Common question of law and fact is involved in C.R. No, 1860/1990, C.R. No,1427/1990 and W.P. No, 63/1988, I propose to dispose of these three petitions by a common judgment.
2: The facts culminating into these petitions are that the Government of Punjab/respondent vide notification dated 19.7.1987 published in the Punjab Gazette under Section 6 of the Punjab Local Government Ordinance, 1979, on July 22, 1987 extended the territorial limits of Municipal Corporation, Faisalabad "for the purposes of next elections to the Local Councils in the Punjab and thereafter." By this notification the boundaries of the Municipal Corporation, Faisalabad were altered and amongst others. Square Nos, 1 to 6 of Chak No, 119/J.B. were included in the Municipal Limits. The petitioners (in C.R. No, 1427/1990 and W.P. No, 63/1988) are the manufacturers of Banaspati Ghee and Vegetable Oils. Their factories were situated outside the limits of the Municipal Corporation, Faisalabad before issuance of the aforementioned notification dated July 22, 1987. The petitioner Companies imported Edible Oils e.g. Cotton Seed Oil, Palm Oil, Soyabean Oil etc. from different parts of Pakistan and some times from foreign countries. Municipal Corporation leased out the octroi collection rights to Defendant No, 3/the Contractor. After issuance of the aforementioned notification dated July 22, 1987 they started demanding the Octroi duty from writ petitioner and plaintiff in Civil Suit out of which revision petitions have arisen. Writ petition and civil suit was filed assailing the notification issued by the Government of Punjab under Section 6 of the Punjab Local Government Ordinance, 1979 and the demand and charging of the Octroi duty from the petitioners on the ground that the said notification was for only election purposes and that no objections were invited from the petitioners for alteration of the boundries of the Faisalabad Municipal Corporation. The suits and the writ petition were defended by filing the written statements alleging that the notification was not only for election purpose but it was to remain in force after the election as well. The factory areas of the petitioners have been validly included in the limits of the Municipal Corporation and that the Octroi duty is being demanded in accordance with law. The writ petition was kept pending, however, in the suit following issues were framed :--
1. Whether the alteration and extension of local limits of Municipal Corporation Faisalabad by notification No, DS (R) 5-2/87 dated 19.7.1987 was only for the purpose of elections of local bodies but not for the purpose of charging of octroi duty and so the charging of octroi duty by defendants from plaintiff's goods such as edible oils etc. on the basis of said notification is illegal, without jurisdiction and void ?' OPP.
2. Whether this Court has no jurisdiction to try the suit ? OPD-3.
3. Whether the Defendant No, 3 is entitled to special costs under Section 35-A CPC ? If so, then to what extent? OPD-3.
4. Whether the plaintiff has not served a notice to Defendant No, 2 under Section 173 of Punjab Local Government Ordinance, 1979 before the presentation of the suit, if so then its effect ? OPD-2.
The learned trial Court vide its judgment dated 11.4.1990 decreed the suit of the plaintiff/petitioner in C.R. No, 1427/1990 holding that "Municipal Corporation admittedly did not comply with the provisions of Local Government Ordinance, 1979 and Punjab Local Councils (Taxation) Rules, 1980 by prior notification, publication and by inviting objections etc." Municipal Corporation was, however, directed to invite objections from the disputing parties and dispose of the same at the earliest. An appeal was preferred by the Municipal Corporation, Faisalabad before the District Judge, Faisalabad which came up for hearing before Mr. Abdul Ghaffar Khan, Additional District Judge, Faisalabad who vide his judgment dated 3.6.1990 set aside the judgment of the learned trial Court and dismissed the suit filed by the plaintiff/petitioner. However, the Municipal Corporation was allowed to charge duty from 25.6.1988, the date of the publication of the Octroi Schedule in the Official Gazette. The judgment of the learned Additional District Judge, Faisalabad, dated 3.6.1990 has been challenged by both the plaintiff and the defendant by filing these two revision petitions.
3. Learned counsel for Municipal Corporation/petitioner in C.R. No, 1860/1990 and respondent in C.R.
No, 1427/1990 and W.P. No, 63/1988 contended that with the extension of the limits of the local council, the tax laws in force automatically became applicable to the newly added areas. Taxes prior to 25.6.1988, were not challenged. The learned Additional District Judge fell iii error in holding that the tax could be imposed w,e,f, 25.6.1988 i,e,, the date of passing of the resolution by the Municipal Corporation. He submitted that a public notice was issued on 14.5.1988 in the daily "Mashriq" inviting the.objections on the tax proposals and after considering the same the corporation in its meeting held on 25.6.1988 passed a resolution imposing the taxes. Official acts are presumed to have been performed validly and in accordance with law. He submitted that the corporation has the jurisdiction to levy taxes under Section 137 and item 1 of Part III of Second Schedule to the Punjab Local Government Ordinance, 1979. The provisions of the Punjab Local Councils (Taxation) Rules, 1980 have been duly complied with. Lastly, he submitted that under Section 6(5) of the Punjab Local Government Ordinance, 1979, the Government of the Punjab is only competent authority to extend the limits of a Local Council and the same cannot be called in question. Reliance was placed on Pakistan Tobacco Co. Ltd. vs. Karachi Municipal Corporation (PLD 1967 S.C. 241), The Chittaranjan Cotton Mills Ltd. vs. The Commissioner Naraynganj Municipality and The Province of East Pakistan (PLD 1958 S.C. (Pak.) 430), Messrs Dawood Yamaha Ltd. vs. Government of Baluchistan and 3 others (PLD 1986 Quetta 148), Sind Fine Textile Mills Ltd., Karachi vs. Peoples Municipality, Shikarpur and 2 others (PLD 1978 Karachi 449), Messers Khayal Muhammad & Sons vs. Chairman, Municipal Committee, Jhelum and 3 others (PLD 1985 Lahore 545) and Sunshine Cotton Mills Ltd. Sheikhupura vs. Administrator Municipal Committee, Sheikhupura and 3 others (PLD 1978 Lahore 263) Ch. Muhammad Khurshid Ahmad, Advocate appearing for the Contractor adopted the arguments of Mr. Aamer Raza Khan, Advocate for Municipal Corporation. Ch. Muhammad Abdul Saleem, Advocate repeated the arguments of Mr. Aamer Raza Khan, Advocate. Ch. M. Bashir, A.A.G. defended the impugned notification.
Cohversly Mr. Abid Hassan Minto, Advocate learned counsel for respondent Company submitted that the extension of the territorial limits of a local council do not make the existing taxation laws automatically applicable to the newly added areas. The objections should have been invited for imposition of the taxes to the newly included areas. Learned counsel urged that public notice relates to the increase in the taxes and it does not mention the imposition of the taxes to the extended areas. He has referred to the items mentioned in the public notice showing the old Octroi rates and the proposed rates. He further submitted that the resolution of the Municipal Corporation only approved the increase in the taxes and not the levy of new taxes. Even the new taxes have not been made applicable to the extended areas. Learned counsel further argued that the Corporation had made an application under Order XLI Rule 27 C.P.C. before the Appellate Court for production of additional evidence i,e, the public notice dated 14.5.1988 and the resolution dated 25th June, 1988 of the Municipal Corporation, Faisalabad. The said application was allowed without any notice to him and the same could mot be read in evidence. Mr. Jari Ullah Khan, Advocate in W.P. No, 63/1988 adopted the arguments raised by Mr. Abid Hassan Minto, Advocate. Ch. Fiza Ullah, Advocate also made his submissions to the same effect.
4. I have gone through the judgments of the Courts below and perused the record. The resolution passed by the Municipal Corporation Faisalabad on 7.5.1988, the public notice published, on 14.5.1988 in daily "Mashriq" and the resolution of the Municipal Corporation dated 25.6.1988 approving the draft notification i,e, the Octroi Schedule which was subsequently notified in the official gazette dated 29.6:1988 were assailed in the case Rauf Trading Company Limited vs. Faisalabad Municipal Corporation through Mayor and another (1990 CLC 1732). The learned Single Judge after considering plethora of case law and the relevant provisions of the Ordinance and the rules framed thereunder observed as under :-- "The Respondent No, 1 has clearly defeated the purpose of Rule 4 while enhancing the rates of itmes in dispute. Now for instance the objections were invited as to the enhancement of the rate to Re. 0.13. Neither any public notice in respect of enhancement of Re. 0.15 was issued nor objections invited nor considered by Sub-Committee, therefore, at least two material stages are missing in the link. The proposition can be looked at from another angle that enhancement beyond Re. 0.13 will be considered as a fresh proposal and respondent was under legal obligation to comply with the whole procedure. This way even there was no proposal to start process.
10. The Respondent No, 1 while enhancing octroi rate beyond Re. 0. 13 in fact frustrated, defeated and set at naught the provisions of Rules 4 and 5. It is clear from Rule 3(3) and Rule 4(b) and (c) that not only the class of the persons or category of property likely to be affected has to be indicated but the rate is also to be specified. Clause (c) of Rule 4 further clarifies that not only the rate but it is also to be notified whether it is being increased, reduced or modified. Therefore, the Respondent No, 1 had no jurisdiction or authority to fix a higher rate than notified in the public notice. Of course the respondent is competent to pass it as a fresh tax after observing all the formalities."
The enhancement of the rate of octroi duty over and above the proposed duty was declared to be illegal and violative of the tax rules. It was further held that the preceding schedule of 1984 would automatically stand restored. The said judgment is still in the field and has not been set aside by any higher forum. Since it has been held that the octroi duty can be charged only in accordance with 1984 Octroi Schedule, by no stretch of imagination it can be said that 1984 Octroi Schedule would apply to the areas which are not yet part of the body of the Municipality and about which objections are not invited from its inhabitants. The case M/s Chaudhri Wire Rope Industries (Private) Limited, Muridke through its General Manager vs. Secretary To the Government of the Punjab and Rural Development Department, Lahore and 3 others (1994 CLC 1060) is on all fours of the present case. The learned Single Judge after going through the relevant provisions of law observed as under :-- "It is difficult to agree with the learned counsel that the effect of the inclusion of the area is that all existing taxes ipso facto became applicable to the extended areas. No such consequence is provided either by Section 6 or Section 7 of the Punjab Local Government Ordinance, 1979. It is to be noticed that Section 6(5) of the Punjab Local Government Ordinance, 1979 spells out in detail the consequences flowing from extension/alteration of limits of a Local Council. But there is nothing contained therein from which it could even be remotely inferred that one of the consequences was that the taxes in force in the existing areas become applicable to the extended areas without further proceedings merely on account of inclusion or extension of the local limits. So far as the newly added areas are concerned, the taxes in question are levied for the first time and, therefore, it is necessary that the procedure prescribed by the Punjab Local Councils (Taxation) Rules, 1980 should be followed. To hold otherwise would amount to depriving the residents of the extended areas of their right to object to the levy and consideration of their objections by the Sub- Committee and the House as contemplated by the Rules." I am not inclined to take a different view. The rates in force in the existing rating areas do not become ipso facto applicable to the extended territorial limits thus making it area of charge.
Sections 137, 138 and 139 of the Punjab Local Government Ordinance, 1979 are the charging sections and Punjab Local Councils (Taxation) Rules, 1980 are only machinery provisions. Without adopting the procedure prescribed by the Punjab Local Councils (Taxation) Rules, 1980, the newly included areas would not ipso facto become rating areas. In my view without providing an opportunity of inviting objections to the proposed levy, the imposition of octroi tax by the rating authority would be contrary to law. The tax payers would be deprived of their valuable right to object to the imposition of tax. The cases relied upon by the learned counsel for the Municipal Corporation are not applicable to the facts of the instant case. In case Pakistan Tobacco Co. Ltd. vs. Karachi Municipal Corporation (supra) during the pendency of the proceedings in the High Court the Municipal limits of the Karachi Municipal Corporation were extended by a notification dated 20th of June, 1964 to take effect from 3.7.1964. The Hon'ble Supreme Court observed as under :-- The tax, even through described as a terminal tax, may be upheld as taxes under the said items 4 and 5; either as an octroi on goods brought into the municipal limits of the Corporation or as a cess on goods exported outside these limits. The Municipal Corporation will, however, have to frame rules in that behalf under Section 41 of the Ordinance, to provide for the levy of such taxes and to notify the same as required under Section 34 of the Ordinance. It can also do so if the Provincial. Government under Section 36 directs it to levy such a tax. But this cannot be done under the existing Terminal Tax Rules, framed under the Municipal Act of 1933. Fresh action will have to be taken if provision has not already been made in that behalf under the powers given by the Ordinance of 1960."
It is thus not clear whether there was any legal requirement for inviting the objections of the tax proposals and whether the tax was levied after inviting objections and considering the same. It cannot be taken as a 'ratio' for the proposition that the existing tax laws would ipso facto apply to the newly added areas. On the contrary, it has been held that fresh action will have to be taken if the provision has not already been made by Ordinance of 1960. Similarly the case Sunshine Cotton Mills Ltd. Sheikhupura vs. Administrator Municipal Committee, Sheikhupura and 3 others (supra) ) is completely silent on the same.
5. As regards the contention of the learned counsel for the Municipal Corporation that a presumption is attached to the official acts, suffice to say that the express provisions have not been complied with and . the increase in the tax has already been declared to be violative of the aforementioned Rules in the case Rauf Trading Company Limited. us. Faisalabad Municipal Corporation through Mayor and another (supra). The judgment was passed by the learned Additional District Judge, Faisalabad on 3.6.1990 when the judgment passed by this Court was not in the field. The contention of Mr. Abid Hassan Minto, Advocate that no notice of the application under Order XLI Rule 27 CPC filed by Municipal Corporation was given to his party has force but since the entire case of both the parties is based on the said two documents, I am not inclined to hold that the same have been illegally admitted in evidence.
6. For the reasons mentioned above the C.R. No, 1427/90 is allowed and judgment of the learned Additional. District Judge dated 3.6.1990 is set aside and that of the learned trial Court dated 11.4.1990 is restored. For the same reasons the Revision Petition No, 1860/1990 is dismissed. In the W.P. No, 63/1988 the issuance of the notification dated 19.7.1988 altering the territorial limits of the Municipal Corporation has been assailed. In the case of M/s Chaudhri Wire Rope Industries (Private) Limited, Muridke through its General Manager vs. Secretary to the Government of the Punjab and Rural Development Department, Lahore and 3 others (supra) it was held as under :-- "So far as the inclusion of the area within the Municipal limits is concerned, the notification issued in this behalf on 25.1.1987 is not open to any valid exception. Section 6 of the Punjab Local Government Ordinance, 1979 unmistakably vests power in the Government to alter the limits of Local Councils. The decision is purely administrative in nature and rests with the Government alone.
This Court cannot in its Constitutional jurisdiction undertake an exercise to find out as to whether or not such a decision was justified on facts. Similarly, on its proper construction, notification dated 25.1.1987 shows that though it was issued keeping in view the elections being held to the Local Councils yet the alteration of limits was not only for that limited purpose nor was it transitional or temporary in nature. The use of word "thereafter" in the notification is clearly indicative of the intention that even after the elections, the altered limits would remain in force." The instant notification is to the same effect and the expression "thereafter" clearly indicates that it would remain in force even after the elections. Under Section 6(5) of the Punjab Local Government Ordinance, 1979 the Government is empowered to alter the limits of a local council. The Government for effective change appearing to it desirable in the interests of effective and convenient Local Government may review the boundaries of a local council. Unlike the Sindh Local Government Ordinance, 1979 there is no legal requirement in the Punjab Local Government Ordinance, 1979, for inviting objections before issuing notification for alteration of boundaries of a local council. The impugned notification cannot be quashed on this ground. To this extent constitutional petition is dismissed. However, for the reasons mentioned above the respondents are directed to refrain from imposing or recovering the octroi duty.