner Inland Revenue etc. v. Jahangir Khan Tareen etc.” (2022 SCMR 92), “Sana Jamali v. Mujeeb Qamar etc.” (2023 SCMR 316), Commissioner Inland Revenue v. Jahangir Khan Tareen (2022 SCMR 92), Mian Muhammad Shahbaz Sharif v. Federation of Pakistan through Secretary, Ministry of Interior etc. (PLD 2004 SC 583), Zeal Pak Industries (Pvt.) Ltd., Karachi v. Regional Commissioner, Income Tax, Karachi etc. (2009 PTD 712), Dilshad Kausar v. Azad Jammu and Kashmir Government etc. (2005 PLC (C.S.) 1048), Mughal-e-Azam Banquet Complex v.The Federation of Pakistan, etc. (2011 PTD 2260) Messrs Chaudhri Wire Rope Industries Ltd. v. Sales Tax Officer, Special Circle-I, Lahore (1988 SCMR 1934), Messrs Ocean Pakistan Ltd. v. Federal Board of Revenue, Islamabad etc. (2012 PTD 1374), Deputy Commissioner of Income Tax etc. v. Messrs Punjab Beverage Company (Pvt.) Ltd. (2008 SCMR 308), Messrs Amin Textile Mills (Pvt.) Ltd. v. Commissioner of Income-Tax etc. (2000 SCMR 201). 3 Bara Ghee Mills (Pvt.) Ltd. v. The Assistant Collector Customs (PLD 2017 SC 738), Khalid Mehmood v. Collector of Customs, Customs House, Lahore (1999 SCMR 1881) W.P. No. 74201 of 2024 Page 5

and does not serve as a precedent for matters that lie outside its explicit scope. This principle underscores the limited applicability of judgments and reinforces the need for careful analysis when considering their implications in future cases4 and that a case is only authority for what it actually decides and cannot be cited as precedent for a proposition that may be inferred from it.5 9. Before proceeding further, we deemed it appropriate to consider as to the true import and meaning of the ratio decidendi. Precedents are understood to make up part of the law; a judicial precedent speaks with authority; it is not merely evidence of law but a source of it and the Courts are bound to follow the law that is so established. Nonetheless, while considering the case law, one cannot just interpret its language and must also engage in legal reasoning to find what is the case’s holding.6 The purpose and essence behind following the ratio decidendi of judicial precedents is rooted in the principle that ‘like cases should be decided alike’.7 These established principles of law of precedents helps keep the law settled, furthers the rule of law, and promotes both consistency and predictability. Elucidating as to what constitutes ratio decidendi of a judgment, the Supreme Court of Pakistan, while handing down judgment in the case reported as Chaudhary Parvez Elahi v. Deputy Speaker, Provincial Assembly Of Punjab, Lahore and others (PLD 2023 SC 539), elaborated the same in the following terms: “24. Two points emerge from the above-quoted legal commentaries and jurisprudence of the Court: first, that the ratio decidendi encompasses only such reasoning of a judgment that is necessary for the decision of the question of law before the Court; and second that the ratio decidendi alone forms the binding precedent/authoritative element of a judgment which possesses the force of law. Other reasons given or discussions had in the judgment of the Court (or the separate opinion of a Judge) which are not necessary for the decision of the case

4 Muhammad Shakeel and others v. Additional District Judge, Faisalabad and others (PLD 2025 SC 572=2025 SCP 35) 5 Syed Hammad Nabi and others vs Inspector General of Police Punjab, Lahore and others (2023 SCMR 584), Naubahar Bottling Company (Pvt.) Limited and others v. Federation of Pakistan through Revenue Division Ministry of Finance and others (2022 SCMR 765), Quinn v Leathem (1901 AC 495); Trustees of the Port of Karachi v. Muhammad Saleem (1994 SCMR 2213); Sindh High Court Bar Association through its Secretary and another v. Federation of Pakistan through Secretary. Ministry of Law and Justice, Islamabad and others (PLD 2009 SC 879) per Ch. Ijaz Ahmed J,, Mst. Muhammadi and others v. Ghulam Nabi (2007 SCMR 761), 6 The Law of Judicial Precedents | Published by Thomsan Reuters | 1st Edition | pp 2 7 The Law of Judicial Precedents | Published by Thomsan Reuters | 1st Edition | pp 21 W.P. No. 74201 of 2024 Page 6

are merely obiter dicta/passing remarks. The gist and effect of such dicta/remarks have been noted in Halsbury's Laws of England (Volume 11, 2020) in the following terms: "26. Statements which are not necessary to the decision, which go beyond the occasion and lay down a rule that is unnecessary for the purpose in hand are generally termed 'dicta'; they have no binding authority on another court, but they may have some persuasive efficacy. There are dicta and dicta, however, and three types may be distinguished: (1) mere passing remarks of a judge are known as 'obiter dicta', a recognised legal term of art that is not readily reproduced by an English phrase and is used to describe judicial statements which are peripheral to the reason for the decision, the ratio decidendi; (2) judicial dicta (which some authorities distinguish from 'obiter dicta') consist of considered enunciations of the judge's opinion of the law upon some point which does not arise for decision on the facts of the case before him, and for that reason is not part of the ratio decidendi; (3) a third type of dictum may consist in a judge supporting his view of a point in question by stating what has been done in other cases, not reported, so that his statement is one which rests not only on his own unsupported view of the law but also on the decisions of those other judges whose authority he has invoked (making him, as it were, a reporter pro tanto)."" If need be, the reliance may also be placed upon the case reported as All Pakistan Newspapers Society and others v. Federation of Pakistan and others (PLD 2004 SC 600). 10. Before adverting to the question as to what is the ratio decidendi of the Naubahar Judgment, it would be useful to appreciate as to the subtle distinction between ‘dicta’ and ‘holdings’ as a near synonym of ratio decidendi – often shortened to ratio – is ‘holding’. The Latin phrase ‘ratio decidendi’ literally means ‘reason for deciding’, whereas, ‘holding’ might be thought to equate more nearly the Court’s determination of the concrete problem presented before it. Ratio decidendi is normally seen as a genus- proposition of which the concrete holding is one species or instances. So the ratio decidendi is more generalized statement of the ‘holding’.8 The ‘holding’ of a superior Court constitutes the precedent as a point necessarily decided; ‘dicta’ do not; they are merely remarks made in the course of a decision but not essential to the reasoning behind that decision. We are

8 The Law of Judicial Precedents | Published by Thomsan Reuters | 1st Edition | pp 46 W.P. No. 74201 of 2024 Page 7

conscious of the settled law that due to the position of the Supreme Court of Pakistan in our Constitutional Scheme of things, even its obiter dictum enjoyed a highly respected position.9 In a more recent judgment handed down by the Federal Constitutional Court of Pakistan, the question of legal position of obiter dicta has authoritatively been expounded in C.A. No. 112- K of 2024 titled Muhammad Qutub-ud-Din & others v. Province of Sindh through Chief Secretary Government Sindh & others, in the following terms: “27. . . . . . . It is a settled principle of law that only the ratio decidendi of a judgment, and not every general observation made therein, constitutes a binding precedent within the contemplation of Article 189 of the Constitution. The observations made sub silentio or obiter dicta, particularly on issues not directly arising for determination, cannot be treated as laying down an authoritative principle of law applicable in all situations irrespective of the governing statutory framework. Reference in this regard may be made to Sh. Muhammad Rafique Goreja and others v. Islamic Republic of Pakistan and others (2006 SCMR 1317) and Sindh High Court Bar Association through its Secretary and another v. Federation of Pakistan through Secretary, Ministry of Law and Justice, Islamabad (PLD 2009 SC 879). . . . . .” Thus, it is trite that not all texts within a judicial decision serves as precedent. That’s a role generally reserved only for ‘holdings’: the parts of a decision that focus on the legal questions actually presented to and decided by the Court. A ‘holding’ consists of “Court’s determination of a matter of law pivotal to its decision”. Everything else amounts to dicta. 10 The process of sorting ‘holding’ from ‘dictum’ has been said to go “to the heart of business of judging”.11 As the definitions of ‘holding’ and ‘ratio’ have varied so has that of ‘dictum’. Generally a ‘dictum’ is a statement in a judicial decision that is unnecessary to the case’s resolution. It is a statement that “does not explain why the court’s judgment goes in favour of the winner”. In the words of Posner J., it is “a statement in a judicial opinion that could have been deleted without seriously impairing the analytical foundations of the holding”. Because it is an incidental remark, it “may not have received the full and careful consideration of the court that uttered it”.12 While the line between holding and dictum is theoretically stark, it can get blurry in practice: “The distinction between dicta and the elusive ratio

9 Shahid Pervaiz v. Ejaz Ahmad (2017 SCMR 206) 10 The Law of Judicial Precedents | Published by Thomsan Reuters | 1st Edition | pp 44 11 Michael Abramowicz and Maxwell Stearns defining dicta, 57 Stan. L. Rev. 953, 958 (2005) 12 The Law of Judicial Precedents | Published by Thomsan Reuters | 1st Edition | pp 46, 47 W.P. No. 74201 of 2024 Page 8

decidendi[ i.e. holding] is in essence a distinction between relevance and irrelevance, and much of the difficulty in elucidating the conception of ratio decidendi arises from attempts to give a precise meaning to relevance in this context.13 11. Keeping the above principles in mind, we have given our anxious consideration to the holding/ratio decidendi of the Naubahar Judgment. The legal challenge laid by the Petitioner in Naubahar case ensued from laying a challenge to the vires of amendments brought about in Section 2(27) of the Acct, 1990 and Section 12(4) of the Act, 2005, which amendments were introduced by virtue of the Finance Act, 2007, evidently as a consequence of the judgment passed by the Supreme Court of Pakistan in the case of Pakistan through Secretary Finance v. Lucky Cement (2007 SCMR 1367), whereby, while considering the phrase ‘inclusive of all charges and taxes’, as it then existed in Section 2(27) of the Act, 1990 and Section 12(4) of the Central Excise Act, 194414, it was held that the levy of FED is not covered by the dint of ‘charges and taxes’. It was the case of Lucky Cement before the Peshawar High Court as well as before the Supreme Court of Pakistan that in their present form, i.e. Section 2(27) of the Act, 1990 and Section 12(4) of the Act, 2005, the charging of ‘Excise Duty’ is not permissible as the excise duty was not covered by the term ‘charges and taxes’ as used in the said provisions. The grounds and arguments raised by Lucky Cement found favor with the Peshawar High Court as well as the Supreme Court of Pakistan and consequently, it was held that ‘Excise Duty’ is not covered by the said provisions. It was in the wake of Lucky Cement Judgment that the provisions of both enactments i.e. Section 2(27) of the Act, 1990 and Section 12(4) of the Act, 2005, were amended and the word ‘[duties]’ was inserted by virtue of Finance Act, 2007. This time around, the present Petitioner i.e. Naubahar Bottling Co., filed a Constitutional Petition i.e. W.P. No.7457 of 2007, under Article 199 of the Constitution before this Court, questioning

13 The Law of Judicial Precedents | Published by Thomsan Reuters | 1st Edition | pp 53, 54 14 It is of note that during the pendency of the challenge laid by Lucky Cement before the Peshawar High Court, which case was finally decided by the Supreme Court of Pakistan in the Lucky Cement Case (2007 SCMR 1367), the Central Excise Act, 1944 was repealed and the Federal Excise Act, 2005 was promulgated, nonetheless, the para materia provision of the Central Excise Act, 1944 existed in Section 12(4) off the Federal Excise Act, 2005. W.P. No. 74201 of 2024 Page 9

the vires of amended Section 2(27) of the Act, 1990 and Section 12(4) of the Act, 2005. For the purpose of clarity, it is imperative to reproduce the prayer clause of the Constitutional Petition filed before this Court: a. The Impugned Amendments in section 2 subsection (27) of the Sales Tax Act, 1990 and section 12 subsection (4) of the Federal Excise Act, 2005 introduced by the Finance Act, 2007 as void ab initio and ultra vires the Constitution and the taxing statutes; b. The Impugned Amendments introduced in section 2 subsection (27) of the Sales Tax Act, 1990 and section 12 subsection (4) of the Federal Excise Act, 2005 as ambiguous, illegal, vague and of no legal effect and all consequential reliefs in relation thereto may also graciously be granted; c. The Impugned Amendments amount to implied double taxation and beyond the scope, limit and vires of the governing statutes, hence, illegal, vague and contrary to charging provisions; d. The Impugned Amendments as expropriatory, unreasonable and arbitrary as same are violative of the fundamental rights of the Petitioners. The said Constitutional Petition was dismissed vide judgment dated 04.04.2013 passed by the learned Single Judge in Chambers of this Court, which judgment was assailed through ICA No.363 of 2013, but it met the same fate vide judgment dated 15.09.2015. It was this challenge to the vires of the provisions contained in Section 2(27) of the Act, 1990 and Section 12(4) of the Act, 2005, which was laid before the Supreme Court of Pakistan through C.P.L.A. No.3121 of 2015 by the present Petitioner i.e. Naubahar Bottling; the leave was granted vide order dated 09.11.2015 and finally the C.A. No.1153 of 2015 was allowed vide Naubahar Judgment. In order to further explicate as to the nature of challenge laid before the Supreme Court of Pakistan, the following paragraphs from the grounds of appeal filed by Naubahar Bottling would be self-explanatory: “E. Thus it can be seen that in order to determine the Excise Duty, the Excise Department calculates it on the basis of a so-called Notional Excise Duty. This is despite the fact that the Federal Excise Act requires the calculation of Excise Duty on the Retail Price rather than on the basis of some Notional Excise Duty. It is respectfully submitted that this is a basic and fundamental error in the Impugned Judgment. F. That it is submitted that the reason why the Excise Department makes the calculation on this basis is because it is well aware that if it were to try to calculate the Excise Duty on the basis of its own interpretation of Section 12(4), namely that the Excise Duty is to be calculated on the basis of the Retail Price including the Excise Duty, then that is something which is mathematically impossible since it is a circular definition which is logically self contradictory. How can excise duty be defined as excise duty plus something else. Is this not manifestly a contradiction in terms. W.P. No. 74201 of 2024 Page 10

G. That there is an additional reason also which substantiates the error, which can be clarified by a simple example; suppose the price of a product is Rs 100 and the rate of duty is 10%. Then the Excise Duty is Rs 10 (i.e. 10% of Rs 100). However, this amount has to be added to the Retail Price as per the Department's interpretation. Thus the Retail Price becomes Rs 110 (i.e. Rs 100 + 10). The problem arises because Rs 10 is now no longer 10% of Rs 110. In fact, 10% of Rs 110 is Rs 11. However, when Rs 11 (instead of Rs 10) is added to the Retail Price, then the Retail Price becomes Rs 111 (i.e. Rs 100 + 11). But the matter does not end there. 10% of this is Rs 11.10 instead of Rs 11. Thus the Retail Price becomes Rs 111.10 (i.e. Rs 100 + 11.10).…

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