This judgment shall dispose of Writ Petitions Nos.847, 698, 3646, 3645, 3647 and 3648 of 2005.
These facts in these petitions are not contested.
2. The petitioners' grievance is that in exercise of power under rule 5 of the West Pakistan Sugarcane (Development Cess) Rules, 1964 (`Rules') the respondents have not exercised their discretion reasonably and lawfully in the matter of levy of penalty for alleged default in the payment of sugarcane cess by the petitioner sugar mills It is common ground that the petitioners were in default of the payment of sugarcane development cess for the period from 1997 to 1999 whereupon respondent No,1, the Provincial Government allowed the petitioners to clear their default in the payment of sugarcane development cess through monthly instalments. The number of monthly instalments granted to the petitioners to clear their arrears ranged from 12 to 24. The payment of the entire amount of over due liability of each, petitioner was secured through deposit in advance of post dated cheques for each instalment which were then encashed by respondent No,2 on the respective due dates. Some petitioners entered into a written agreement (herein referred as "instalment agreement") with respondent No,2 (Cane Commissioner) that set out the terms upon which the arrears of sugarcane development cess was to be repaid. Such instalment agreements are available in the record of Writ Petitions Nos.3645, 3646, 3647 and 3648 of 2005. In the other writ petitions, the petitioners claim that the same agreement, although not signed by the respondent No,2, was actually acted upon by the parties. All petitioners before this Court have faithfully performed their instalments agreement but allege that after a bulk of the overdue cess had been cleared by the petitioners each of them has received a notice from respondent No,2 demanding payment of penalty for committing default. After hearing the petitioners the said respondent has held that the full amount of the sugarcane development cess defaulted respectively by each petitioner shall be recovered as penalty from each of them under rule 5(1) of the Rules. The petitioners in separate appeals challenged the levy of penalty by respondent No,2 before respondent No,1 on the ground that it stands waived by virtue of the instalment agreement.
Respondent No,1 has however held that levy of penalty is provided by law and has rightly been imposed by the Cane Commissioner. Respondent No,1 passed a standard format order on 12-8- 2004 in the case of each petitioner against which they have come before this Court through separate writ petitions mentioned first above'.
3. The following matters were crystallized during the submissions by the parties and ensuing discussion. In the first place, it is established that the instalment agreement between the parties does not contain any term that waives the charge of penalty claimed by the respondents from the petitioners for the period of default. In fact the claim of the petitioners for waiver of penalty amount is, therefore, at best, based upon the omission by the respondents to claim penalty at any stage prior to or at the time of concluding the instalment agreement. Learned counsel for the petitioners claim that had such a liability to penalty been asserted by the respondents at that time, then either no agreement would have taken place or waiver would have been expressly mentioned in the instalment agreement. This argument by the learned counsel for the petitioners is not well- founded. The right of the respondents to charge penalty is not derived from the consent of the parties but emanates from section 14 of the West Pakistan Finance Act, 1964 that creates the charge of penalty and rule 5(1) whereby the time, manner and procedure for collection of penalty is spelled out. Therefore, liability to pay penalty would survive both in the absence of the instalment agreement as well as its failure to state the petitioners non-liability thereto. Silence on the point in the instalment agreement operates to preserve the petitioner's obligation to pay such a charge rather than to extinguish the same.
4. Once the liability of the petitioners to pay penalty for their past default to clear sugarcane cess dues is determined to exist, the question that remains is what quantum of penalty can be recovered from the petitioners. Learned counsel for the petitioners drew the attention of the Court to the language of rule 5 which is to the following effect: "5. Penalty.--(1) If a sugar mill does not deposit the cess due into the Government Treasury by the prescribed date, the Cane Commissioner or any other officer, authorized in this behalf, may in pursuance of section 14 of the Act, impose on the management a penalty not exceeding the amount of the tax: Provided that such penalty shall not be imposed without giving the mill management an opportunity of being heard.
(2) Any sugar mill aggrieved by an order passed under sub-rule (1) above may, within thirty days of the order, prefer an appeal to Government.
(3) On expiry of thirty days from the order made under sub-rule (1) or after decision of the appeal under sub-rule (2), the mill management shall be required by the Cane Commissioner, by a notice in form S.C.R.II to deposit the penalty imposed under this rule and the amount of the cess which remains unpaid." (Underlining is ours).
5. It is clear from the provisions of rule 5(1) that respondent No,2 has a discretion to impose penalty that is subject to the maximum ceiling of the amount of tax that is in arrears. By the impugned orders the respondents have decided to impose the maximum amount of penalty in the case of each petitioner. When asked why no relief in the quantum of penalty had been granted to any petitioner, learned Additional Advocate General referred to the terms of policy devised by the respondents in the matter of charging of penalty from sugar mills. The terms of this policy is reproduced in order dated 29-1-2002 passed by this Court in W.P. No,7559 of 2001 titled Haseeb Waqas Sugar Mills (Pvt.) Limited v. Secretary Foods, etc. The relevant portion of the said order is reproduced below: "The learned Law Officer states that pending approval by the Government, the petitioner sugar mills shall be dealt with in accordance with the terms of the aforesaid policy. The terms of the policy are reproduced below:--
(a) the previous record of the sugar Mills on timely payment of Sugarcane Cess will be taken into account.
(b) Regular past payment of sugarcane cess within the stipulated period will be given due consideration while imposing penalty under the rules.
(c) Wilful and persistent default would entail proportionately greater penalty.
(d) Default on growers share would constitute a greater offence as compared to default on mill share.
(e) Unavoidable circumstances established on record by the defaulting mills would be considered.
(t) The magnitude of default would be considered while imposing penalty.
(g) The penalty shall be imposed and or rescheduled in such manner that the probability of outcome for any sugar mill on default in terms of penalty shall be uniform.
(h) The rescheduling decisions will be made on case to case basis in accordance with the parameters set out by the Ministerial Committee.
(i) In addition, the following formula may be kept in view.
Sr. No,Period in default % age imposition of penalty
1. Default between 3 months to 6 months (after close of season) 15 to 25
2. Default between 6 months to one year 26 to 50%
3. Default beyond 12 months 51 to 100
(j) The aforesaid policy provisions can be relaxed by the Cane Commissioner, Punjab in special circumstances, reasons, whereof shall be recorded in writing.
2. In view of the policy framed above and the statement of the learned Law Officer it is ordered that pending approval by the Government all sugar mills in the Punjab shall be dealt with in accordance with the terms of the policy as reproduced in paragraph 1 of this order. It is further ordered that in order to ensure transparency, in all cases where the Cane Commissioner relaxes any provision of the policy in exercise of powers referred to in Clause (j) of paragraph 1 above his decision shall be communicated to the sugar mills. In Punjab and to any industry-wise association of sugar mills in Pakistan."
6. Respondent No,2 states that the direction contained in paragraph No,2 of the aforesaid order obliges the respondents in the facts of the present case to impose the maximum charge of amount of penalty. The direction given in paragraph No,2 of the aforesaid order requires that pending approval of the policy by the Provincial Government, the terms thereof are to be adhered uniformly by the respondents as a measure of transparency and reasonableness.
7. The stand taken by the respondents is neither justified by the facts of the case nor by the terms of policy relied by them. In the present case, the Provincial Government has entered into an instalment agreement with the petitioners acknowledging their entitlement for sufficient reasons to pay arrears of sugarcane cess development in instalment. The factum of such an agreement shows that the petitioners demonstrated, within the meaning of paras. (e) and (0 of the terms of the aforesaid policy, the existence of "unavoidable circumstances" and huge "magnitude of default" by them, which would render the literal adherence to the rule of maximum penalty applicable for default for a period of more than 12 months to be unreasonable. Finally, where the period in default exceeds 12 months para. (i) of the said terms of policy itself gives a discretionary margin of relief in the quantum of penally to be applied from 51% to 100% of the sugarcane cess amount in arrears. The impugned orders of the respondents Nos.1 and 2 show that they did not apply their minds to the foregoing discretionary margin nor did they consider at all the impact of mitigating circumstances of the case under paras. (e) and (0 of the aforesaid terms of policy, which as pointed out above stand acknowledged by the conclusion of the instalment agreement.
8. The failure by the respondents to consider the factors relevant to the imposition of penalty as highlighted in the term of policy and to exercise their discretion in accordance therewith in fixing the quantum of penalty represents a failure to exercise jurisdiction fairly and reasonably in the circumstances of the case. The liability of the petitioners to pay penalty for their default to discharge their sugar cess dues cannot be doubted, however, it is equally clear that the petitioners have a good case for a reduced amount of penalty to be imposed in view of the circumstances mentioned above. Apart therefrom the absence of further default in the payment of instalments may be another consideration for the respondents in relaxing the quantum of penalty. Each of these factors provide criteria for the exercise of discretion by the respondents.
9. Finally para. (i) of the terms of policy sets out the range of quantum of penalty in cases of default of various duration. It must be noted that this provision is only one of the factors and not the only factor of consideration regarding imposition of penalty. In the weighing of the foregoing factors, the important standard to be observed by the respondents whilst exercising the instant discretionary power to levy penalty is that they must act transparently, reasonably, fairly and uniformly. Their assessm ent of the different criteria impinging upon the quantum of penalty to be imposed must be based upon reasoning and material contained on the record.
10. It is accordingly declared that the impugned assessment of maximum amount of penalty by the respondents in the case of each petitioner uniformly is void and unlawful. Respondents Nos.1 and 2 are directed to conduct fresh proceedings for the assessment of the said liability of the petitioners subject to the petitioners depositing 25% of their respective amounts of sugarcane cess in default. The petitioners shall also file applications before the respondent No,2 providing grounds having reference to the terms of policy reproduced above for remission in the quantum of penalty payable by them to be determined by respondent No,2 in the range between the amount of their down payment to the ceiling fixed by the policy. These applications by the petitioners shall be disposed of in the light of the principles noted above after giving an opportunity of fair hearing to the petitioners. The petitions are accordingly allowed partly in the terms given above.