KHALID ALI Z. QAZI, J.---Through the listed set of appeals, the appellants have called into question the common judgment passed by a learned Single Judge i.e, Mushir Alam J, dismissing a number of suits whereby the infrastructure fee/cess had been assailed. As the points of facts and law in all the present appeals are common, the same are being disposed of through this consolidated order.
2. The brief facts giving rise to the present appeals are that Provincial Assembly of Sindh vide the Sindh Finance Act, 1994 (hereafter: "1994 Act") provided for the imposition of an infrastructure fee through section 9 of the said 1994 Act, which reads as follows:-- "9. There shall be levied and collected a 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."
3. Furthermore, the said 1994 Act, through section 10 thereof, provided for making of rules for the purposes of the assessm ent and collection of the above infrastructure fee. The said section 10 reads as follows: -- "10. Government may make rules for carrying into effect the purpose of this Act and such rules may among other matters, prescribe the procedure for the assessment, collection and payment of and exemption from the taxes and cesses levied under this Act."
[NB. At places in this judgment the levy as introduced through the 1994 Act is also referred to as the "first version"].
4. In pursuance of the above sections 9 and 10 of the1994 Act the Government of Sindh vide notification dated 22-8-1994 prescribed the Sindh Development and Maintenance of Infrastructure fee Rules, 1994. While the rules provide for a mechanism for the rate, quantification, assessment, appeal and revision of the infrastructure fee, the relevant rule prescribing for the rate of fee is rule No,3 which is reproduced as follows: -- "3. Rate of Fee.---(1) The fee for the services in respect of development and maintenance of infrastructure shall be assessed and collected by the Excise and Taxation Officer of the District at the following rates:--
(a) On goods entering the Province from out side the country:--
(i) Where the customs duty 0.1% on duty is paid in the Province paid value.
(ii) Where the customs duty is 0.2% on C and F to be paid outside the Province value
(2) The fee on the goods mentioned in clause (b) shall not be charged during the year 1994-95."
5. Thereafter through section 5 of the Sindh Finance Act, 1996 (hereafter: "1996 Act") section 9 of the 1994 Act was substituted to read as follows:-- "5. In the Sindh Finance Act, 1994
(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 purpose of this section, the word "Infrastructure" includes roads, streets, bridges, culverts, lights on passages, plantation on passages, benches, by passes, air centers road side rest houses, 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 of passed and shall have and shall have and shall be deemed always to have effect accordingly."
[NB: At places in this judgment the amendment through the 1996 Act is also referred to as the "second version"1.
6. Subsequently, vide notification dated 30-6-1996 the Government of Sindh made certain changes in the rates of the fee.
7. A number of Constitutional Petitions were filed in the Court challenging the vires of the infrastructure fee levied through the 1994 and 1996 Acts, discussed above. While such petitions were pending suit 764/99 titled H.A. Rahim (Pvt) Ltd. v. Government of Sindh and another was also filed on the original side of this Court, challenging the vires of the infrastructure fee levied through the 1994 and 1996 Acts.
8. Suit 764/99 was decided on 27-5-2000 by a learned Single Judge i.e, Attaur Rehman J., as he then was, and such judgment is reported as H.A Rahim (Pvt) Ltd. v. Government of Sindh and another 2003 CLC 649. In this judgment the learned Single Judge was pleased to declare that the infrastructure fee was unconstitutional and ultra vires, while annulling the same. It seems that a belated High Court Appeal (HCA) No,33/2001 was filed so as to challenge the judgment of the Single Judge in the case of H.A. Rahim (Pvt) Ltd. v. Government of Sindh and another. While this appeal was filed on 14-2-2001 the Governor of Sindh was pleased to promulgate the Sindh Finance (Amendment) Ordinance, 2001 being Sindh Ordinance No, XII of 2001 dated 24-2-2001. Through this Ordinance an attempt was made, inter alia, to change the nomenclature of the levy of "infrastructure fee" to "infrastructure chess", while at the same time making an attempt to invalidate the judgment of the learned Single Judge i.e, Atta ur Rehman J. In the case of H.A. Rahim.
9. On 26-2-2001 i.e, just 2 days after the promulgation of the Sindh Finance (Amendment)
Ordinance, 2001 on 24-2-2001, a learned Division Bench comprising Sabihuddin Ahmed and Zahid Kurban Alvi JJ, while hearing the bunch of the Constitutional Petitions whereby the infrastructure fee levied through the 1994 and 1996 Acts had been assailed, dismissed the said petitions as infructuous in view of promulgation of Sindh Finance (Amendment) Ordinance, 2001, leaving the petitioners to challenge the validity of the same by filing fresh petitions/case .
10. The next day i.e, 27-2-2001 (of the passing of the above order dated 26-2-2001) a learned Division Bench of this Court comprising Sabihuddin Ahmed and S. Ali Aslam Jafri JJ. Heard HCA 33/2001 through which the judgment in H.A. Rahim's case in Suit No,764 of 1999 had been challenged. It was clearly observed in the order dated 27-2-2001 that the said appeal was "prima facie hopelessly barred by limitation". However, Mr. Raja Qureshi, the then Advocate-General, was given time to file further affidavit and explain the delay.
11. Thereafter HCA 33/2001 came up before another learned Division Bench of this Court comprising Muhammad Roshan Essani, Acting C.J. And Ali Aslam Jafri J. On 14-3-2001. On the latter date the learned Division Bench was pleased to condone the delay in the filing of the appeal. However, a statement was made by the then learned Advocate-General Mr. Raja Qureshi to the effect that in view of the promulgation of the Sindh Finance (Amendment) Ordinance, 2001, the appeal filed by him i.e, HCA 33/2001 had become infructuous and he no longer wished to press the appeal. On such statement the appeal was disposed of.
12. It was in the backdrop that a number of suits were filed before original side of this Court challenging the vires of the Sindh Finance, (Amendment) Ordinance 2001. The 2001 Ordinance, through sections 2, 3 and 4 provided for levy of the infrastructure cess, invalidation of the judgment in the H.A. Rahim case and barred the jurisdiction of the Courts to question the said Ordinance. The said sections 2,3 and 4 of the latter Ordinance read as follows:--
13. "2. Amendment of the Sindh Finance Act, No, XIII of 1994.- In the Sindh Finance Act, 1994, for section 9 including the Explanation and section 9-A, the following shall be substituted:--
9. Levy of cess for special maintenance and development of Infrastructure.---(1) Substitution of sections 9 and 9-A of Sindh Act, XIII of 1994). There shall be levied and collected a cess for special maintenance and development of infrastructure for smooth and safer 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 the prescribed.
Explanation.---For the purpose 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, wild life and its sanctuaries, public schools, vocational and technical training centers and projects, libraries museums and similar institutions controlled and financed by the Private 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, hospital and dispensaries and development, improvements, 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 law, rules or judgments, order of decree of any Court---
(i) the Infrastructure fee levied, assessed, charged and collected in pursuance of the Sindh Finance Act, 1994 before the 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 the Sindh Development and Maintenance of Infrastructure Fee Rules, 1994 in relation to Infrastructure fees before the 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."
[NB: At places in this judgment the amendment through the Sindh Finance (Amendment)
Ordinance 2001 is referred to as the "third version"].
13. During the pendency of the suits the fourth version of law was introduced through the Sindh Finance (Second Amendment) Ordinance, 2001, being Sindh Ordinance No, XVI of 2001 on 15-5- 2001, which was retroactively made effective from 24-2-2001. The said fourth version of law brought about certain amendments in section 2 thereof as follows:-- "2. Amendment of the Sindh Finance Act No, XIII of 1994.--- the Sindh Finance Act, 1994, in section 9 for subsection (1) excluding the Explanation the following shall be substituted; There shall be levied and collected a cess of maintenance and development of infrastructure of goods at the rate of 0.5 per cent of their value of 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. ";
(ii) the existing Explanation shall be re-numbered as Explanation "I" and after the Explanation so re- numbered, the following new Explanation shall be added; 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. ";
(iii) After subsection (2), the following new subsection shall be added;
(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."
[NB: At places in this judgment the amendment through the Sindh Finance (Second Amendment)
Ordinance, 2001 is referred to as the "fourth version"].
14. A learned Single Judge (i.e, Mushir Alain J.) took cognizance up to the fourth version of law and dismissed all the suits vide a very elaborate judgment dated 28-10-2003 running into 79 pages.
The appellants through the present appeals have not only called into question all the versions of the impugned legislation but also the judgment of the learned Single Judge dated 28-10-2003.
15. Vide orders dated 6-11-2003 and 18-12-2003 notices were issued to the learned Advocate- General of Sindh and the Attorney-General for Pakistan, respectively under Order XXVII-A of the C.P.C. In keeping with the decision of the Supreme Court reported as Federation of Pakistan v. Aftab Ahmed Khan Sherpao PLD 1992 SC 723.
16. The appeals were placed from time to time before different benches, while on 3-3-2005 the said appeals became partly heard before a learned bench comprising Anwar Zaheer Jamali (now the learned CJ.) and Mujeebullah Siddiqui (as he then was) JJ. The judgment for the appellants were further heard by the same learned bench on 8-3-2005, 9-3-2005 , 10-3-2005 and 11-3-2005.
Thereafter the learned counsel for the respondents sought time on various dates. On 20-2-2006 Mr. Rasheed Ahmed Akhund, the learned counsel for the respondents, requested for further two months time so that the Government could reconsider an amendment in the impugned Ordinance or otherwise. Time was granted. On 21-8-2006 Mr. Akhund again requested for further adjournment on the pretext that the Government was still processing the issue so as to resolve the controversy to the satisfaction of the appellants. He requested the matter to be adjourned to a date in office to be fixed after two months. The request was allowed. On 30-10-2006 Mr. Jawad Memon, Director Excise and Taxation, made a statement in Court that a proposal had been submitted to the Government of Sindh in the month of June, 2006 for finalization of the schedule of infrastructure fee which had not been then finalized. The officer was directed to pursue the matter and put up the same before the concerned Minister on the same date i.e, 30-10-2006 with a further direction to submit a progress report to the Registrar of this Court after every two days. The matter was adjourned to 6-11-2006. Thereafter, it seems that the respondents pursued the matter at their end and submitted a progress report before the Court in the shape of a letter dated 30-10-2006, two letters dated 1-11-2006, letter dated 30-11-2006 and letter dated 4-11-2006, which are being reproduced as follows:--
(a) Letter by the Director, Excise and Taxation, Sindh to the Secretary, Excise and Taxation dated 30- 10-2006:-- "DIRECTORATE OF EXCISE AND TAXATION (TAXES-ii) KARACHI No:353 / DET/TAXES 11/2006/1679 Karachi, the 30th October, 2006 The Secretary to the Govt. Of Sindh, Excise and Taxation, Karachi.
Subject: HEARING OF HIGH COURT APPEALS (HCA'S) OF INFRASTRUCTURE CESS CASES IN .HIGH COURT OF SINDH.
Reference:
1. Letter No,553/DET(Taxes-II) 2006/ 844 dated 15-8-2006
2. Letter No,553/DET(Taxes-II) 2006/868 dated 11-8-2006
3. Letter No,553/DET(Taxes-II) 2006/919 dated 9-9-2006
4. Letter No,553/DET(Taxes-H) 2006/971 dated 21-9-2006 Respectfully stated that as already intimated by the undersigned the hearing was fixed on 30-10- 2006, Mr. Rashid A. Akhund, Advocate and the undersigned were summoned in the Chamber of the Honourable Justice Anwer Zaheer Jamali and Honourable Justice Mujeebullah Siddiqui. The Honourable bench expressed dissatisfaction on the progress on efforts for rectification of the discrimination in the rate of levy of Infrastructure Cess. The Honourable Court was informed that a proposal regarding the rectification has already been worked out and the same has been submitted to the Minister, Excise & Taxation Department, Government of Sindh. The reasons for delay being the recent reshuffling in the port folios of the Ministers in the Sindh Cabinet were explained to the Honourable Court.
The High Court directed to take up the matter personally and get it finalized before the text date of hearing i.e, 6-11-2006. The Honourable Court further directed the undersigned to furnish progress report after every 2 days before the Registrar of the High Court of Sindh.
It is therefore requested that matter may kindly be finalized before the next date of hearing i.e, 6-11- 2006 for presenting the same before the Honourable High Court of Sindh in the interest of Government revenue.
(Sd.) Director Excise & Taxation (Taxes-II)
Karachi C. C. To:
1. The Advocate-General, Sindh
2. The Registrar High Court of Sindh.
3. The Director-General, Excise and Taxation Sindh
4. P.S. To Minister Excise and 'Taxation Department Government of Sindh with request to place it before the Honourable Minister immediately.
5. Mr. Rashid a Akhund, Advocate Director Excise & Taxation (Taxes-II)
Karachi
(b) Letter by the Director, Excise and Taxation, Sindh to the Registrar of this Court dated 1-11-2006:- "DIRECTORATE OF EXCISE AND TAXATION, (TAXES-.II) KARACHI No:353/ DET/TAXES Karachi, the 1st November, 2006 11/2006/1684 The Registrar, Sindh High Court, Karachi.
Subject:--HEARING OF HIGH COURT APPEALS (HCA'S) OF INFRASTRUCTURE CESS CASES IN HIGH COURT OF SINDH.
In compliance of the directives of the Honourable bench of the High Court, it is stated that the subject-matter is in progress on top priority basis. A meeting in this regard was held in the office of the Honourable Minister, Excise and Taxation Department on 31-10-2006 with the team of Field Officers, another meeting was held in the office of Secretary to the Government of Sindh, Excise and Taxation Department, Karachi on 1-11-2006 at 11-00 a.m. And again a meeting is scheduled in the office of Minister Excise and Taxation at 2-00 p.m. To finalize the issue.
(Sd.)
Director Excise & Taxation (Taxes-II)
Karachi C.0 to:--
1. The Advocate-General Sindh
2. The Secretary to the Government of Sindh, Excise and Taxation Department, Karachi.
3. The Director-General, Excise & Taxation Sindh.
4. P.S. To the Minister, Excise & Taxation Department, Government of Sindh with request to place it before the Honourable Minister immediately.
5. Mr. Rashid A. Akhund, Advocate"
(c) Letter by the Secretary, Excise and Taxation, Sindh to the Secretary, Finance Deptt. Dated 1-11- 2006:-- GOVERNMENT OF SINDH. EXCISE AND TAXATION DEPARTMENT No: So (Taxes)/E&T/1686/2006/ Karachi, the 1st November, 2006 The Secretary, Finance Department Government of Sindh Karachi Subject-RATIONALIZATION OF THE INFRASTRUCTURE CESS During the proceedings of the Constitutional Petitions filed by various importers the Double Bench of Mr. Justice Anwer Zaheer Jamali and Mr. Justice Mujeebullah Siddiqui passed observation that the procedure of levy of Infrastructure Cess is discriminatory because it does not consider the weight of the truck/trailer carrying the goods and also not considering the distance travelled by the goods which needs to be amended and asked Mr. Rashid A. Akhund, Advocate to get the opinion of Government of Sindh whether they are ready to amend the procedure of levy of Infrastructure Cess.
The Department through Mr. Rashid A. Akhund, Advocate had been asking for time to complete the exercise, on 30th October, 2006 during the hearing, the Director, Excise and Taxation (Taxes-II), Karachi was called in the Chamber by the Honourable Judges who showed their dissatisfaction on the progress of amendment.
The Double Bench fixed next date of hearing on 6th December, 2006 with the direction that amendments may be finalized before the date. The D.B. Further directed Director, Excise and Taxation (Taxes-II), Karachi to submit progress report after every 2 days.
The Department has worked out the amendment and the same is enclosed herewith for the concurrence of Finance Department. An early action is requested.
(Sd.)
Secretary to the Govt. Of Sindh Excise and Taxation Department"
(d) Letter by the Section Officer to the Secretary , Excise and Taxation, dated 3-11-2006: GOVERNMENT OF SINDH, FINANCE DEPARTMENT No: FD-SO (RES-I) 2(20)/2006 Dated: Karachi, the 3rd November, 2006 To, The Secretary, Government of Sindh, Excise and Taxation Department, Karachi.
Subject:--RATIONALIZATION OF THE INFRASTRUCTURE CESS I am directed to refer to your letter dated 1-11-2006, on the subject captioned above whereby it has been intimated that certain observations passed by the Honourable High Court of Sindh regarding the procedure of Infrastructure Cess, which needs to be amended as same has been asked to Advocate of Government of Sindh. The Division Bench fixed the next date of hearing i.e, 6-11-206 with the directions that amendments may be finalized before the date of hearing.
Finance Department has no objection for making amendment is sections 9 and 10 of Sindh Finance Act, 1994, subject to fulfilment of the legal procedure. Hence Administrative Department is advised to float a summary of the Chief Minister Sindh to discuss the matter in the next meeting of the Provincial Cabinet, for incorporating required amendments, as prescribed vide Rule 45 of Sindh Rules of Business 1986.
(Sd.)
Section Officer (Res-I)
A copy is forwarded for information to:-- Additional Finance Secretary (Rest). Finance Department, Government of Sindh, Karachi.
Section Officer (Res-I)"
(e) Letter by the Director, Excise and Taxation, Sindh to the Registrar of this Court dated 4-11-2006: "DIRECTORATE OF EXCISE AND TAXATION (TAXES-II) KARACHI.
No:353/DET/TAXES-I1/2006/1703 Karachi, the 4th November, 2006 The Registrar, Sindh High Court Karachi.
Subject: HEARING OF HIGH COURT APPEALS (HCA'S) OF INFRASTRUCTURE CESS CASES IN HIGH COURT OF SINDH.
In compliance to the directions of the Honourable Division Bench of the High Court the progress is submitted as under:--
1. In response to Excise and Taxation Department's proposal regarding Rationalization of the Infrastructure Cess in the light of the observations of the Honourable Division Bench, Finance Department has agreed to the proposal and further Advised to float a summary for the Chief Minister, Sindh.
2 Summary for the Chief Minister, Sindh has been floated and the same has been forwarded to the Finance Department for onward submission to the Chief Minister through the Chief Secretary Sindh.
Copies of the correspondence are attached.
(Sd.)- Director Excise & Taxation (Taxes-II)
Karachi C.C. To:--
1. The Advocate-General, Sindh
2. The Secretary to the Government of Sindh, Finance Department, Karachi.
3. The Secretary to the Government of Sindh, Excise & Taxation Department Karachi.
4. The Director-General, Excise and Taxation Sindh.
5. P.S. To the Minister, Excise and Taxation Department, Government of Sindh with request to place it before the Honourable Minister immediately.
6. Mr. Rashid A. Akhund, Advocate.
Director Excise & Taxation (Taxes-II)
Karachi
17. On 6-11-2006 Mr. Muhammad Javed Memon, Director Excise and Taxation appeared in the Court and stated that much progress had been made in the matter -and that a summary had been approved by the Minister of Excise and Taxation and further the Finance Department had also agreed in principle for the approval of the summary. He requested for some more time so that the whole process could be finalized. Two weeks time was allowed and it was directed that on the next date a copy of the finally approved infrastructure fee schedule was to be provided to the counsel for the appellants through Mr. Rasheed Akhund Advocate.
18. On 18-12-2006 the then Advocate-General of Sindh i.e, Mr.Anwar Mansoor Khan placed on record a copy of letter dated 16-12-2006 accompanied with the summary for the Chief Minister and some other documents. He submitted that the summary was approved by the Chief Minister and the relevant notification of the Government of Sindh was likely to be issued within a week's time.
The contents of the letter dated 16-12-2006 and the consequent summary are reproduced as follows:--
(a) Letter by the Deputy Secretary to the Secretary, Law dated 16-12-2006:-- No: SO (Taxes)/E & T/ GOVERNMENT OF SINDH EXCISE AND TAXATION DEPARTMENT Karachi, dated the 16th December, 2006.
To The Secretary Government of Sindh Law Department Government of Sindh Karachi.
Subject:--RATIONALIZATION OF THE INFRASTRUCTURE CESS I am directed to enclose herewith a copy of the Summary duly approved by the Honourable Chief Minister Sindh regarding rationalization of the rates of Infrastructure Cess on imported goods in the light of the observations of the Honourable Division Bench of the Sindh High Court.
Since the amendment has to be brought in the sections 9 and 10 of Sindh Finance Act, 1994, Ordinance needs to be promulgated.
It is therefore requested that draft Ordinance duly vetted may kindly be provided for submitting the same to the Honourable Governor of Sindh for his kind approval and promulgation.
Keeping in view the utmost urgency, a very early action is requested.
(Sd.)
(ZUBAIR PERVEZ)
DEPUTY SECRETARY C.C to:--
1. The Advocate-General, Sindh, Karachi.
2. The Director (Taxes-II), Excise & Taxation, Karachi, with a request to pursue the matter with all concerned.
(b) The summary for the Chief Minister GOVERNMENT OF SINDH EXCISE AND TAXATION DEPARTMENT SUMMARY FOR THE CHIEF MINISTER (Cases against the levy of Infrastructure Cess)
The Infrastructure cess is levied and recovered under the Sindh Finance Act, 1994 w.e.f, 1-7-1994. It is the biggest source of revenue of Government of Sindh, an amount of Rs,5872.390(m) was collected as Infrastructure Cess in the year 2005-2006.
2. A number of suits were filed against the levy of Infrastructure Cess in High Court of Sindh which were turned down by the judgment of High Court of Sindh on 28-10-2003 declaring this levy within the legislative competence of Provincial Government of Sindh.
3. Consequently a large number of appeals by various imports were filed against the said judgment which is being heard by a Division Bench comprising of Mr. Justice Anwer Zaheer Jamali and Mr. Justice Mujeebullah Siddiqui.
4. The said Division Bench, during hearing on 16-3-2005 observed that the procedure of levy of Infrastructure Cess is discriminatory because it does not consider the weight of the truck/trailer carrying the goods and also not considering the distance travelled by the goods which needs to the amended and asked Mr. Rashid A Akhund, Advocate to get the opinion of Government of Sindh whether they are ready to amend the procedure of levy of Infrastructure Cess.
5. A number of meetings were held in the Department to discuss and evolve the amended procedure of levy in the light of the observation of the Honourable High Court. A proposed schedule of rate of levy of Infrastructure Cess as per observation of the High Court is attached as Annex-"A"
6. A meeting was also held with the Finance Department Sindh. The outcome of the meeting is reproduced as under:-- "Finance Department, Sindh has no objection for making amendments in sections 9 & 10 of Sindh Finance Act, 1994 subject to fulfilment of legal procedure. Hence Administrative Department is advised to float a Summary for the Chief Minister, Sindh to discuss the matter in the next meeting of the Provincial Cabinet, for incorporating required amendments as prescribed vide Rule 45 of Sindh Rules of Business, 1986 (copy is placed as Annex-"B")"
7.On the one hand the proposed amendment would yield an additional revenue upto 7 to 8 % of the total recovery whereas on the other hand it would protect the biggest source of revenue of Government of Sindh from any future litigation.
8. The amended rates mentioned at Para 5 may kindly be approved.
9. SECRETARY, EXCISE AND TAXATION, SINDH (Sd.)-Dt. 4-11-2006 10.MINISTER, EXCISE AND TAXATION DEPARTMENT, SINDH (Sd.) Dt. 4-11-2006
11. SECRETARY, FINANCE DEPARTMENT, SINDH (Sd.). Dt. 18-11-2006
12. ADVISOR TO THE CHIEF MINISTER, SINDH FINANCE DEPARTMENT (Sd.) Dt. 18-11-2006 13.CHIEF SECRETARY, SINDH (Sd.) Dt. 18-11-2006 14.CHIEF MINISTER, SINDH (Sd.) Dt. 10-12-2006"
19 Thereafter on 28-12-2006 the Governor of Sindh promulgated the Sindh Finance (Amendment)
Ordinance, 2006, being Sindh Ordinance No, XXXIII of 2006, prescribing new paradigms of the rates through sections 2 and 3 thereof, which are reproduced as follows:-- "Amendment of section 9 of Sindh Act No, XIII of 1994
2. In the Sindh Finance Act, 1994, hereinafter referred to as the said Act, in section 9, for subsection (1), the following shall be substituted:--
(1) There shall be levied and collected a cess for maintenance and development of Infrastructure on goods at the rate determined on the basis of their value, net weight and distance in accordance with the Schedule appended to this Act, for carriage by road and smooth and safer movement in the Province upon entering or before leaving the Province from or for outside the Province or country, through air or sea:--
(2) There shall be levied and collected a cess for maintenance and development or Infrastructure on goods at the rate determined on the basis of their value, net weight and distance in accordance with the Schedule appended to this Act, for carriage by road and smooth and safer movement in the Province upon entering or before leaving the Province from or for outside the Province or country, through air or sea: Provided that cess on gold shall be charged at the rate of 0.125% of the value of gold.
Explanation.---For the purpose 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 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 loading and unloading of goods, parking places, markets, water supply, hospitals and dispensaries and development, improvement, maintenance and protection of such matters.
Addition of Schedule of Sindh Act No, XIII of 1994.
3. In the said Act, after section 10, the following Schedule shall be added: SCHEDULE (See section 9)
Net weight of goods Rate of cess along with distance 1250 kilograms 0.5% of C&F Value plus one Paisa per kilo meter Exceeding 1250 kilograms but not exceeding 2030 kilograms 0.505% of C & F Value plus one Paisa per kilo meter Exceeding 2030 kilograms but not exceeding 4060 kilograms 0.510% of C & F Value plus one Paisa per kilo meter Exceeding 4060 kilograms but not exceeding 8120 kilograms 0.515% of C & F Value plus one Paisa per kilo meter Exceeding 8120 kilograms but not exceeding 16000 kilograms 0.520% of C & F Value plus one Paisa per kilo meter Exceeding 16000 kilograms but not exceeding 2030 kilograms 0.525% of C & F Value plus one Paisa perkilo meter Explanation.---For the purpose of the Schedule, the value means C&F price of goods to the owner as assessed by the Customs Authorities upon their entering in and using the infrastructure of the Province and for other goods the price disclosed in the shipping documents and distance means the distance within the Province."
20. The above Ordinance was placed before this Court by Mr. Rasheed Akhund on 23-1-2007, while on 4-3-2008 a statement was made that the said Ordinance was re-enacted through the Sindh Finance (Amendment) Ordinance, 2007, being Sindh Ordinance No, XX of 2007 dated 11-9-2007 and later it was ratified by the Sindh Parliament through the Sindh Finance (Amendment) Act, 2007 on 24-10-2007.
[NB: At places in the judgment the amendment through the Sindh Finance (Amendment)
Ordinance, 2006, dated 28-12-2006 the re-enactment of the said Ordinance through the Sindh Finance (Amendment) Ordinance, 2007 dated 11-9-2007 and the ratification of the said Ordinance through the Sindh Finance (Amendment) Act, 2007 dated 24-10-2007 are referred to as the "fifth version"].
21 It may be clarified that all the correspondences reproduced above were submitted by the respondents and constitute part of the official record in the appeals.
22. The fifth version of law i.e, the Sindh Finance (Amendment) Ordinance 2006 (followed by the re- enacted Ordinance and Act of 2007, referred above) was promulgated at the time when the appeals were pending. Dr. Farogh Naseem, one of the learned counsel for the appellants, had submitted during the course of the hearing that either the appellants be allowed to either amend the memo of appeals so as to launch an attack on the latter fifth version or if- the respondents would have no objection the appellants be orally allowed to challenge the fifth version, considering that the Honourable Court has ample power to take into account subsequent events, which would include new legislation as well. Upon this, Mr. Rasheed Akhund, the learned counsel for the respondents has shown grace by starting that he would not raise any technical plea and the appellants be permitted to assail the new legislation by way of oral arguments/motion.
23 Mr. Munib Akhtar the learned counsel for some of the appellants has attacked the impugned judgment and legislation as follows :
(a) in sum and substance the impugned levy is nothing but a tax on imports and exports, which only falls within the exclusive jurisdiction of the federal legislature. Such impugned legislation is completely without jurisdiction and illegal;
(b) the impugned levy before the 2006 Ordinance i.e, fifth version of law is discriminatory and violates Article 25 of the Constitution. According to the learned counsel before the 2006 Ordinance, the law did not prescribe any intelligible method to impose taxation. As a result goods meant for export/import were being discriminated against the goods being utilized within the country, as former were subjected to taxation whereas latter were not taxed;
(c) as regards the fifth version i.e, the 2006 Ordinance the same also did not address the objections of the appellants with regards discrimination. The learned counsel placed reliance upon Mirpurkhas Sugar Mills Ltd v. District Council, Tharparkar 1991 MLD 715, Mirpurkhas Sugar Mills Ltd. v.
District Council 1990 MLD 317, Kotri Association of Trade and Industry v. Government of Sindh 1982 CLC 1252, Saphire Textile Mills v. Government of Sindh PLC,. 1990 Karachi 402, G.K. Krishnan v. State of Tamil Nado AIR 1975 SC 583, I.A. Sharwani v. GOP 1991 SCMR 1041, Inamur Rehman v. FOP 1992 SCMR 563 and Sindh Glass Industries Ltd v. CCI&E 1990 CLC 638.
24. Dr. Farogh Naseem, learned counsel for some of the appellants, has submitted as. Follows:--
(a) the incidence of tax in this case is on goods entering or leaving the provinces from or for outside the country, through air or sea. According to him the incidence of taxation should not be confused with the purposes of the levy which are for the development and maintenance of the infrastructure and for carriage of goods by road. According to the learned counsel carriage of goods by road does not form the taxable event but one of the purposes of the levy;
(b) reference is invited to Articles 141, 142, Entries No, 27,34,43 and 54 of the Fourth Schedule to the Constitution;
(c) under Article 151 of the Constitution any tax hampering provincial trade is void;
(d) after the judgment of learned Single Judge in the case of H.A. Rahim v. Province of Sindh 2003 CLC 649, the limited point requiring determination is as to whether the subsequent legislation has successfully invalidated the said judgment or not; (e)the nature and character of tax has no reasonable nexus with the method c f calculation provided in the statute; (f)the charging section of the statute is to be strictly construed; (g)reliance has been placed on Molasses Trading v. FOP 1993 SCMR 1905, B.P Biscuits v. Wealth Tax Officer 1996 SCMR 1470 and State v. Ziaur Rehman PLD 1973 SC 49.
25. Ms. Sam Minhas, learned counsel for some of the appellants, has submitted as follows:--
(a) the impugned legislation is discriminatory;
(b) the impugned legislation constitutes a colourable exercises of power;
(c) the impugned legislation violates the doctrine of occupied field.
26. In response, Mr. Rasheed Akhund, learned counsel for the respondents has defended the impugned judgment and the legislation as follows:--
(a) according to him the impugned levy is on carriage of goods by road and such event is missing from Entry 24 of the fourth Schedule to the Constitution. According to him the said Entry 24 is relatable to carriage of passengers and goods by sea or air. According to him this omission confirms that the law makers have not intended to empower the federal legislature to impose tax on carriage of goods by road, which can only be imposed by a provincial legislature;
(b) according to the learned counsel the fifth version of law has sufficiently taken care of the objections of the appellants on the touch stone of discrimination; also the fifth version of law creates the required nexus between the nature and character of the levy and method of its calculation;
(c) in response to the arguments of the appellants under Article 151 of the Constitution Mr. Akhund has placed reliance on Shahtaj Sugar Mills v. Province of Punjab 1998 SCMR 2492 and Pakistan Tobacco Co. Ltd. v. Province of N.-W.F.P. PLD 2002 SC 460;
(d) furthermore, the learned counsel has placed reliance upon Elahi Cotton Mills v. FOP PLD 1997 SC 582 and International Tourist Corporation v. State of Haryana AIR 1981 SC 774;
(e) in the end the learned counsel has stated that in case the appeals are allowed grave prejudice shall be caused to the Government as lot of public revenue is stuck up in these appeals.
27. In rebuttal Messrs. Muneeb Akhtar and Dr. Farogh Naseem have stated as follows:--
(a) no tax can be imposed except in accordance with law which is the mandate provided under the Article 77 of the Constitution;
(b) the method of calculation of the impugned levy has nothing to do with the impugned taxable event. Reliance was placed on Friends Diaries v. FOP PLD 1989 Lahore 337 and Kohinoor Textile Mills v. FOP 2002 PTD 121;
(c) it was further contended by the learned counsel that the Courts of Law are not the tax collectors of the State. Reliance was placed on Gulf Edible Oil v. FOP 2001 PTD 3956.
28. We have considered the arguments of the learned counsel for the parties, perused the record and the law on the subject.
29. Before dealing with the respective arguments of parties it shall be worthwhile to first lay down the constitutional limitations on the powers of the respective parliaments. Pakistan subscribes to a federal written constitution. There is a legislature at the centre, while each province has its own respective legislatures. Reference in this regard may be invited to Article 142 of the Constitution which is the basis of the distribution of legislative powers. The said Article 142 reads as follows:- "142. Subject-matter of Federal and Provincial laws.---Subject to the Constitution-
(a) [Majlis-e-Shoora (Parliament)] shall have exclusive power to make laws with respect to any matter in the Federal Legislative List;
(b) [Majlis-e-Shoora (Parliament)], and a Provincial Assembly also, shall have power to make laws with respect to any matter in the Concurrent Legislative List;
(c) A Provincial Assembly shall, and [Majlis-e-Shoora (Parliament)] shall not, have power to make laws with respect to any matter not enumerated in either the Federal Legislative List or the Concurrent Legislative List; and
(d) [Majlis-e-Shoora (Parliament)] shall have exclusive power to make laws with respect to matters not enumerated in either of the Lists for such area in the Federal as are not included in any Province."
30.A bare perusal of the above reproduced Article 142 of the Constitution would reveal that the federal parliament has the exclusive powers to make laws in respect of the matters mentioned in the federal legislative list, while both the federal and provincial parliaments have the powers to legislate in respect of the matters mentioned in the concurrent legislative list. In case any item is neither mentioned in the concurrent nor the federal legislative lists the same falls within the exclusive domain of the provincial legislature. This is what is called a residuary legislative clause in the parlance of constitutional jurisprudence. In other words, the residuary power to legislate in respect of items not appearing in the federal and concurrent legislative lists fall within the ambit of the provincial parliaments. Lastly, the federal parliament is equipped with the exclusive powers to make laws with regard to matters not mentioned in either the concurrent or the federal legislative lists, pertaining to those areas which do not fall in any of the provinces for example the Islamabad capital territories.
31. The federal and concurrent legislative lists are provided in the 4th Schedule to the Constitution.
There are 59 entries in Part-1 of the federal legislative list while there are 8 entries in Part 2 of the federal legislative list. In the concurrent legislative list there are 47 entries. The following entries from Part 1 of the federal legislative list are important for our purposes, hence the same are reproduced as follows:-- "21. Major ports, that is to say the declaration and delimitation of, such ports, and the constitution and powers of port authorities therein.
22. Aircraft and air navigation; the provision of aerodromes; regulations and organization of air traffic and of aerodromes.
24. Carriage of passengers and goods by sea or by air.
27. Import and export across customs frontiers as deemed by the Federal Government, inter- provincial trade and commerce, trade and commerce with foreign countries, standard of quality of goods to be exported out of Pakistan.
34. National highways and strategic roads.
43. Duties of customs, including export duties.
44. Duties of excise, including duties on salt, but not including duties on alcoholic liquors, opium and other narcotics.
46. Estate duty in respect of property.
47. Taxes on income other than agricultural income.
49. Taxes on the sales and purchases of goods imported, exported, produced, manufactured or consumed.
50. Taxes on the capital value of the assets, not including taxes on capital gains on immovable property.
53. Terminal taxes on goods or passengers carried by railway, sea or air, taxes on their fares and freights.
54. Fees in respect of any of the matters in this Part, but not including fees taken in any Court."
32. Chief Justice Marshall of the American Supreme Court in the case of Providence Bank v. Billings, 4 Pet. 514, 561, 7 Led. 939, 955, (reproduced in "A Treatise on the Constitutional Limitations" by Thomas M. Cooley) was pleased to state that the "power of legislation, and consequently of taxation, operates on all persons and property belonging to the body politic. This is an original principle which has its foundation in society itself. It is granted by all for the benefit of all." No doubt this is an "original principle", upon which the American society is based, it may be stressed without any further ado that taxation is a pecuniary burden upon the citizen of the State. Hence no tax is permissible except under the authority of law and the Constitution. In other words, tax can only be levied and recovered in consonance with the dictates of law and the Constitution. Article 77 of the Constitution clearly contains this salutary principle, which though is explicitly applicable to federal taxes, banalogy the principle contained therein is squarely extendable to provincial taxation as well.
33. Before we dilate upon the nature of the impugned taxation and whether the same is in accordance with law and the Constitution, it shall be imperative to first discuss the basic principles and limitations in relation to the interpretation of fiscal laws in the backdrop of the Constitution and the constitutional entries, as the basis for the imposition of tax. We have been able to lay our hands on the judgment of Sh. Abdur Rehim, Allah Ditta v. Federation of Pakistan PLD 1988 SC 670. In this case a Full Bench of the Honourable Supreme Court comprising 4 Judges was faced with a challenge in respect of the imposition of regulatory duty. One of the contentions was that the same was illegal and beyond the scope provided by Item No,43 of the 4th Schedule which prescribes for duties on export and import. Muhammad Haleem, C.J., as he then was, while writing for the Court was pleased to hold that when considering the scope of legislative powers it should be borne in mind that it is a recognized principle of constitutional law that except where any limitations have been imposed by the Constitution itself, the power of legislature to legislate on the enumerated subjects is unlimited and practically absolute. The legislature is free to exercise this power as and when the occasion arises. The learned Chief Justice was further pleased to hold that it was an essential legislative function to add, subtract, decrease and increase the customs duties so long as the subject to legislation was -covered by item No,43, which is the touchstone of the validity of the legislative measure.
34. A perusal of the above principle of interpretation of constitutional entries as propounded by Muhammad Haleem CJ in the above mentioned case would confirm that the construction of the constitutional entries constitute the basis of the inquiry as to whether the levy in question is lawful or invalid. In other words the test is whether on a liberal but fair construction the levy can reasonably fall within the parameters of the constitutional entry in question. The above principle was tacitly applied in the case of Sohail Jute Mills Limited. v. Federation of Pakistan PLD 1991 SC 329.
In this case the levy of Iqra surcharge imposed by the Customs Authority was challenged on the ground that the same not constituting a customs duty could not be imposed within the parameters of Entry No,43 of the federal legislative list. Which pertains to duty of customs, including export duties. Rejecting the argument a Full bench of the Honourable Supreme Court was pleased to hold that in substance the Iqra surcharge imposed on imports was nothing but an additional customs duty and hence the same was valid. Shafi ur Rehman J, as he then was, in his elaborate judgment was pleased to hold that if the language in the taxing statute was clear, the same had to be strictly construed irrespective of any hardship that could be caused. However in case of any ambiguity or vagueness in the language of the statute, the interpretation beneficial to the citizen had to be adopted.
35. A judgment of the Supreme Court in the case of PIDC v. Pakistan 1992 SCMR 891 is another milestone in the area of interpretation of constitutional entries. In this case the Honourable Supreme Court had to deal with the question as to whether free reserves of a company constitutes "income" within the meaning of Entry 43 of the Third Schedule to the Constitution of Pakistan, 1962 (equivalent to entry 47 to the Fourth Schedule of the 1973 Constitution). In this case it was observed that the Constitution was a living document and was to be interpreted in the widest possible manner so as to ensure continuity and balance in the several constituents and organs of the State.
Writing for the Court, Saleem Akhtar J. (as he then was), was pleased to observe that the items in the constitutional entries, which confer the power of taxation, were to be construed in the widest possible manner and not in any restricted or pedantic way. It was further held that none of the items in the constitutional entries were to be read in a narrow restricted sense, and that each general word would extend to all ancillary or subsidiary matters which can fairly and reasonably be said to be comprehended in it. We have further laid our hands on a judgment of a learned Single Judge of the Lahore High Court reported as Nishat Tek Ltd. v. FOP PLD 1994 Lah 347. In this case the taxpayer had thrown a challenge upon the vires of the federal education fee imposed by the Finance Act, 1992 on the ground that the federal legislature had no authority to regulate on the subject of adult education. The learned Deputy Attorney-General defending the matter raised an argument that every possible explanation should be given so as to uphold legislation. It was held by the Lahore High Court that the constitutional entries do not confer legislative power but merely point out to the broad fields in which the legislative power could be exercised. The Court agreed with the Deputy Attorney-General that the constitutional entries should be given a very wide construction and the same should not be interpreted in a narrow or pedantic sense. Very importantly, it was held that it was the "pith and substance of the legislation" which should be seen while determining the power of the legislature to legislate on a particular subject. While further construing the judgment of the Honourable Supreme Court in the case of Suhail Jute Mills (cited supra PLD 1991 SC 329) the Lahore High Court was pleased to hold that no doubt entries are to be construed in a broad and pragmatic sense but where even upon the broadest possible interpretation of various entries the item of taxation could not fall within such entries the Courts would not stretch the connotation beyond the permissible limits. It was upon the basis of such a principle that the Lahore High Court struck down the federal education fee on grounds that no- where in the federal or concurrent legislative lists such power was vested with the federal legislature to impose tax on education.
36. In the Indian jurisdiction one of the landmark judgments on the subject is a decision by the Federal Court reported as United Provinces v. Mrs. Atiqa Begum AIR 1941 FC 16. In this case the Federal Court of the United India was pleased to hold that the U.P. Regularization of Remission Act, 1938 was within the sphere allowed to the provincial legislature by the then operative Constitution i.e, the Government of India Act, 1935. It was further observed that the 1938 Act was not opposed to section 292 of 1935 Act was intra vires the United Provinces legislature. 'While dilating upon the scope of interpretation of constitutional entries Gwyer CJ was pleased to observe as follows:-- "None of the items in the lists is to be read in a narrow restricted sense. Each general word should be held to extend to all ancillary or subsidiary matters which can fairly and reasonably be said to be comprehended in it."
It is settled law that words in constitutional entries should not be given a narrow and pedantic construction. The question arises as to what should be the yardstick in gauging the limits of the extent to which the words in the constitutional entries could be stretched. Some guidance in this regard can be conveniently taken from a judgment from the Supreme Court of India reported as Navinchandra Mafatlal v. C.I.T. (1954) 26 ITR 758 (SC). In this case it has been held that the words in constitutional entries though must be given the most elaborate construction they must be confined to their ordinary, natural and grammatical meaning. The relevant excerpt is reproduced as follows:-- "The cardinal rule of interpretation, however, is that words should be read in their ordinary, natural and grammatical meaning subject to this rider that in construing the words in constitutional enactment conferring legislative power the most liberal construction should be put upon the words so that the same may have effect in their widest amplitude."
Another illuminating judgment in this respect is that case of L.P. Varghese v. ITO AIR 1981 SC 1922, in which it was again held as follows:-- "....It is true that the words used even in their literal sense, are the primary and ordinarily the most reliable source. Of interpreting of any writing, be it a Statute, a Contract or any thing else. But it is one of the surest indexes of a mature and developed jurisprudence not to make a fortress out of the dictionary; but to remember that Statutes always have some purpose and object to accomplish whose sympathetic and imaginative discovery is the surest guide to their meaning."
37. The discussion on the subject of interpretation of constitutional entries will not be complete without inviting reference to the path-breaking decision of our own Supreme Court in the case of Elahi Cotton v. FOP PLD 1997 SC 582. In this case the tax payers had challenged sections 80C, 80CC and 80D of the Income Tax Ordinance, 1979, introduction by the Finance Acts, 1991and 1992 on grounds, inter alia, that the impugned sections introduced taxes on "sales" and "purchases" under the garb of income tax. As such it was contended that the impugned taxation violated the mandate conferred upon the federal legislature under Entry 47 of the fourth schedule to be Constitution, which only permitted taxes on "income" and by no connotation or stretch of imagination "purchases" and "sales" could be construed as "income". A Full Bench of the Supreme Court comprising five learned Judges found the legislation to be intra vires, while holding that when interpreting laws relating to economic activities, the same must be viewed with greater latitude than the laws relating to civil rights, keeping in view the complexity of the economic problems which do not admit a solution through any "doctrinaire or strait jacket formula." It was held in this case that an attempt should be made to save rather than destroy the statute, unless where ex facie the legislative instrument was violative of any constitutional provision.
It was further observed (in Elahi Cotton) that the entries in the legislative lists of the Constitution were not powers of legislation but only fields of legislative heads. The allocation of subjects to the list was not by way of any scientific or logical definition but by way of a mere simple enumeration of a broad catalogue. The key test laid down was whether a particular word in the constitutional entry was susceptible to a particular connotation, not only in the ordinary parlance but also by way of a fiction. While quoting and approving Corpus Juris Secundum Volume LXXXIV (from the American Jurisdiction) it was observed as follows:- "The power of taxation rests on necessity, and is an essential and inherent attribute of sovereignty belonging as a matter of right to every independent State or Government. Such power is an inherent one, and is not depended on any grant by the Constitution, or the consent or the owners of property subject to taxation; Constitutional provision with respect to taxation constitute a limitation on the legislative power and not a grant of power. The power to tax rests primarily in the State, to be exercised by its Legislature, as discussed infra section 7 and the State may exercise the power directly or may delegate such power as political sub-divisions of the State, as considered in infra section 8. The exercise of the taxing power is a high Governmental function, in invitum in nature.
Generally, the power of taxation is an extensive as the range of subjects over which the power of the Government extends. As to such subjects, and except insofar as it is limited or restrained by Constitutional provisions, a State's power of taxation, if exercised for public purposes, in general, unlimited and absolute, extending to all persons, property, and business within its jurisdiction.
Since this power is contained in our Constitution our approach while interpreting the same should be dynamic, progressive and oriented with the desire to meet the situation, which has arisen, effectively. The interpretation cannot be narrow and pedantic but the Court's efforts should be to construe the same broadly, so that it may be able to meet the requirement of ever changing society. The general words cannot be construed in isolation but the same are to be construed in the context in which they are employed. In other words, their colour and contents are derived from their context."
In Elahi Cotton the Supreme Court was pleased to observe that the tax through sections 80C, 80CC and 80D of the Income Tax Ordinance, 1979 even if could not be construed as tax on "actual income", the same could well be construed as tax on "deemed income" and hence it can safely fall within the parameters of Entry 47 of the Fourth Schedule.
38. From the above survey of the case law, both from the Pakistani and foreign jurisdictions the following principles of law can safely be deciphered:-
(a) the power of taxation is an inherent right of the State in any modern civil society;
(b) the State can exercise its choice so as to tax any subject-matter, transaction or property with the rider that no tax can be imposed except under the authority of law and in accordance with the mandate prescribed by the law and the Constitution;
(c) words in the Constitution are to be given a dynamic interpretation in keeping with the development of the society and the exigencies of time;
(d) the constitutional entries contained in the legislative list do not confer any legislative power but only point out to the broad fields/legislative heads in which the legislative powers can be exercised;
(e) the words in the constitutional entries have to be given their ordinary, grammatical and natural meaning. The said words should not be construed in a narrow or pedantic manner and are required to be given a very wide and liberal connotation. However, the words in the said constitutional entries cannot be stretched beyond a certain limit; this limit is prescribed by the principle of "pith and substance", which means that the words in the constitutional entries are to be given the most liberal construction but they cannot be stretched to the limit so as to occasion an unfair, unreasonable or absurd construction. In other words, if a word in the constitutional entry by no stretch of imagination can be given the meaning intended by the legislature, the said stretched meaning should not be so given because otherwise the same would do violence to the principle of fair construction, which is another colour of the principle of "pith and substance". Elaborating further, a liberal but a fair and reasonable construction is to be adapted to the word in the constitutional entry;
(f) if the words in the statute are clear, a strict interpretation is to be offered despite any hardship that may be caused to the taxpayer, if, however, the words in the taxing statute are vague and ambiguous, a beneficial interpretation favourable to the taxpayer is to be adopted.
39. The various principles of law in the field of interpretation of constitutional entries, having been stated above in varied dimensions, it will now be convenient to apply the said principles to the facts of the present case.
40. In order to scan the various charging sections/provisions contained in the impugned law(s) it shall be convenient to underscore the same as follows:--
(I) SINDH FINANCE ACT, 1994 (hereafter: "first version")
17th July 1994.
"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."
(II) SINDH FINANCE ACT, 1996(hereafter; "second version")
14th July, 1996 "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 rate and in the manner as may be prescribed.
(III) SINDH FINANCE (AMENDMENT) ORDINANCE, 2001 SINDH ORDINANCE NO. XII OF 2001 (hereafter: "third version") 24th February, 2001 "9. (1) (Substitution of sections 9 and 9-A of Sindh Act, XIII of 1994). There shall be levied and collected a cess for special maintenance and development of infrastructure for smooth and safer 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.
(IV) THE SINDH FINANCE (SECOND AMENDMENT) ORDINANCE, 2001 SINDH ORDINANCE No, XVI OF 2001 (hereinafter: "fourth version")
Effective on 24th February, 2001 (dated 15-5-2001)
"9. There shall be levied and collected a cess for maintenance and development on 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.
(V) SINDH FINANCE (AMENDMENT) ORDINANCE, 2006 Sindh Ordinance No, XXXVIII of 2006 (hereafter: "Fifth Version") effective from 28-12-2006.
Section 9 (i)
"(I) There shall be levied and collected a cess for maintenance and development of Infrastructure on goods at the rate determined on the basis of their value, net weight and distance in accordance with the schedule appended to this Act, for carriage by road and smooth and safer movement in the Province upon entering or before leaving the province from or for outside the province or country, through air or sea:
41. The analysis of the above versions of law shows that at least for the first three versions the taxable event has been the same i.e, goods entering or leaving the Province, from or for outside the country, through air or sea". The latter taxable event is nothing but import or export. This can be further demonstrated by a reference to section 2(6) of the Imports and Exports (Control) Act, 1950, which defines "imports" and "exports" to mean respectively bringing into and taking out of Pakistan by sea, land or air. In Pakistan Textile Mill-OwnersAssociation v. Administrator of Karachi PLD 1963 SC 137 the terms "import" and "export" have been defined as follows"-- " 'importand 'exportin their ordinary and natural sense mean to bring into or take out or away from a particular place."
In East and West Steamship Co v. Collector Customs PLD 1976 SC 618 a Full Bench of the Supreme Court was pleased to define the term "import" so as to mean an act of bringing goods into the country from abroad. The relevant excerpt from the said judgment is reproduced as follows:-- "The word 'importcarries the natural meaning of 'bringing inand has no technical meaning. Mr. A. K.
Brohi construed the word 'importas entailing the entire process of filing Bill of Entry, discharging from the vessel at wharf, assessm ent of value of the goods and the duty payable on them. We, however, see no warrant for placing its artificial meaning on the word 'import'. In Blacks Law Dictionary 'importationis defined as 'The act of brining goods and merchandise into a countryfrom a foreign country and 'importedin general, has the same meaning in the Tariff laws that its etymology, shows in porto to carry in. To importis to bear or carry into. An imported article is one brought or carried into a country from abroad. In Wharton's Law Lexicon 'importis given the meaning 'goods or produce brought into a country from abroad'."
In Master Foam (Pvt) Ltd v. Government of Pakistan PLD 2005 SC 373 it was held that the Courts in Pakistan have consistently given the word "import" its ordinary and natural meaning of "bringing into the country" and have rejected the imposition of artificial constraints on it, such as those imposed by the American doctrine of "original package". In Saphire Textile Mills v. Government of Sindh PLD 1990 Karachi 402 a Division Bench of this Court, while relying upon Blacks Law Dictionary and Ballentine's Law `Dictionary was pleased to hold that the popular meaning of "export" is carrying or sending out something from the country.
42. Entry 24 to the Fourth Schedule of the Constitution provides for the carriage of passengers and goods by sea or air; Entry 27 of the Fourth Schedule to the Constitution provides for import and export across customs frontiers, while Entry 43 pertains to duty of customs R including export duties. Collaterally, reference may also be invited to Entry 54 to the Fourth Schedule which provides for imposition of fees in respect of all the items mentioned in the federal legislative list. Therefore, on reasonable fair but broad construction of the entries mentioned above would amply show that it is only the federal legislature which is empowered to impose any tax/duty or fee in respect of goods leaving or entering the country be sea or air. This being so the first three versions of the law are completely unconstitutional, illegal, without jurisdiction and of no legal effect as the provincial legislature has levied fee/cess on goods entering or exiting the country by sea or air. The judgment in the case of H.A. Rahim v. Province of Sindh 2003 CLC 649 was in relation to the first two versions of the law i.e, infrastructure fee imposed by the Sindh Finance Acts, 1994 and 1996. The judgment of the learned Single Judge in that case (i.e, Ataur Rehman, J,), was on a sound footing since he had come to the conclusion that the levy imposed through the first two versions of law was illegal, unconstitutional and without jurisdiction. There is another aspect to the judgment in the H.A. Rahim case. We have seen that the respondents had filed a belated appeal bearing HCA 44/2001 and for reasons best known to them they withdrew the same vide order dated 14-7-2001. This means that the judgment of the learned Single Judge in H.A. Rahim case attained finality. The question thereafter was whether the subsequent legislation i.e, the past two versions of the law sufficiently cured the various lacunae pointed out in the judgment of the learned Single Judge in the H.A.
Rahim case. Reference may be invited to the Division Bench judgment of this Court reported as Mirpurkhas Sugar Mills Ltd v. District Council, Tharparkar 1991 MLD 715 and Molasses Trading and Export (Pvt) Ltd. v. FOP 1993 SCMR 1905 wherein it has been acknowledge that the legislature has the power to invalidate the Court's judgment provided that the defects pointed out in the piece of legislation which has been annulled by the court are removed by the validating statute. In the present scenario, the learned Single Judge in the H.A. Rahim case held that no tax on the goods entering in or exiting the country through sea or air could be imposed by the provincial legislature.
The third version of the law failed to remedy this defect as pointed out by the learned Single Judge in the H.A. Rahims case. As one would see in the third version The taxable event has remained the same i.e, goods entering or leaving from or outside the country, through air or sea. The only change is in the nomenclature as "infrastructure fee" has been renamed as "infrastructure cess". Some purpose of the levy i.e, "cess for special maintenance and development of infrastructure for smooth and safer movement of goods"has been mentioned in the third version. But the latter is only the purpose of the levy and not the taxable event. It is only in the fourth version that the taxable event has been changed as "carriage by road" of the goods has been introduced in the taxable event. It is pertinent to note that Entry 24 of the fourth schedule to the Constitution provides for the carriage of passengers or goods by sea or air. However, the event of carriage of passengers or goods by road is conspicuously missing. This means that for the purpose of carriage of passengers or goods by road the provincial legislature is empowered under Article 142 (c) of the Constitution to legislate in relation thereto. The fotirth version of law i.e, Sindh Finance (Second Amendment) Ordinance, 2001, was introduced on 15-5-2001. However, it was made effective retroactively from 24-2-2001. At least to the extent of the charging section the fourth version of the law was a step in the right direction.
43. However, in the judgment of H.A. Rahim (cited supra) it was not just the charging section but another very vital aspect fatal to the levy was pointed out. The said aspect was that the nature and character of the levy had no nexus with the yardstick prescribed by the statute/rules to compute the tax/fee. It was observed that while the nature and character of the levy was services in relation to the development/maintenance of infrastructure such as roads, culverts, the standard/yardstick of measuring the levy was customs duty and valuation of the goods. It was held that the nature and character of the levy had no nexus with the yardstick to measure/calculate the same. Hence on this count also the levy was annulled. The relevant excerpts in this regard are paras 23 and 24 of the judgment in the H.A. Rahim case, which are reproduced as follows:-- "23. Lastly it appears that the rate of the infrastructure fee and the levy itself have no nexus with each other. Rule 3 of the 1994 Rules, appearing at pages 35 and 37 of the Court file, prescribes the rate of the infrastructure fee. The yardstick for the fee is customs duty and valuation of goods. The contention of the plaintiff that customs duty and valuation of the goods has got nothing to do with the services proposed to be rendered by the province in the nature of infrastructure i.e, roads, culverts etc carries force. This being so, the nature and general character of the levy have no nexus and correlation with the standard laid down for measuring the rate of the fee or liability. In coming to this conclusion I am supported by the case of Excise and Taxation Officer v. Burmah Shell 1993 SCMR 338. In this case although the head notes of the judgment do not bring out the ratio correctly, the same can be appreciated after reading the entire judgment. In this case the West Pakistan Finance Act, 1972 imposed a tax on goods imported and exported against a licence. The scale of the fee was set out in the schedule which prescribes the value of the licence as the yardstick of the tax rate. It was held that there was conflict between the charging provision and the schedule since the tax on the value of goods was found to have no correlation with the valuation of the licence. Similarly in the case. Of Nishat Tek Ltd. v. FOP PLD 1994 Lah. 347, one of the reasons expressed by the Lahore High Court for striking down the federal education fee was that the rate of the fees was arbitrary, unreasonable and had no correlation with the fee in question. In this case the yardstick to calculate the federal education fee was the valuation of the fixed assets of the assessee-companies. The Court found the same to have no nexus with the fee in question. In the case of Pakistan Tobacco Co. Ltd., v. FOP 1999 SCMR 392; head note (h) and at p; 393G, it was held that the rate of excise duty should have nexus with the value of goods which are produced or manufactured and that the same cannot be fixed arbitrarily. In India also this is settled proposition.
In the case of Buxa Dooans Tea Company Ltd. And others v. State of East Bengal and others 1989 Supreme Court cases (Tax) 394, it was held that, the standard laid down for measuring the tax liability must have nexus with the nature and general character of the levy.
24. In the present case as already pointed out there is no nexus on correlation between the fee (i.e, infrastructure fee on services rendered) and its rate or yardstick (i.e, customs duty and valuation of goods). In this manner no levy can be imposed or collected."
44. In the first two versions of law as already pointed out the customs duty and valuation was the basis of computing the levy. In the third version of the law the position remained unaltered with regards the yardstick for the purposes of computing the levy since the amendment was only made in the charging section. In the fourth version of the law the valuation of the goods by way of C and F prices was the criteria to calculate the infrastructure cess. Once again this did not change the basis of computation of the levy. Earlier customs duty and valuation was the criteria, however, by the fourth version C and F price/valuation of the goods become the criteria. Whether the valuation was by way of C and F prices or by of customs valuation made no difference. The nature and character of the levy i.e, the assessment for the maintenance and development of the infrastructure had no nexus with the yardstick to compute the levy i.e, valuation of the goods. Let us illustrate this by way of an example; a truck of goods and a truck of coal covering the same distance would be subjected to complete disparate imposition of cess, despite the fact that both the transactions entail the same event of carriage of goods through truck at an equal distance.
The infrastructure wear and tear ensued in both the events would be the same. The two tax payers were subjected to complete different quantums of cess/duty. Therefore apart from the agreement that there was no nexus between the nature and character of the levy and the yardstick to calculate it, the impugned levy was also inherently discriminatory, militating against Article 25 of the Constitution. It was in view of the above defect that a learned Division Bench comprising Anwar Zaheer Jamali (now the learned C.J.) and Mujeebullah Siddiqui (as he then was) JJ., which had partly heard the matter, had directed the respondent to submit the progress report with regards any amendment in the method/schedule of imposition of the infrastructure cess. Perhaps it was in view of this that Mr. Rasheed Akhund on 21-8-2006 had stated that the Government was taking steps to resolve the controversy to the satisfaction of the appellants. The respondents themselves realized that the levy could no longer be sustained and the documents reproduced above confirm the same.
45. It may, however, be stated for clarity that our conclusions that upto the fourth version the levy was discriminatory and its nature and character had no nexus with the yardstick prescribed for its calculation, are irrespective of any views of the earlier learned Bench or admission of the respondents or their counsel. The fifth version of law was promulgated with effect from 28-12-2006 (i.e, through Sindh Finance (Amendment) Ordinance, 2006. A perusal of the new rates in schedule of the fifth .Version therein would confirm that the rates of the cess have been made dependent upon the distance. This being so the possible objection of the appellants that the levy was discriminatory and that it did not contain any intelligible yardstick to compute the levy with respect to its nature and character, stands cured. A perusal of the fifth version of the law shows that it is neither retrospective in nature nor it is applicable to past and closed transactions. Section,1(2) of 2006 Ordinance confirms that it shall be enforceable at once i.e, from the date of its promulgation, being prospective and not retrospective.
46. To summarize, the defects pointed out by the learned single Judge in the H.A. Rahim case were two fold:--
(a) firstly, the taxable event contained in the charging section was beyond the scope of the provincial legislature;
(b) the nature and character of the levy had no nexus with the yardstick prescribed to calculate/collect the levy. The third version of the law did not remedy any of the above two defects.
The fourth version of the law only remedied the first defect, while it was only the fifth version of the law which ultimately removed both the fundamental defects found by the learned Single Judge in the H.A. Rahim's case. The argument of the appellants that the fifth version of the law is a colourable exercise of power does not seem to be proper since the fifth version of law apart from removing the objections of the appellants in relation to discrimination and the "nexus" arguments was brought about under the directions of a learned bench of this Court. Therefore, to call the fifth version of law a colourable exercise of power is rather uncharitable.
47. The learned counsel for the appellants have also launched an attack on the touchstone of Article 151 of the Constitution. Reliance has been placed on Kotri Association of Trade and Industry v. Government of Sindh 1982 CLC 1252, Khyber Electric Lamp Manufacturing Co Ltd. v. Chairman, District Council 1986 CLC 533, Saphire Textile Mills v. Government of Sindh PLD 1990 Karachi 412, Mirpurkhas Sugar Mills Ltd v. District Council, Tharparkar 1990 MLD 317 and 1991 MLD 715. We are not impressed with this argument and while relying upon the judgment of the Apex Court reported in Shahtaj Sugar v. Province of Punjab 1998 SCMR 2492 it may be observed that no tangible material or substantial reasons have been given to show a loss to have been occasioned so as to militate against Article 151 of the Constitution. The matter has more elaborately been dealt by the Supreme Court in the case of Pakistan Tobacco Co v. Government of N.-W.F.P. PLD 2002 SC 460. In this case the Supreme Court dealt with a challenge on the imposition of the Tobacco Development Cess levied by the N.-W.F.P. Government on the ground that the same violated Article 151 of the Constitution. It was held that Article 151(3)(b) of the Constitution authorized the Provincial Government to impose tax subject to the condition mentioned therein. Even in this case it seems clear that impugned levy is in keeping with the mandate underscored in Article 151(3)(b) of the Constitution and the appellants have not been able to establish otherwise.
48. The upshot of the above discussion is that fifth version of law brought about through the Sindh Finance (Amendment) Ordinance, 2006 (dated 22-12-2006) and subsequently ratified into an Act of Parliament i.e, the Sindh Finance Act, 2007 (Sindh Act, No, II of 2007 dated 24-10-2007) is a valid piece of legislation, however, the earlier four versions of law i.e, sections 9 and 10 of Sindh Finance Act, 1994, section 5 of Sindh Finance Act, 1996, Sindh Finance (Amendment) Ordinance, 2001 and Sindh Finance (Second Amendment) Ordinance, 2001 are all completely unconstitutional, without jurisdiction and of no legal effect. The impugned judgment of the learned Single Judge (i.e, Mushir Alam J.) has found the fourth version of law to be intra vires. Such conclusion, to the best of respects at our command, is not correct. Hence, the impugned judgment dated 28-10-2003 in these appeals are set aside.
49. It may not be out of place to mention that sections 3 and 4 of the Sindh Finance (Amendment)
Ordinance, 2001 have provided for the validation of the earlier levy and for the ouster of the jurisdiction of any Court to entertain a challenge to the said Ordinance, respectively. It is needless to state that when the main statute itself has been declared to be ultra vires any individual section/provision providing for validation or ouster of jurisdiction cannot be sustained. Even otherwise the validation clause has no juristic footing since the validation, as observed above, has not taken effect within the meaning of principle propounded in the Molasses case 1993 SCMR 1905.
With regards the ouster of jurisdiction it is needless to state that the jurisdiction of the superior Courts are not ousted in respect of executive or legislative actions which are completely, illegal, unconstitutional and without jurisdiction (see FOP v. Ghulam Mustafa Khar PLD 1989 SC 26).
50. The appeals are therefore partly allowed and the following is the summary of our conclusions:- -
(a) the first four versions of the law i.e, sections 9 and 10 of the Sindh Finance Act, 1994, section 5 of the Sindh Finance Act, 1996, the Sindh Finance (Amendment) Ordinance, 2001 and the Sindh Finance (Second Amendment) Ordinance, 2001 are hereby declared to be ultra vires the Constitution, invalid, void ab initio and of no legal effect;
(b) the fifth version of law i.e, the Sindh Finance (Amendment) Ordinance, 2006 is valid and hence the levy imposed and collected from the effective date of the fifth version i.e, 28-12-2006 is valid and all imposition and collection before such date are declare to be invalid; (c)any Bank guarantees/securities furnished under the first four version of the law for transaction before 28-12-2006 stated discharged and are liable to be returned back;
(d) all Bank guarantees/securities furnished by the appellants in respect of transactions after 28- 12-2006 are liable to been cashed;
(e) the operation of above sub-paras 50 (c) and (d) of this judgment are hereby suspended by a period of 60 days so as to facilitate any party aggrieved by the present judgment from exercising its right in exhausting any further remedy available to it under the law;
(f) there shall be no order as to costs.
51. Before finally parting we are indeed grateful to the invaluable assistance rendered by Messrs.
Munib Akhtar, Dr. Farogh Naseem and Ms Sam Minhas, the learned counsel for the appellants and Messrs, Rasheeil Akhund Advocate, Abdul Fatah Malik (Additional Advocate-General) for the respondents.