JUDGMENT : MR. JUSTICE SHAHID KARIM.--(1). This petition alongwith connected petitions at Appendix-I sought to be decided by this common judgment lay a challenge to SRO 584(I)/2017 dated 01.07.2017 ("the notification" ) issued by the Board with the approval of Federal Minister-In-charge. The notification amended the original notification SRO 1125(1)/201 1 dated 31.12.201 1 in which it was provided that the goods specified in column 2 of the Table given in that notification to be the goods on which sales tax shall be charged on zero-rate or at the rate of 5% as the case may be. This condition was amended by the notification in the following manner:-- "(iii) in condition (xiii), for full stop at the end a semicolon and the word "and" shall be substituted and thereafter the following new condition (xiv), shall be added, namely:-- "(xiv) in case the goods covered under this Notification are supplied to a person who has not obtained registration number , further tax prescribed under sub-section (IA) of section 3 of the Act shall be charged at the rate of one percent of the value whereas further tax at the rate specified in the said sub-se ction (IA) of section 3 shall be charged on supplies of finished articles."
2. Thus in fact the Federal Board of Revenue (FBR) with the approval of the Federal Minister-In-charge imposed further tax prescribed under sub-section (1A) of section 3 of the Sales Tax Act, 1990 ("the Act"), to be charged at the rate of one percent of the value where the goods covered by the earlier notification are supplied to a person who has not obtained registration number . In this manner , a charge was imposed on the petitioners which has been challenged in these petitions. During the course of the hearing in these petitions, the petitioners sought to add a further challenge to the original grounds urged in the petitions so as to seek a declaration that section 4(c) of the Act was as amended by the Finance Act, 2017 (the amendment ) be declared unconstitutional and ultra vires.
Section 4(c) as amended by the Finance Act, 2017, read as under:00 "such other goods as the Board with the approval of the Federal Minister -in-charge may, by Notification in the official gazette, specify"
The words "Board with the approval of the Federal Minister-in-charge" were substituted for "Federal Government" by the Finance Act, 2017.
3. Section 4 of the Act, may also be reproduced in its entirety and provides that:-- "4. Zero rating.--Notwithstanding the provisions of section 3 except those of sub-section (IA) the following goods shall be charged to tax at the rate of zero per cent:--
(a) goods exported, or the goods specified in the Fifth Schedule;
(b) supply of stores and provisions for consumption aboard a conveyance proceeding to a destination outside Pakistan as specified in section 24 of the Customs Act, 1969 (IV of 1969);
(c) such other goods as the Board with the approval of the Federal Minister -in-charge may, by notification in the Gazette, specify:
(d) such other goods as may be specified by the Federal Board of Revenue through a general order as are supplied to a registered person or class of registered persons engaged in the manufacture and supply of goods supplied at reduced rate of sales tax.
Provided that nothing in this section shall apply in respect of a supply of goods-- i. are exported, but have been or are intended to be re-imported into Pakistan; or ii. have been entered for export under Section 131 of the Customs Act, 1969 (IV of 1969), but are not exported; or iii. have been exported to a country specified by the Federal Government, by Notification in the official Gazette: Provided further that the Federal Govern ment may, by a notification in the official Gazette, restrict the amount of credit for input tax actually paid and claimed by a person making a zero rated supply of goods otherwise chargeable to sales tax."
4. Section 4, it can be seen, deals with the issue of goods which shall be charged to tax at the rate of zero percent and the power to do so was previously conferred on the Federal Government and thereafter by the amendment through Finance Act, 2017 the substitution was made and the power was conferred on the Board with the approval of Federal Minister-In-charge instead of the Federal Government. For the sake of completeness, the said substitution has further been amended by the Finance Act, 2018 and the position prior to Finance Act, 2017 has been restored. The words 'Federal Government' have once again been inserted in section 4(c) of the Act.
5. The challenge to the constitutionality of section 4(c) of the Act was compelled primarily on the basis of a judgment rendered by the High Court of Sindh in CP D-7159 of 2017 ("the judgment" ) which struck down as unconstitutional section 18(3) of the Customs Act, 1969 which is in pari materia with section 4(c) of the Act. Section 18(3) of the Customs Act, 1969 confers on C the Federal Government the power to impose a regulatory duty on a wide range of imports. It states that: "18(3) The Board. with approval of the Federal Minister -in-charge may, by notification in the official Gazette, levy, subject to such conditions, limitations or restrictions as it may deem fit to impose, a regulatory duty on all or any of the goods imported or exported, as specified in the First Schedule at a rate riot exceeding one hundred per cent of the value of such goods as determined under section 25 ?r , as the case may be, section 25A."
6. The above provision was brought under attack in a number of petitions before the High Court of Sindh on the ground that the conferment of power on the Board with the approval of Federal Minister-In-charge was ultra vires the enunciation of the Constitution as well as the holding of the Supreme Court' of Pakistan in Messrs Mustafa Impex, Karachi & others v. Government of Pakistan through Secretary Finance, Islamabad & others (PTCL 2017 CL. 456). It may be mentioned that section 18(3) was made subject to the same set of amendments as section 4(c) of the Act, 1990 and so there is a strikin g similarity between the two. The ground was permitted to be raised in these petitions and a notice was issued to the respondents including the Federal Government as also a notice in terms of Order XXVII-A, CPC to the Attorney General was issued. The parties have been heard today in support of their respective contentions. The arguments which featured in this case revolved around the issue whether the decision of the High Court of Sindh provided the constitutional justification for striking down section 4(c) as well.
7. There is no doubt that section 18(3) of the Customs Act, 1969 is in similar terms as section 4(c) of the Act and empowers, the Federal Government to levy by notification in the official gazette a regulatory duty on all or any of the goods to be imported or exported as specified In the first schedule. Thus, the delegation of powers is in respect of imposition of a regulatory duty on the Federal Government by the legislature. Section 4(c) of the Act also empowers the Federal Government to specify such other goods which may be charged to tax at the rate of zero per cent. Section 4(c) also contemplates the delegation of legislative power of taxation and the discretion has been vested in the hands of the Federal Government to specify the goods which will be charged to tax at the rate of zero per cent. the impugned notification the petitioners have been subjected to the imposition of a further tax at the rate of one per cent if the goods were supplied to a person who has not obtained registration number and this is despite the fact that the supply of goods is being charged to tax at the rate of zero per cent. The issue before the High Court of Sindh was whether the amendment made by the Finance Act, 2017 in section 18(3) of the Act, 1969 offended the provisions of the Constitutio n and the holding of the Supreme Court of Pakistan in Mustafa Impex.
While taking into account the various aspects of the controversy in the context of the constitutional structure as undertaken by the Supreme Court of Pakistan in Mustafa Impex, the High Court of Sindh came to the conclusion that the amendment made through Finan ce Act, 2017 by the insertion of the words "Board with the approval of Federal Minister-in-charge" did not erase the defect which had been determined by the Supreme Court and the constitutional mandate was that any such power could only be conferred on the Federal Government and not otherwise and in particular no entity other than the Federal Government could be empowered to levy any tax and the attempt to enact section 18(3) of the Act, 1969 was merely an attempt to nullify the judgment in Mustafa Impex which it had failed to do so since a statu tory provision could not undo the ratio decidendi of a judgment which merely propounds the various constitutional provisions. Thus, it was held that the delegated legislative powers to impose a duty or tax was a function that can only vest in the Federal Government itself and not elsewhere or otherwise. In conclusion, the amendment made to section 18(3) by the Finance Act, 2017 was held to be contrary to the constitutional mandate and declared to be ultra vices the Constitution.
8. Having heard the learned counsel for the parties, and having gone through the judgment rendered by the High Court of Sindh, I have no reason to disagree with the ratio of the judgment. Mustafa Impex formulated the following constitutional position as to the delegation of legislative power on the Federal Government:-- "It is important to note, however , that the word "may", connoting a discretionary element, was used in the original article.
40. The two critically important changes which have been made in the present formulation are:--
(a) the power of delegation to officers and subordinate authorities has been taken away , and
(b) the making of rules has been made mandatory . Two very significant inferences follow ineluctably from the changes.
The executive power of the Federal Government has now been channelized and the exercise thereof is to be through the mandatory modality of Rules of Business. These Rules are therefore binding-on the Government and a violation of the terms thereof can be fatal to the exercise of executive power . It needs emphasizing that the conscious substitution of the word "may" by "shall" speaks to the intention of Parliament to leave no doubt in the matter .
(ii) Whereas originally the Federal Government had the, power to delegate any of its functions to officers or authorities i.e. it would have been possible to delegate functions pertaining to fiscal matters to the Finance Ministry: this is no longer possible.
There is no discretion left in the Executive in relation to this. Obviously , the framers of the 18th Amendment felt so strongly about this that, notwithstanding, their reluctance to retain any vestiges of the 1985 Amendments, in this matter they preferred to retain the phraseology adopted in it. There has, therefore, been a radical restructuring of the law . We will revert to this aspect of the matter below ."
9. The High Court of Sindh culled out the meaning from Mustafa Impex to apply it to the amendment made in section 18(3) of the Act, 1990 (and by extension, to the amendment herein) in the following observations:-- "20. It will be seen from the foregoing passages that as regards the clause in its original form, the Supreme Court expressly held that the Federal Government could delegate any of its, functio ns to subordinate officers and authorities, and gave the example of fiscal functions being delegated to the "Finance Ministry". In our view, the reference to the Ministry is comprehensive enough to include the Finance Minister (i.e., the Minister incharge) as he is the head of the Ministry . The FBR is of course an authority subordinate to the Federal Government (although we may note in passing that subordination and taking dictation (in the legal sense) are not necessarily the same thing). Thus, in our view, the foregoing observations of the Supreme 14 Court are broad enough to cover a situation similar to there being, in the context of the clause in its original form, a delegation of a function such that it was to be performed by the FBR subject to the approval of the Minister -incharge."
"23. In our respectful view, the following conclusions emerge from the foregoing passages. The 'functions" of the Federal Government can be conferred on "officers or authorities" subordinate to the former in terms of Article 98.
However , unlike the position in the original clause of Article 99. it is not every (i.e., "any") function that can be so conferred. Only "designated" functions can be conferred. Furthermore, those functions of the Federal Government that relate to exercise of legislative power cannot he conferred at all, i.e., cannot be regarded as part of the "designated" functions. Now, the conferment of the power to impose regulatory duty on the Executive is clearly a species of delegated legislation. This position is well settled and attested in the case law, including such leading cases as Abdul Rahim, Allah Ditta v. Federation of Pakistan and others PLD 1988 SC 670, which as noted above was relied upon for the respondents. Thus, if at all such a power is delegated upon the Executive, it can only be a function of the Federal Government as constitutionally constituted and understood being, as explained in Mustafa Impex, the Federal Cabinet. It cannot be conferred on any officer or authority subordinate to the Federal Government in terms of Article 98 even if the Federal Cabinet itself so recommends.
24. It follows from the foregoing that notw ithstanding our conclusion as regards the combination of FBR acting with the approval of the Minister -incharge coming within the scope of Article 98, the function with which we are here concerned (i.e., the delegated legislative power to impose a regulatory duty) is a function that can vest only in the Federal Government itself and not elsewhere or otherwise. The amendment made to s. 18(3) by the Finance Act, 2017, being contrary to the constitutional position, must therefore necessarily fail."
10. The reasoning applies in equal measure to the present petitions as well and equally makes section 4(c) of the Act as unconstitutional having been enacted in contravention of the foundational rule in the Constitution and construed in Mustafa Impex by the Supreme Court. The learned D.A.G as well as Ch. Zafar Iqbal, Advocate counsel for the respondents in some of the petitions referred to a decision of the Cabinet dated 26.5.2017 whereby the Cabinet considered the summary dated 26.5.2017 submitted by the Reve nue Division on the Budgetary Proposals 2017-18 and: approved the proposals contained therein. However , that decision does not have the effect of conferring of seal of approval by the Cabinet on the decision taken with regard to the promulgation of the notification in issue. That notification was never placed before the Cabinet for its approval. The Cabinet merely approved the budgetary proposals and which amongst others contained the amendment to section 4(c) of the Act which is under challenge in these petitions. Thus, the said decision does not assist the respondents in any manner .
11. Mr. Liaqat Ali Chaudhry , Advocate, learned counsel for FBR sought to place reliance on a precedent reported as Messrs Mamukanjan Cotton Factory v . The Province of Punjab and others (PLD 1975 Supreme Court 50).
12.However , the issue decided in Mamukanjan Cotton Factory is distinguishable from the one which has been raised in these petitions. In the said precedent, the learned counsel for the petitioners sought to argue that the validating ordinance purported to enable the Provincial Government to retain a claim which according to the judgment of the High Court the Government could not have at the material time levied and collected. Further that the judgment was rendered by the High Court in the exercise of its jurisdiction conferred by the Constitution itself and therefore the validating ordinance being a sub-constitutional legislation could not undo or destroy the end product of the constitutional jurisdiction. This argument was repelled by the Supreme Court in the following words: -- "The argument, in my opinion, is without substance and which if accepted would indeed lead to startling results. It would strike at the very root of the power of Legislature, otherwise competent to legislate on a particular subject to undertake any remedial or curative legisla tion after discovery of defect in an existing law as a suit of the judgment of a superior Court in exercise of its constitutional jurisdiction, the argument overlooks the fact, that the remedial or curative legislation is also "the end product" of constitutional jurisdiction in the cognate field. The argument if accepted, would also seek to throw into serious disarray the pivotal arrangement in the Constitution regarding the division of sovereign power of the State among its principal organs, namely , the executive, the Legislature and the judiciary , each being the master in its own assigned field under the Constitution."
13. There is no cavil at all with the concl usion drawn by the Supreme Court in the above precedent. There is no doubt that the mere exercise of constitutional jurisdiction does not mean that the legislature is divested on its powers to enact a validating law to stunt and nullify the effect of the judgment rendered by a High Court. In the present petitions, however , the question is materially and plainly distinct from the one which was raised in Mamukanjan Cotton Factory . The question here is the interpretation of the constitutional mandate and the attempt by the legislature to circumvent that mandate by enacting a sub-constitutional legislation. Clearly this cannot be done as this can only be achieved by an amendment in the Constitution and not otherwise. If the Constitution mandates that certain act has to be performed in a certain manner and the construction of that mandate has been made by the Supreme Court, then nothing short of a constitutional amendment will undo the effect of a judgment of the Supreme Court. This question was neither raised nor determined in Mamukanjan.
14. Mr. Liaqat AR Chaudhry invoked to his aid section 74A of the Act, 1990 which is a validation provision and recites that: "74A. Validation.--( 1) All notifications and orders issued and notified in exercise of the powers conferred upon the Federal Government, before the commencement of Finance Act, 2017 shall be deemed to have been validly issued and notified in exercise of those powers."
15. The above provision, suffice to say, has no relevance to the controversy in hand. It seeks to validate the acts of the Federal Government and not that of the Board with the approval of the Federal Minister-in-charge. The latter acts are not covered by the validation made.
16. In view of the above, these petitions are allowed. It is declared that: (a) the amendment in Section 4(c) of the Act enacted through Finance Act, 2017 is ultra vires the Constitution and of no legal effect; (b) the notification issued in terms thereof in purported exercise of the powers conferred by section 4(c) of the Act is also declared ultra vires and of no legal ef fect and is hereby struck down.
APPENDIX-A Sr.No. W.P Nos. Title
1. 71260 of 2017 M/s Kh. Woolen Mill v. F.O.P etc.
2. 60403 of 2017 M/s Crescent T extile v . F.O.P etc.
3. 61700 of 2017 M/s Best Fibre v. F.O.P etc.
4. 62966 of 2017 Sally T extile Mills v . F.O.P etc.
5. 63076 of 2017 M/s Latif Worsted Spinning v . F.O.P
6. 67976 of 2017M/s Tanvir Cotton v. F.O.P etc.
7. 89963 of 2017Nishat Mills v. F.O.P etc.
8. 89972 of 2017 Nishat Linen v . F.O.P etc.
9. 69937 of 2017 Ravi Spinning Mills. v . F.O.P etc.
10. 70104 of 2017 M/s Ittehad Pvt. Ltd v . F.O.P etc.
11. 75312 of 2017 M/s AJ Textile Mils. v . F.O.P etc.
12. 76811 of 2017 M/s Kashif Spinning v. F.O.P etc.
13. 81165 of 2017 M/s Esha Embroidery v. F.O.P etc.
14. 84555 of 2017 Crescent Dining v. F.O.P etc.
15. 88686 of 2017 M/s Nagra Spinning v . F. O. P etc.
16. 90428 of 2017 M/s Ideal Spinning v . F.0,P etc.
17. 92727 of 2017 Sargodha Jute v. F.O.P etc.
18. 93910 of 2017 M/s Royal T extile v . F.O.P etc.
19. 93907 of 2017 M/s Sarhad T extile v . F.O.P etc.
20. 97807 of 2017 M/s ReshmaTex v. F.O.P etc.
21. 100147 of 2017M/s Said Ahmad Brands. v. F.O.P etc.
22. 101782 of 2017Shadab Textile v. F.O.P etc.
23. 105173 of 2017M/s Olympia Industry v. F.O.P etc.
24. 109179 of 2017B.A Traders v. F.O.P etc.
25. 109185 of 2017Tuba Traders v. F.O.P etc.
26. 109191 of 2017Shakil Silk Factory v . F.O.P etc.
27. 109503 of 2017M/s Mega Industry v. F.O.P etc.
28. 112111 of 2017 Kamal Industry v. F.O.P etc.
29. 113324 of 2017Ha& Javed Hassan v. F.O.P etc.
30. 113650 of 2017M/s F.M Textile Mills v. F.O.P etc.
31. 119035 of 2017M/s Madni Dining & Printing v. F.O.P
32. 122254 of 2017M/s Ishaque Textile v. F. O. P etc.
33. 150122 of 2018Rehman Silk Factory v. F.O.P etc.
34. 150123 of 2018Ahmad Silk Factory v. F.O.P etc.
35. 130245 of 2018M/s Al-Haq Exports v. F.O.P etc
36. 133257 of 2018Ravi Spinning Mills v. F.O.P etc
37. 133514 of 2018Khalid Nazir Spinning v. F.O.P etc.
38. 133873 of 2018D.S Industry v. F.O.P etc.
39. 136449 of 2018M.S. AJ Synthetic & Footwear v. F.O.P
40. 151309 of 2018M/s Z.A Corporation v. F.O.P etc.
41. 151649 of 2018Adnan Enterprizes v. F.O.P etc.
42. 153298 of 2018Tayyab Silk Factory v. F.O.P etc.
43. 153301 of 2018Imran Silk Factory v. F.O.P etc.
44. 154582 of 2018M/s Asmy Dining v. F.O.P etc.
45. 154770 of 2018Padco Enterprizes v. F.O.P etc.
46. 156418 of 2018A.A Traders v. F.O.P etc.
47. 156688 of 2018Asad Silk Factory v. F.O.P etc.
48. 157862 of 2018M/s Olympia Branded v. F.O.P etc.
49. 157903 of 2018M/s Mohnowal Textile v. F.O.P etc.
50. 157896 of 2018M/s Jamhoor Textile v. F.O.P etc.
51. 157892 of 2018M/s Rawal Textile v. F.O.P etc.
52. 157884 of 2018M/s Tribal Textile v. F.O.P etc.
53. 157876 of 2018M/s Lahore Textile v. F.O.P etc.
54. 157868 of 2018M/s Qureshi Textile v. F.O.P etc.
55. 157856 of 2018M/s Monnoo Industry v. F.O.P etc.
56. 157848 of 2018M/s Margala Textile v. F.O.P etc.
57. 159411 of 2018M/s A.H.N Synthetic v. F.O.P etc.
58. 158525 of 2018M/s Ismail Weaving v. F.O.P etc.
59. 160725 of 2018M/s Galaxy Textile v. F.O.P etc.
60. 161516 of 2018M/s Pak West Industry v. F.O.P etc.
61. 202091 of 2018 Abdullah International v. F.O.P etc.
62. 202013 of 2018Sefam Pvt. Ltd v. F.O. P etc.
63. 178963 of 2018M/s Indus Home v. F.O.P etc.
64. 177720 of 2018Procon Engineering v. F.O.P etc.
65. 177671 of 2018Shams Textile v. F.O.P etc.
66. 173818 of 2018Ayesha Spinning v. F.O.P etc.
67. 172760 of 2018Kamal Textile Mills v. F.O.P etc.
68. 171511 of 2018Umair Silk Factory v. F.O.P etc.
69. 171318 of 2018Export Culture v. F.O.P etc.
70. 165764 of 2018Rizwan & Shaukat Silk Fac. v. F.O. P
71. 202479 of 2018Usama Textile Industry v. F.O.P etc.
72. 202475 of 2018D.S Textile Industry v. F.O.P etc.
73. 203108 of 2018M/s Zyphyr Textile v. F.O.P etc.
74. 203066 of 2018Ameer Muhammad Silk Fac. v. F.O.P
75. 204275 of 2018M/s Al-Karam Dining v. F.O.P etc.
76. 206078 of 2018M/s Great Yuemey v. F.O.P etc.
77. 206385 of 2018Mohsin Rehman v. F.O.P etc.
78. 206506 of 2018Muhammad Alam Weaving v. F.O.P
79. 207821 of 2018M/s H.A Hag Spinning v. F.O.P etc.
80. 200052 of 2018Nadeem Hasnain v. F.O.P etc.
81. 210105 of 2018Ayan Silk Factory v. F.O.P etc.
82. 180167 of 42018Arzoo Textile Mills v. FO.P etc.
83. 164887 of 2018Al-Meraj Dining v. F.O.P etc.
84. 164859 of 2018M/s Gulshan Knitware v. F.O.P etc.
85. 162570 of 2018A.E Enterrpizes v. F.O.P etc.
86. 162479 of 2018M/s Chaudhry Industry. v. F.O.P etc.
87. 199221 of 2018Shoaib Anjum Silk v. F.O.P etc.
88. 197772 of 2018Ittefaq Cloth Centre v. F.O.P etc.
89. 197230 of 2018M/s Al-Hamra Textile v. F.O.P etc.
90. 197239 of 2018M/s Kamal Ltd. v. F.O.P etc.
91. 196739 of 2018M Aslam W eaving v . F.O.P etc.
92. 196744 of 2018M. Arshad Weaving v. F.O.P etc.
93. 193137 of 2018Kareem Spinning v. F.O.P etc.
94. 192332 of 2018Bilal Silk v. F.O.P etc.
95. 191187 of 2018Al-Rahim T extile v . F.O.P etc.
96. 191191 of 2018M/s Iftikhar A. W eaving v . F.O.P etc.
97. 189590 of 2018Al-Haram W eaving v . F.O.P etc.
98. 188746 of 2018Husnain Zahid v. F.O.P etc.
99. 188017 of 2018MKB Spinning Mills v . F.O.P etc.
100. 185172 of 2018M/s Aala Processing Ind v. F.O.P etc
101. 181883 of 2018M/s MHA Weaving Mills v . F.O.P etc
102. 180847 of 2018NR T extile Mills v . F.O.P etc
103. 248546 of 2018 M/s GM Industry v . F.O.P etc
104. 248547 of 2018 M/s Waqas Woolen Mills v. F.O.P etc
105. 248391 of 2018 Colony T extile Mills Ltd. v . F.O.P etc
106. 246279 of 2018 Ali Ans Silk Factory v . F.O.P etc
107. 245140 of 2018 M/s Nimir Resins Ltd v. F.O.P etc
108. 243967 of 2018 M/s Pakistan Inter Lining v . F.O.P
109. 242722 of 2018 Kamran Impex v . F.O.P etc.
110. 229940 of 2018 C.A Textile Mills v . F.O.P etc.
111. 228907 of 2018 Fair T raders v . F.O.P etc.
112. 224204 of 2018 Mohsin Silk Factory v . F.O.P etc.
113. 215326 of 2018 Glamour Textile v. F.O.P etc.
114. 210734 of 2018 M/s Usman W eaving v . F.O.P etc.
115. 210735 of 2018 M/s Iflikhar W eaving v . F.O.P etc.
116. 210736 of 2018 M/s Salman W eaving v . F.O.P etc.
117. 2101 15 of 2018 Khurshid Sons. v . F.O.P etc.
118. 249635 of 2018 M/s Ramis Impex v . F.O.P etc.
119. 250096 of 2018 M/s. Baba Spinning v. F.O.P etc.
120. 160833 of 2018M/s Nishat Chunian v . F.O.P etc.