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Petitioner: Messrs QUETTA TEXTILE MILLS LIMITED through Chief Executive VS Respondent: PROVINCE JUDGMENT
Court Name: Sindh High Court Judge(s): Mushir Alam Title:Messrs QUETTA TEXTILE MILLS LIMITED through Chief Executive vs PROVINCE
JUDGMENT
Reported As: PLD 2005 Karachi 55 Result: Suits dismissed Judgment JUDGMENT Through this common Judgment, I proposed to dispose of the aforementioned suits involving similar questions of facts and law. Brief facts as are relevant for deciding the controversy in above suits are, plaintiffs in all suits for their commercial pursuit indulged in manufacturing activity and or trading venture, invariably import and/or export raw material, goods, machinery plant and equipment through Province of Sindh by air or sea routes. Through instant suits, plaintiffs have challenged the vires of sections 9 and 10 of Sindh Finar :e Act, 1994, as amended, from time to time and the Rules, by-laws including, Sindh Development Maintenance of Infrastructure Fee Rule, 1994, and all notifications issued thereunder. In many cases refund of Fee or Cess collected, is also prayed for. In all the suits, it is common ground that impugned enactment is beyond legislative competence, un-Constitutional, ultra vires and void ab initio. It is averred that, the movement of goods entering and leaving Province from outside the country through air or sea cannot be restricted by imposing impugned levy, being against the freedom of Inter-Provincial Trade as guaranteed under Article 151 of the Constitution. It was pleaded that levy of impugned fees imposed through impugned legislation
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was successfully challenged in Suit No,764 of 1999 Messrs Rahim and Sons v. Province of Sindh and another 2003 CLC 649. Such levy and "section 9 of the Sindh Finance Act, 1994 as amended by section 5 of Sindh Finance Act, 1996 along with section 9-A of the Latter and consequential order, notifications, rules, demands, notices and drives for recovery were declared to be un- Constitutional ultra vires, unlawful, void ab initio, of no legal effect and thus struck down. Permanent injunction was also granted restraining the defendant from effecting the recoveries under the provision have been declared to be ultra vires". It appears that after the pronouncement in the above suit on 27-5-2000, amendment was made in the impugned legislation through Sindh Finance (Amendment) Ordinance, 2001 dated 24-2-2001. Whereby, sections 9 and 9-A of Sindh Finance Act, 1994 were substituted, validating earlier enactment "notwithstanding anything contained in any law, rules or judgment, order or decree of any Court". Said re-enactment was again challenged, through suits in hand. However, during pendency of present suits, Sindh Finance Act, 1994 was once again amended vide Sindh Finance (Second Amendment) Ordinance, 2001 dated 15-5-2001, whereby subsection (1) to section 9, Explanation No,1 and subsection (3) were also added. Such amendments in the Finance Act have been impugned in most of the suits by seeking amendment. To appreciate the contentions of both the parties, it will be advantageous 'to give summary of legislative history of the impugned legislation On 17-7-1994 Sindh Finance Act XIII of 1994 was promulgated where under a fee was imposed under section 9 thereof, which reads as follows: "Section 9.-There shall be levied and collected fee for services rendered in respect of development and maintenance of infrastructure on the goods entering or leaving the Province, from or for outside the country, through air or sea at the rates and in the manner as may be prescribed." Consequently, to carry out the object of above enactment, on 22-8-1994 Sindh Development and Maintenance of Infrastructure Fee Rule, 1994 were framed on 22-8-1994 providing for the fee payable on goods entering and goods leaving Province for outside the country. Section 9, in the Sindh Finance Act, 1994 was substituted by Sindh Finance Act (XV of 1996) on 14th July, 1996 substituted provision reads as follows: "(1) For section 9, the following shall be substituted: 9. Infrastructure Fee on goods.--There shall be levied and collected infrastructure fee on the movement of goods entering or leaving the Province from or for outside the country, through air or sea at the rates and in the manner as may be prescribed. Explanation.--For the purposes of this section, the word "infrastructure" includes roads, streets, bridges, culverts, lights on passages, plantation on passages, beaches, by passes, first aid center, road-side rest house, safety and protection on rail roads and construction of connected roads to railway stations, regulation and control of traffic for smooth flow and movement of goods, public order, police force, patrol for safety of goods, stands for loading and unloading of goods, markets and development, improvement, maintenance and protection of such matters. 9-A. Validation.--Anything done, action taken, assessment made and collected, order passed, or purported to have been done, taken, made, assessed collected or passed on or before the coming into force of this section or on or after the enforcement of the Sindh Development and Maintenance of Infrastructure Fee Rules, 1994, by the authority specified in the said rules shall be deemed to have been validly done, taken, made, assessed, collected or passed and shall have and shall be deemed always to have effect accordingly". ' Certain minor amendments as to the rate at such fee to be collected were revised in the rules as well last mentioned amended provision were considered in M/s. Kahim & Sons case (supra). It was declared as ultra vires and void ab initio. However, through Sindh Finance (Amendment) Ordinance No, XII 2001, dated 24-2-2001 Section 9 of the Sindh Finance Act was again substituted as follows: "9 Levy of Cass for special maintenance and development of infrastructure.
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(1) There shall be lined and collected a cess for special maintenance and development of infrastructure for smooth and safer movement of goods entering or leaving Province from or for outside the country, through air or sea at the rates and in the manner as may be prescribed. Explanation.--For the purposes of this section, the word "infrastructure" includes, roads, streets, bridges, culverts, lights on passages, plantation on passages, beaches, public parks, place of public recreation and convenience, eating places, landscape, forests, fisheries, delta conservation lakes, breeding places of aquatic life, wildlife and its sanctuaries, public schools, vocational and technical training centers and projects, libraries, museums and similar institutions controlled and financed by the Province, control of traffic for smooth flow and safer movement of goods, public order, police force, patrol for safety of goods, stands for loading and unloading of goods, parking places, markets, water supply, hospitals and dispensaries and development, improvement, maintenance and protection of such matters. (2) The proceeds of the cess shall be utilized for special maintenance and development of infrastructure and other activities ancillary thereto in such manner as may be prescribed. 3. Validation.--Notwithstanding anything contained in any laws, rule or judgment, order or decree of any Court- (i) The infrastructure fee levied, assessed, charged and collected in pursuance of Sindh Finance Act, 1994 before coming into force of this Ordinance shall be deemed to have been validly levied, assessed, charged or collected as Cess and (ii) Anything done, action taken assessment and collection made, order passed or purported to have been done taken under section 9 of the Sindh Finance Act, 1994 and Sindh Development and Maintenance of Infrastructure Fee Rules, 1984 in relation to Infrastructure fee before coming into force of this Ordinance shall be deemed to have been validly done, taken, made or passed in relation to Cess and shall have and shall be deemed always to have effect accordingly 4. Jurisdiction barred.-- No provision of this Ordinance or any order made thereunder shall be called in question by or before any Court." It may further be observed that to undo the effect of the judgment rendered in M/s. Rahim & Sons case (supra), validation cover, barring clause under sections 3 and 4 was also provided, to the infrastructure fee/levy assessed and collected under the Sindh Finance Act 1994. Above legislative amendment led to the filing of present suits, During pendency of suits further amendments in the Sindh Finance Act 1994 were made in section 9. Section 1, was substituted, Explanation, thereto was retained, another Explanation No,2 was added after the amendments brought about to the Ordinance dated 15-5-2001. The final version of the impugned legislation reads as follows:-- (1) This Ordinance may be called the Sindh Finance (Second Amendment) Ordinance, 2001. (2) It shall come into force at once and shall be deemed to have taken effect from 24th February 2001. "Section 9(I).--There shall be levied and collected a cess for maintenance and development of infrastructure on goods at the rate of 0.5 per cent of their value for carriage by road and smooth and safer movement in the Province upon entering or before leaving the Province from or for outside the country, through air or sea, in the manner as may be prescribed." Explanation-I.-- For the purposes of this section, the word "infrastructure" includes, roads, streets, bridges, culverts, lights on passages, plantation on passages, beaches, public parks, place of public recreation and convenience, eating places, landscape, forests, fisheries, delta conservation lakes, breeding places of aquatic life, wildlife and its sanctuaries, public schools, vocational and technical training centers and projects, libraries, museums and similar institutions controlled and financed by the Province, control of traffic for smooth flow and safer movement of goods, public order, police force, patrol for safety of goods, stands for loading and unloading of goods, parking
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places, markets, water supply, hospitals and dispensaries and development, improvement, maintenance and protection of such matters. Explanation-II.--For the purposes of this section, the value means C & F price of goods to the owner upon their entering in and using the infrastructure of the Province; and for other goods the price disclosed in the shipping documents. (2) The proceeds of the cess shall be utilized for special maintenance and development of infrastructure and other activity ancillary thereto in such manner as may be prescribed. (3) No refund of the cess claimed to have been paid or over-paid through inadvertence error or misconstruction shall be allowed, unless such claim is made within three months of the date of payment of such cess." 3. Validation.-- Notwithstanding anything contained in any law, rule or judgment, order or decree of any Court- (i) The infrastructure fee levied, assessed, charged and collected in pursuance of Sindh Finance Act, 1994 before coming into force of this Ordinance SHALL BE DEEMED to have been validly levied, assessed, charged or collected as Cess and (ii) Anything done, action taken assessment and collection made, order passed or purported to have been done taken under section 9 of the Sindh Finance Act, 1994 and Sindh Development and Maintenance of Infrastructure Fee Rules, 1984 in relation to Infrastructures fee before coming into force of this Ordinance shall be deemed to have been validly done, taken, made , or passed in relation to Cess and shall have and shall be deemed always to have effect accordingly. 4. Jurisdiction barred.--No provision of this Ordinance or any order made there under shall be called in question by or before any Court. For the purpose of convenience above enactment in the sequence of order of promulgation are referred to as First, Second, Third and Fourth version. Above legislative transformation of Section 9 of Finance Act in the present form is under challenge in all above suits. Defendants were served, Province of Sindh filed written statement, raising preliminary objections as to very maintainability of suit, inter alia, on the ground of bar under sections 42 and 56 of Specific Relief Act & Section 9 CPC. Beside bar to challenge legislative proceeding of Provincial legislature in terms of Art. 169 read with Art.127 of the Constitution of Pakistan 1973. On merits, it was claimed that Province of Sindh is in incurring huge expenditure on the development and maintenance of infrastructure or welfare of the people of Sindh, to meet such exigencies requires finance, which will be met by levy, subject- matter of suits. It was averred that such levy is imposed beyond the customs barrier and is neither imports nor export tax. It was further averred that it is a levy on movement of goods using the infrastructure of the Province of Sindh. It was specifically pleaded that, matter relating to "carriage of goods by road" has been excluded from Entry No,24 of the Federal Legislative list of Fourth. Schedule: therefore under Article 142(c) exercising residuary authority Province is competent to legislate on leftover subject. It was further demanded that free movement of goods guaranteed under Article 151 is impeded as alleged in the plaint. On 28-5-2002 by consent following issues were framed: (1) Whether the Sindh Finance Amendment Ordinance 2001 and the Sindh Development and Maintenance of Infrastructure Rules and Notifications issued thereunder are un-Constitutional, void and of no legal effect? (2) Whether the demands raised under the above Enactment, Rules, Regulations and Notifications un-Constitutional? (3) Whether the Plaintiff is entitled to the refund of the amount already paid to the Excise & Taxation Department, Government of Sindh? (4) What should the judgment and decree be?
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All the counsel also agreed that, above legal issues could be heard and decided on the basis of material available on record and no evidence is required to be led by any of the party. Accordingly, all the cases were heard extensively at great length. Dr. Farough Naseem led the arguments on behalf of the plaintiff's counsel. It was inter alia, urged that under Part V of the Constitution of the Islamic Republic of Pakistan, 1973 legislative competence- of the Federation & Province have been outlined in respect of the various subjects. According to him, the "infrastructure fee" now termed as `cess', in fact is a custom duty and/or import/export tax, which is within the legislative competence of the Federal Legislature. Entry No,27 and Entry No,43 of the Federal Legislative list cover the subject. Secondly, that Inter-Provincial Trade in terms of Article 151 of the Constitution, 1973 is 'Free'. Impugned levy negate such freedom, was successfully challenged in M/s. Rahim & Sons case (supra). Judgment has attained finality. No appeal was filed. According to Dr. Farough, under the new legislative measure 'fee' has been substituted by `cess'. He therefore, contended that, by whatever name such levy is called it remains beyond the legislative competence of the Province. As authority to levy a cess as per Entry No,54 enumerated in the 4th Schedule include levy of fee mere re-enactment of the same legislation with minor modifications will not validate something, which suffers from inherent lack of legislative competence. In support he has relied on Mirpurkhas Sugar Mills Limited v. District Council, Tharparkar through Chairman and 3 others (1991 MLD 715 (722) Molasses Trading & Export (Pvt.) v. Federation of Pakistan (1993 SCMR 1905 (1920). According to him, there is no change in the charging section Impugned levy, does not withstand the test laid down in the Constitution as well as law expounded by the Courts of law. Mr. Munib Akhtar, appearing in another set of similar cases, while adopting the arguments of Dr. Farough Naseem, outlined the Legislative competence of Federal and Provincial Assembly under the legislative list. According to him, when 'subject' is not enumerated in the Federal or concurrent Legislative list it is only then, a Province could invoke residuary power to legislate. He relied on Ellahi Cotton Mills Ltd. v. Federation of Pakistan (PLD 1997 SC 582) at pages 622624). To augment his arguments as to the basic principal of taxing statute he relies on. Government of Pakistan. v. Hashwani Hotel Ltd. (PLD 1990 S.0 68) (pages 74-75). He took me through the impugned enactment from the date of promulgation (i,e, 17th July, 1994) and all four amendments) made up to date (i,e, 15th May, 2001). Where under, impugned levy was imposed and had undergone transformation from fee to cess. According to him, transformation of 'Fee' into cess does not change the incident of charging section, even in the third version of enactment basic element, as to the liability and the burden was not fixed. He urged that, successive amendment did not remove the inherent defect. It was urged that impugned legislation is in colorable exercise of legislative power, which are, otherwise, not possessed by the Provincial Legislator. He contended that similar question arose while interpreting Rawangi Mahsool or export taxes, said Provisions were struck down in cases reported as Kotri Association of Trade and Industry. v. Government of Sindh (1982 CLC 1252), Mirpurkhas Suggar Mills Ltd. v. District Council Tharparkar (1990 MLD 317) and Sayphir Textile Mills Ltd. v. Government of Sindh (PLD 1990 Karachi 412). He urged that impugned levy is against the guaranteed Free Inter-Provincial Trade, in term of Article 151 of the Constitution same could be struck down on such score above, reliance was laid on Mirpurkhas Sugar Mills Ltd. v. Disrict. Council Tharparkar (1991 MLD 715). He also objected to the validation clause and so also the ouster of jurisdiction clause. It was urged despite ouster clause this Court is within its jurisdiction to examine the vires of the legislator. In support he relies on Megh Raj and others v. Allah Rakhia and others (AIR 1942 F.0 27 (32). Mr. Munib Akhter, without conceding to the validity of such infrastructure fee made alternative arguments based on the stand taken by the defendant in the written statement that "the levy is imposed on goods which cease to be imported goods or have not yet become exported goods and when they become or still remain an "integral mass" the local goods". It was
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therefore, contended by Mr. Munib, in a situation. It was therefore, urged, when there remains no distinction between two type of goods then such levy is hit by Article 25 of the Constitution. As it is not based on intelligible classification, thus liable to be declared as void ab initio in terms of the dicta laid down in I.A. SHARWANI and others v. Government of Pakistan through Secretary, Finance Division, Islamabad and others (1991 SCMR 1041 (1086). Mr. Munib, further contended that, impugned legislation is nothing, but, colourable legislation, the Provincial legislation had no authority over the subject, in the garb of residuary authority such legislation cannot be sustained to support he relied upon Federation of Pakistan v. Shaukat Mian (PLD 1999 SC 1026 (1056). Ms. Sana Minhas, appearing in another bunch of cases supplemented the arguments of Dr. Farough Naseem and Mr. Munib Akhtar, she inter alia, contended Impugned legislation is hit by (i) Doctrine of occupied field. (ii) No resources of the Province are being availed. (iii) It is prospective legislation. (iv) Any amendment made in the Legislation declared void ab initio, ipso facto is also void. Elaborating her first ground of attack regarding "Doctrine of occupied field" Ms. Sana contended that Provincial Legislature could only embark upon a subject in twins of Article 142(C) only in cases where the Federal Legislature in term of Article 142(a) had no authority to legislate on the subject and secondly, and alternately it was urged that such legislation could only be permitted had the Federation, earlier not legislated on the subject. It was urged that, impugned legislation in fact is an attempt to take place of Import and Export Control Order 1950 and Import Fee Rules, 1993 (1993 PTCL (ST) 1108), that are in field. She further cited National Highway Authority Act, 1991 (PLD 1991 (CS) 386 and Territorial Water and Maritime Zones Act 1976 (PLD 1977 (CS) 37), such Acts, according to her were already in field therefore, no room was left for impugned legislation. According to her, since there are already legislation on the subject field was occupied. No parallel legislation either by Federal or Provincial legislator could be promulgated. According to her doctrine of occupied field is protracted under Article 143 of the Constitution of Pakistan 1973. It was urged that the test prescribed for such doctrine is fully applicable on the present case. In support of her first contention she has relied on "Interpretation of Statute" by N.S Bindra [9th Edition] Pages 1225-1226. Fundamental Law of Pakistan by A.K. Brohi [1958] pages 249-255. Constitution of the Islamic Republic of Pakistan, 1973 by Justice Muhammad Munir [Vol.1] pages 692,693,697-702. Constitution of India- An Analytical Approach by H.K. Saharay [2nd Edition] pages 595. In support of her second contention, it was primarily urged that impugned levy is not a tax, it is imposed on use of infrastructure of the Province is being used. Extending her argument on same score, it was contended that, amount of levy is in excess of service rendered. There is no quid pro qua. To augment of her second ground of attack she contends, that such charge or levy otherwise, are discriminatory and not justifiable. To elaborate, she suggested a situation, where two trucks of steel proceeded from Lahore to Karachi. One enters the KPT gate and other, the Shipyard gate, both travelled the same distance, used same infrastructure, one entering the gate of KPT is to be charged, while the other truck entering the shipyard for the local consumption, is not charged with impugned levy, is nothing but discriminatory. Her arguments are more in line with the arguments of Mr. Munib Akhtar, challenging Impugned levy on the ground of discrimination. She next contended Impugned levy is not based on rational yardstick. She explained her arguments by illustrating that, if a person carries or precious stone or metal enters through designated route by air and leaves for other Province, then for such entry or exit from the Province as well outside Pakistan by air will not involve use infrastructure of the Province. Same is the position in respect of the goods that are carried across the border by Railway, Highway or through Water, all such channels of communication/transportation are regulated under the respective enactment by the Federal
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Government. To further expound her arguments she points out Highways are regulated under the National Highway Authority Act 1991. Water Navigation is regulated under the "Territorial Water Zone Act 1997" the Railway, under the Railway Act. According to her all above infrastructures are regulated under the Federal Legislation. According to her, any attempt by the Province to enter into the field of the Federal Government is beyond its legislative competence as the field is already occupied. As regard the 3rd ground, according to her, last manifestations of the impugned levy (i,e, fourth version) came into effect from 24-2-2001. According to her, in view of dicta laid down in Molasses Trading & Export (Pvt) Limited v. Federation of Pakistan and others (1993 SCMR 1905 (1923) such levy could only be prospective, therefore, it cannot be levied with retrospective effect. Last ground of her attack was that, the impugned levy was declared to be void ab initio. No validation could be given to the levy which has been declared void ab initio and not merely void. She had drawn distinction between void and void ab initio legislation. She urged that legislation could be void for number of reasons unless, hurdle is removed it cannot be re-enacted. Once legislation is declared void ab initio no degree of amendment could validate it. In support of her contention, reliance was placed on the Province of East Pakistan and the Secretary, Finance and Revenue (Revenue) Department, East Pakistan, Dacca v. Md. Mehdi Ali Khan and others (PLD 1959 SC 387 (412 &446) Saiyyid Abul A'la Maudoodi, v. The Government of West Pakistan and others (PLD 1964 SC 673 (735ff 785jjj) Shukar Din (Naik No,411) and others v. Major Abaidur Rehman Second-in- Command and M.I.C., Sutlej Rangers, and others (PLD 1965 Lah.522 (Para 527), Haji Ghulam Rasool and others v. The Chief Administrator of Auqaf, West Pakistan (PLD 1971 Lah. 376 (380 para 11). Mr. Abdul Ghafoor Mangi supplemented by contending that impugned levy amounts to double taxation which is violative of Constitutional protection. All the other Counsel for the plaintiffs adopted the arguments of M/s. Dr. Farough Naseem,…
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