The petitioner i,e, WAPDA is a statutory body wholly controlled by the Government of Pakistan. Its funds are either generated by the Government itself or obtained from sources approved by the Government.
2. The petitioner claims and the respondents admit that the Chairman and the Members of WAPDA are appointed by the Government of Pakistan. Its members are invariably ex-officio Government/Public Servants. The functions entrusted to WAPDA under the WAPDA Act are the same as performed before 1958 by the Provincial Government. And that it is functioning as an agency of the Government of Pakistan.
3. The petitioner obtained finances and made financial transactions with and through Respondent No 3 and its syndicated associates, with the Governmental approval and guarantees.
4. Through Finance Act (XII of 1991), inter alia Item No, 14.14 in the First Schedule to the Central Excises and Salt Act, 1944 was added and read as under: "Service provided or rendered by banking companies, financial institutions, insurance companies Cooperative financing societies, Other lending banks or institutions Dealing in advancing of loans, in respect of advances made to any persons."1/12 of 1% of the amount of each advance outstanding on the last working days of each calendar month.
5. Vide Section 4(8) of the Finance Act 1992 (VII of 1992), entries in Column No, 3 of Item No, 14.14 of Part II of the First Schedule were amended to raise the excise duty to 2% on the advances.
6. On the imposition of the above referred levy, the Federal Government, in exercise of its powers under sub-section (I) of Section 12-A of the Central Excises and Salt Act, 1944, made further amendments and also granted certain exceptions from such duty by issuance of various notifications, which included SRO 519(I)/92 dated 25.5.1992 which reads as under: "In exercise of the powers conferred by sub-section (I) of Section 12-A of the Central Excises and Salt Act 1944 (I of 1944) the Federal Government is pleased to direct that the following further amendments shall be made in its Notification No, S.R.O. 555(I)/79 dated the 28th June 1979, namely: In the aforesaid Notification is Table II, in column (II, in Item No, 14.14 for the entries relating thereto in columns (2) and (3) the following shall be substituted, namely:-- Advances not exceeding Rs, 50,000/-1/12th of 1% of the amount of each advance outstanding on the last working day of each Calendar month.
Advance made for the Rs, 50,000/- purchases of plant and machinery or for construction of factory building.1/12th of 1% of the amount of each advance outstanding on the last working day of each Calendar month.
Loans for construction of residential houses, where the title of the house belongs to an individual.1/12th of 1% of the amount of each advance outstanding on the last working day of each Calendar month.
Export Finance credit. 1/12th of 1% of the amount of each advance outstanding on the last working day of each Calendar month.
Loans made for agricultural purpose.1/12th of 1% of the amount of each advance outstanding on the last working day of each Calendar month.
Qarz-e-Husana. 1/12th of 1% of the amount of each advance outstanding on the last working day of each Calendar month.
Advance taken by the Government or by a Banking Company, a Financial institution, an Insurance company, a cooperative financing society and other lending bank or institution.1/12th of 1% of the amount of each advance outstanding on the last working day of each Calendar month.
(h) Bad Debts NIL Explanation:--"Bad Debts" means loans classified as bad and doubtful under prudential Regulations for Loan Classification issued by the State Bank of Pakistan."
7. Against the respondents' claim of imposing, charging and collecting of the Central Excise Duty, on the basis of outstanding advances under the amendments made to the First Schedule of Central Excises and Salt Act, 1944 vide the Finance Act (XII of 1991) and Act (VII of 1992), WAPDA filed the present Constitutional petitions.
8. The learned counsel for WAPDA averred that that WAPDA by its Constitution and functioning is a Government Authority/Agency entrusted with precisely the same functions which prior to 1958 were performed by Provincial Governments. Wherefore, it enjoyed exemption from the payment of Income Tax and is likewise eligible to exemption available as provided for under Section 12-A of the Central Excises and Salt Act, 1944 read with Notification No, SRO No, 519(1)/92 dated 25.2.1992, Item `g' which prescribes a "nil" duty for advances Laken by the Government. And that as ,WAPDA is a Government Agency/Authority performing the functions of the Government it is entitled to the exemption as per the above Notification dated 25.5.1992.
9. The learned counsel for the petitioner has also placed reliance upon the following judgments to support the above proposition:-- "Central Board of Revenue v. S.I. T.E." (PLD 1985 Supreme Court 97); "Chairman, District Council, Rahim Yar Khan v. United Bank Limited, Rahim Yar Khan" (1989 CLC 1397); 'Messrs Rice Export Corporation of Pakistan v. Karachi Metropolitan Corporation" (PLD 1990 Karachi 186); 'Messrs Gadoon Textile Mills and 814 others v. WAPDA and others" (1997 SCMR 641); "Water and Power Development Authority and Ghazi Barotha Contractors v. Administrator, District Council, Swabi, etc. (NLR 2000 Tax 136).
10.In the contrary arguments, the learned Deputy Attorney General appearing for Respondent No, 1 and the learned counsel appearing for CBR etc. contended that under Section 3 of the WAPDA Act, the petitioner is a body corporate entitled to own property, wherefor, the petitioner is a person separate from the Government which is also evident from the provisions of Sections 13 and 22 of the WAPDA Act whereunder WAPDA is liable to pay the Government costs of consultancy and advice and WAPDA is also given grants and loans by the Government. And as such institutional and financial independence of WAPDA and the Government is mentioned in the WAPDA Act itself.
11.I have considered the submissions of the learned counsel for the parties. The simple proposition involved herein is as to whether WAPDA being a Governmental Agency is entitled to the exemption from the payment of excise duty and can avail itself of item 'g' of Notification No, SRO No, 519(1)/92 dated 25.5.1992.
12.Regarding the legal status of WAPDA as an Agency or Authority of the Federal Government, the respondents have raised no dispute. However the legal status of WAPDA was pronounced upon by the Hon'ble Supreme Court of Pakistan in the case of "Messrs Gadoon Textile Mills and 814 others v.
WAPDA and others" (1997 SCMR 641) as under: Before taking up the contentions of the learned counsel for the parties, we may examine the legal status of WAPDA. The WAPDA was incorporated by West Pakistan Water and Power Development Authority Act (XXXI of 1958) gazetted on 24.4.1958, hereinafter referred to as the Act. The Preamble of the Act provided the object of its incorporation, namely, to provide for the unified and coordinated development of the water and power resources of West Pakistan. It may be pointed out that WAPDA was intended to cater for West Pakistan as one unit. However, after the fall of Dacca and dissolution of West Pakistan and creation of four Provinces by P.O. No, 1 of 1970 (Province of West Pakistan (Dissolution) Order, 1970) gazetted on 30.3.1970, and upon enforcement of the Constitution of Islamic Republic of Pakistan, 1973, hereinafter referred to as the Constitution, and because of Item 3 in Part II of the Federal Legislative List, WAPDA became a Federal subject under the supervision of the Federal Government. The words "West Pakistan" appearing in various provisions of the Act were substituted by the word "Pakistan". A number of adaptations/amendments were made inter alia by P.O. No, 4 of 1975 (Federal Adaptation of Laws Order) 1975, gazetted on 1.8.1975, Ordinance No, LXXIL of 1979 (West Pakistan Water and Power Development Authority (Amendment) Ordinance, 1979, gazetted on 29.12.1979, and Act No, XIII of 1994 (Pakistan Water and Power Development Authority (Amendment) Act, 1994, hereinafter referred to as the Act, gazetted on 6.7.1994. It may be stated that clause (i) of Section 2 defines the word "Authority" as means the Pakistan Water and Power Development Authority established under Section 3 of the Act. It may be observed that by virtue of sub-section (2) of Section 3 of the Act, the Authority is a body corporate which is entitled to acquire, hold and dispose of property having perpetual succession and common seal and entitled to sue and be sued. It will not be out of context to mention that the power to dispose of the property was conferred on the Authority by virtue of the amendment incorporated by Act XIII of 1994 dated 6.7.1994."
The Hon'ble Supreme Court of Pakistan after further analysis of the spheres of operation of WAPDA, its duties, powers, functioning and modalities, observed that: The above resume of the Act indicates that WAPDA is a corporate body having its own charter. It is subject to administrative control of the Federal Government. It is also subject to financial scrutiny by the National Assembly as its audited annual accounts are to be placed before the National Assembly, which in turn refers the same to its Committee on Public Accounts for scrutiny and examination. The amending Act, 1994 has made amendments of far-reaching consequences inasmuch as efforts have been made to convert WAPDA into a modern, viable and dynamic Corporation. The scope of its activities has been considerably enlarged. It may privatize or otherwise restructure any operation other than hydel generation power stations and National Transmission Grid, it may enter into a joint venture inter alia with any other Corporation/company and, it may even purchase bulk power from private sector etc. Of course, this is subject to Constitutional constraints." Similarly, an Hon'ble Division Bench of the Peshawar High Court also determined the legal status of WAPDA in the case of "(1) Water and Power Development Authority (WAPDA) (2) Ghazi Brotha Contractors vs. Administrator, District Council, Swabi, etc." (NLR 2000 Tax 136) and held that: The Authority consists of a Chairman and Members, who are appointed by the Government, and the service under the Authority is service of Pakistan and every person holding a post under the Authority would be deemed to be civil servant for the purpose Service Tribunals Act, 1973. The authority has to submit yearly reports and returns to the Government and its accounts are auditable by the Comptroller and Audit General of Pakistan in such manner as prescribed by the Government. All these provisions of the Act would show that Federal Government has complete control on WAPDA and it is performing functions of the State like a Department of the Government, therefore, it is entitled to the same exemptions as are permissible to the Federal Government under Article 165 of the Constitution, thus its property or income can be said to be the Government property and income and stand exempted from the liability of tax." As such in the above case, WAPDA was held to be entitled to the same exemptions as are permissible to the Federal Government under Article 165 of the Constitution of Islamic Republic of Pakistan.
13. Furthermore, an Hon'ble Division Bench of Sindh High Court at Karachi in the case of 'Messrs Rice Export Corporation of Pakistan v. Karachi Metropolitan Corporation" (PLD 1990 Karachi 186) held Rice Export Corporation of Pakistan Limited (an incorporated Company) to be essentially performing the functions of the Federal Government as provided in the Constitution of Islamic Republic of Pakistan and thus adjudged the property of Rice Export Corporation to be that of the Federal Government, entitling the Corporation to the exemptions permissible to the Federal Government in terms of Article 165 of the Constitution and not liable to taxation, as regards such property, under an Act of Provincial Legislature.
The Hon'ble Supreme Court of Pakistan in the case of "Central Board of Revenue vs. S.I.T.E" (PLD 1985 Supreme Court 97) settled the question of law involved in the present case as well by pronouncing that: The respondent-Company was carrying on the function of Industrial Development and the trade and business connected therewith for and on behalf of the Government. The truth is that the lifting of veil, has revealed that for the relevant purposes in this case it was doing so just like a department of the Government, notwithstanding the incorporation; which as explained earlier will not make any difference regarding the relevant Constitutional Provision -on exemption from Federal Taxation."
14.The position of law thus stands settled that WAPDA is an Agency of the Federal Government; performs the functions of the Federal Government. It therefore cannot be burdened with a tax through a Provincial Statute and is entitled to the same exemptions as permissible to the Federal Government in terms of Article 165 of the Constitution of Islamic Republic of Pakistan. The distinction drawn by the learned Deputy Attorney General and the learned counsel for the other respondents is based upon the structural facade or incorporated attire adorned on the Authority by the WAPDA Act. The consolidated reading of the provisions of the WAPDA Act only emphasizes the functions of the Government being performed by WAPDA. The thin veil of structural distinction disappears.
15.In the light of what has been discussed above, WAPDA being an Agency of the Government is entitled to the exemption or 'nil' levy of excise duty under Notification No, SRO 519(1)/92 dated 25.5.1992. This Constitutional petition is thus accepted. Imposition, charge and demand of excise duty from WAPDA by the respondents is held to be without lawful authority. There shall be no order as to costs.
16.Following identical petitions filed' by WAPDA on imposition and demand of excise duty are also decided through this judgment.
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