This is a petition under Article 199 of the Constitution of Islamic Republic of Pakistan, seeking declaration to the effect, that the Notification, dated 10th of July, 1989 (under section 7, Sales Tax Act, 1951); the letter of C.E. & S.T. Circle II, Lahore, dated 5th of July, 1989 (intimating revised rates of Central Excise duty and Sales Tax on Billets/Ingots), and the oral order on which the abovesaid letter is based as well as the relevant provisions of Finance Act, 1989, are without lawful authority and hence of no legal effect. It is further prayed that the petitioner be permitted to sell the products already produced before the introduction of impugned tax without additional burden of the new impost and the current production on such terms as the Court may deem fit to impose. Any other relief deemed fit and available together with costs has also been prayed in the petition.
2. The petitioner, a private limited Company, is producing semi-finished products for steel industries in Pakistan. According to petitioner, its foundry primarily produces, what is commonly known as Bilt', an Urdu slang of the English word 'Billet' which in the market is also applied to 'ingots' as both 'Billet' and 'Ingot' are produced and made available in the market for further production of goods by re-rolling, forging and other methods. It was explained that distinction in the usage of 'Ingot' and 'Billet' came about only since 1923 when a new way of making steel by continuous casting became common to the industries. The old method of Ingot production is through old blast furnace/open hearth furnace system wherein after heating, the liquid steel is tapped into a refractory-lined open-topped vessel called a steel ladel which is moved by an overhead crane to a pouring platform where the steel is then poured into a series of moulds of the desired dimension.
The steel solidifies in each of the moulds to form a casting called an 'Ingot'. Internationally Ingots are now produced for further working by the new method of melting by using electric furnace. It was stated that the foundries producing Ingots in Pakistan are using electric furnaces due to its efficiency and economy and that so far as the end-products are concerned, `Billets' and 'Ingots' are used for entirely identical purposes and products, though R the plants using continuous casting system have greater option in providing required shape of the Ingots and are capable of larger production.
3. The continuous casting system is based on heavy capital cost unlike Ingot moulden system. It is a process wherein liquid steel is poured directly into semifinished shapes (such as slabs, blooms, blanks or billets). This process is growing in use, is modern and efficient as it eliminates the need for heavy rolling-mill equipment. In this process, liquid steel is poured via a tundish into a water- cooled copper mould and as casting commences, the bottom of the mould is sealed with a dummy bar into which the steel solidifies. The solidified cast product is removed continuously by way of a direct spray-cooling withdrawal roll and cut-off system, maintaining a desired molten metal level with copper mould. Once cut off, the cast product is discharged on to a cooling hank. It was also explained that since the early 1940 s, continued research and development have resulted in the perfection of methods for continuous casting of molten steel directly into the form of slabs and billets, by by-passing the ingot stage and the necessity for hot-rolling operations formerly required to produce such products. In sum, the advantage of use of continuous casting is that it does away with several complicated steps of steel making--pouring steel into Ingot moulds, heating the Ingots in soaking pits and passing them through a rolling mill to make blooms, slabs and billets. "By this arrangement the cost of blast furnaces, coke ovens, soaking pits and large rolling mills is avoided." (The New Book of Knowledge, Vol. 19 page 406).
4. The petitioner produces the Billets entirely through continuous casting. It is its plea that both Ingots and Billets were taxed or exempted from tax in absolutely identical terms year after year, since the time that blooms, billets and slabs appeared in Pakistan Custom Tariff, and that the petitioner, on the assumption that the tax burden on goods produced by it would be the same, has produced large quantities of goods, which it cannot possibly sell after adding the newly-imposed tax burden of the Excise Duty and the Sales Tax. The petitioner came to know of this additional tax burden on receipt of Memo. Dated 5th July, 1989 to the effect that the Central Excise duty and Sales Tax will be charged as under:-- Name Of ProductRate of central Excise Duty Rate of Sales Tax Billet Rs.600 M.Ton 12/1-2% Ingot Nil Rs. 375 M. Ton Rerolling productNil Rs. 175 M.TON Scrap-imported Nil Rs. 175 M.TON
5. The plea of the petitioner is that this change of policy was calculated to cripple the petitioner who uses the modern method of production of an item i.e, billet and whose end use is exactly the same as that of the traditional ingot and that the actual effect of the new tax discloses the mala fides of the whole exercise as under:-- Name Of ProductRate of Import Duty Rate of central Excise Duty Rate of Sales Tax Billet Rs.600 M.Ton 12/1-2% Ingot Nil Rs. 375 M. Ton Rerolling product Nil Rs. 175 M.TON Scrap-imported Rs. 1,500 M.Ton Nil Rs. 175 M.TON It was pleaded that different treatment of both the items is not only discriminatory but also unwarranted as;
(a) Both Billet/Ingot are cast from re-meltable steel scrap; (b)Both Billet/Ingot are processed through Bessemer Thomas, SiemensMartin, Armco or Electric processes.
(c)Both Bille'/Ingot can be square or rectangular.
(d)Both billet/Ingot are Semi-Finisbed products.
(e) Both Billet/Ingot are used for re-rolling into bars, rods, angles, shapes and sections or for the manufacture of forgings and other finished products.
6. The case of the petitioner is that traditionally duties and taxes on Ingots/Billets were akin in order to maintain parity of cost as both are meant to roll similar finished products and hence the cost of production of these items has to be equivalent. It was added that the levy of additional tax burden on Billet places unreasonable burden on the producers of Billet specially the petitioner which is the major producer of Billet in the private sector and as such this action is violative of Article 18 of the Constitution. It was submitted that the respondent-Government has not disclosed any basis or reason for giving different treatment to the two products which were being taxed earlier for years at the same rate. It was asserted that the relevant factors were not at all considered and the delegated legislative power was abused acting in mala fide manner, and that additional burden was placed on billet to cause unbearable financial loss to the petitioner with the view to put it out of market. It was argued that aforenoted assertions stand established as the concerned quarters i.e, Ministry of Finance have not controverted the same by filing any written statement.
7. The aforesaid plea was specifically advanced as a written statement under the signature of Assistant Collector, respondent No,3 was filed by the learned Standing Counsel, on behalf of all the respondents (Federation and the Superintendent Central Excise Circle II, Lahore) and that too without any supporting affidavit. The stand taken in the written statement is that Ingot is a primary product while Billet is a semi-finished product, both are produced through different processes, and that what is obtained through continuous casting process is commercially, technically and legally called 'Billet' while the product which is obtained by pouring molten steel into moulds, heating and soaking in pits is known as 'Ingot' and that 'Billet' can be produced from 'Ingot' but Ingot cannot be produced from Billet. So both are factually and legally two distinct products and are also separately classified under Pakistan Custom Trariff. (Items 73.06 and 73.07. P.C.T.). It was also asserted that cost of production of Billet is much less than the cost of production of Ingot; that quality and quantity of production of billet is incomparable with the quality and quantity of production of ingot and that the difference in prices of billet and the end-products of Billet from the prices of Ingot and end-products of Ingot ranges from Rs,1,000 to Rs,25,000 per M.Ton.
8. The pleas of granting advantage to one product and discriminating the other arbitrarily and thus being priced out of market, were denied by asserting that economic decisions like production, marketing and pricing are not based on assumptions and it is incorrect to say that because of exemption given to Ingot, the petitioner will not be able to sell its product, as sales tax and excise duty are payable by all the producers of 'Billet' which include Messrs Punjab Steel Mills Shandara, the only other private sector producer of billet and Pakistan Steel Mills, a State Enterprise who are the largest producers of billet, without any distinction and that in any case this Court in constitutional jurisdiction cannot enquire into questions of trading, market conditions, cost of production, and pricing. It was argued that though Billet and Ingot were subjected to identical rates of Excise Duty and Sales Tax or were being allowed exemption from tax or duty on 'identical terms' but from that it cannot he inferred and that would not make both the products classifiable under one item. The plea of mala fide exercise of delegated legislative power was also refuted by saying that no new tax or additional burden has been levied and that akinness of duties and taxes on both the products cannot be a determining factor. It was also contended that exemption of one item or the other item from payment of already levied tax is a matter of grace and not a right and exists only by grant; that the Courts cannot go into, or question, the right of the Government to exempt one or the other item and nobody can claim, as a matter of right, exemption from tax on any basis or that any other item has been exempted. It was further added that in any case grant of exemption from tax is a matter of grace and exemption is granted by the Government taking into consideration various factors which are not subject to enquiry, investigation or jurisdiction of this Court.
9. The assertions as to the effect of the impugned Notification, rates of Excise duty, sales tax and exemptions, advanced by the petitioner were replied to in general terms. In reply to the assertion that the petitioner imports about 70% of the total imported scrap, it was stated that the figures quoted are not supported by any authentic source and so the same require verification. It was, however, added that it is just, fair and in conformity with the principles of free competition that an item which fetches higher price should bear higher tax incident while another item which fetches lower price should have a lower tax incident as it is in line with the principles of progressive taxation and ensures free competition, hence, neither Article 18 nor Article 25 of the Constitution has any application to the case.
It was further pleaded that the letter containing administrative direction cannot be assailed in writ jurisdiction as the petitioner can neither be aggrieved of these administrative directions nor of the Notification, dated 10-7-1989 granting exemption as in case this notification is rendered ineffective, the result would be that both Ingot and Billet would be subject to Sales Tax 12-1/2% of the value. The plea as to availability of remedies under the Central Excise Law and Sales Tax Act was however, not pressed during arguments. Learned standing counsel, during arguments finally stressed that Finance Act, 1989 does not deal with the impugned levy or exemption and that notification of exemption having not been challenged, no relief can be granted to the petitioner.
10. The petitioner, as is apparent from above paras., feels aggrieved as in the matter of allowing exemption from payment of Excise Duty and Sales Tax, the Federal Government in exercise of delegated power has given to its product 'Billet' a treatment different from that extended to the producers of Ingot as eventually the producers of Billet have been made to pay excise duty and sales tax at higher rates. In order to appreciate the grievance made, the position of the Excise Duty and the Sales Tax imposed in the past as well as the provisions of the relevant law may appropriately be noted:--
(A) EXCISE DUTY
(i) Section 3 of the Central Excises and Salt Act, 1944, provides that there shall be levied and collected in such manner as may be prescribed duties of excise on all exciseable goods and services produced, provided or rendered in Pakistan as and at the rates set forth in the First Schedule. as under :-- The relevant item of the First Schedule as it read before amendment was Item No.Description of goods Rate of duty 09.04.Steel Ingots "Steel INGOTS' means the product obtained by processing iron ore, pig iron, or iron scrap or any other ferrous raw material, whether cast into a mould in any shape or form or whether used in molten or semi-- finished state for the manufacture of rolled or forged or formed steel products.Rupees of forty-nine and fifty paisas per tonee
(ii) Section 12-A empowers the Federal Government to exempt by notification, from time to time, any goods, class of goods or any services or class of services subject to such conditions if any as may be specified, from the whole or any part of the duty leviable under the Act. The Federal Government vide Notification S.R.O.555(1)/79, dated Nth June, 1979 exempted Steel Ingots (Item No. M.04) from the whole Excise duty and thus Duty payable was Nil. This position prevailed till 14th July 1988 as through Ordinance No. III of 1988 (Central Excises and Salt Act (Amendment) Ordinance, 198,S) entry pertaining to Item No. 09.04 Steel Ingots of the First Schedule was substituted as under :-- Item No.Description of goods Rate of duty 09.04 INGOTS, Billets, slabs and sheet barsRs.2,000 per M.Ton.
On the same date i.e 14 July, 1988 Federal Government issued Notification S.R.O.614(1)/88 whereby payment of duty in excess of Rs.600 was exempted by amending aforequoted Notification SRO- 555(1)/79, dated Nth June. 1979. The relevant extract of the Notification substituting the entries reads:-- Item No.Description of goods Rate of duty 09.04 (a) Iron and Steel INGOT Billets, Slabs and sheet bars.
(b) Others.Rs.2,000 per M.Ton.
Nil
(iii) The Ordinance III of 1988 was repealed by Ordinance 23 of 1988 which was promulgated on 5th November, 1988 but was enforced with effect from 26 October, 1988 (See PLD 1989 Central Statutes 25). Thereafter, Finance Act, 1988 (Act VI of 1988) enforced with effect from 20th December, 1988 again substituted amongst others the entries of First Schedule to the Central Excises and Salt Act, 1944 pertaining to item No. 09.04 precisely in the same way as was done by Ordinance No. III of 1988.
Then S.R.O. 555(1)/89 was issued on 3rd June, 1989 by the Government whereby the word 'INGOT' was omitted from entry against Item No. 09.04 appearing in Notification S.R.O. 614(1)/88, dated 14th July, 1988.
(iv) The position of Excise duty, at one glance would be as under.
Time Relevant law Entries of first 1 2 3 4 5 Prior to July,S.3, Central Excises and Salt Act read with First Schedule.Item Description of goods.Rate of duty Extent Exemption Notification 09.04---Steel INGOTS--- (as defined)Rs.49.50 per ton.I-SRO.555(1)/79 dated 28-6- 1979-NIL 14-7-88 Ord.III (PLD 1988 C S 137)09.04 INGOTS Billets, slabs & sheet bars.Rs. 2,000 SOR-614(1)/88 dated 14-7- 1988 (1) Iron & Steel INGOTS Billets, slabs & sheet bars Rs.600
(2) others-Nil 5-11-88 Ord. 23 of 1988 enforced w.e.f. 26-10-
88. Repealed Ord.III of 1988.
26-12-88 Act VI ---09.04--- of 1988.INGOTS Billets slabs & sheet bars.Rs. 2,000 per ton.III-SRO-555(1)/89 dated 3-6- 1989 word ---INGOT--- omitted from abovesaid Notificationth th
(B) SALES TAX.
(i) The position of levy of Sales Tax may now be summarized. Section 3(2) of the Sales Tax Act, 1951 provides that tax shall be at the rate of twelve and half per cent on the value of goods. Section 7 empowers the Federal Government to exempt any goods from the tax payable under the Act.
(2) The exemption Notifications issued from time to time and relevant to the questions raised may now be noted.
(I)SRO-606 (1)/81 dated 25th June, 1981.
Serial No, Description of goods. Extent of exemption.
57 Iron and Steel failing within the headings 73.01 to 73.09, 73.15, 73.18 and 20.01.......Whole (II)S.R.O. 523 (1)/88, dated 26(h June, 1988 amended the abovesaid Notification. The amended column pertaining to description of goods reads:-- "Iron and steel (except ingots, billets, and mild steel products, all sorts of re-rolling mills including bars, rods, coils, wires, joints, girders, angles, channels, tees, flats, beams, Zeds, trough, piling and all other rolled, forged, formed, or extruded shapes and Sections)" falling within the headings 73.01 to 73.09, 73.15, 73.18 and 26.01.
(III)SRO-566 (1)/89, dated 3rd of June, 1989 superseded the notification SRO--666(1)/81, dated 25th June, 1981 and in this notification Item No.57 as appearing in the aforenoted two notifications was not included. As Items No. 73.06 INGOT & 73.07 Billet of P.C.T. were not included in the notification of exemption, the Sales Tax as provided under Section 3(2) @ 12-1/2 per cent on the value was payable in this period.
(IV) SRO-734(1)/89, dated 10th July' 1989. Exempting Sales Tax as is in excess of the amount specified in column No.4 of the table below.
S.No,Description of goods. P.C.T. heading No,Rate 1 2 3 4
1. INGOTs 73.06. Rs, 375 per Metric Ton.
2. Bars, rods (including wire rods) angles, shapes and Sections of iron or steel.73.10 and 73.11Rs, 175 per Metric Ton Note:-- This notification was to remain in force until the 30th September, 1989. The Notification was kept in force till 30th November, vide SRO-993 (1)/89, dated 30th September, 1989 and life of this Notification has been extended till 30th January, 1990 under another Notification dated 30th November, 1989.
(ii) The legal position which emerges as regards Excise Duty, is that till the 14th July, 1988 no Excise duty was payable on 'INGOT' as well as on 'Billet'. Both these products fell within the definition of the term 'Steel INGOT' as defined under Item 09.04 of the First Schedule to the Central Excises and Salt Act, 1944. Even under Ordinance No. III of 1988 while granting exemption vide Notification dated 14th July, 1988 both 'INGOT and 'Billet' were treated alike as excise duty on both was payable @ Rs.600 per metric tonne and that it was only since 3rd June, 1989 that 'INGOTS' were. treated differently from Billets as Excise duty on INGOT was totally exempted.
As regards Sales Tax, it is pertinent to note that in the Notification of Exemption issued under Section 7 of the Sales Tax Act 1951 though INGOT and Billet were described in terms of classification given in Pakistan Custom Tariff, wherein INGOT and Billet were classified under separate headings 73.06 and 73.07 respectively yet both the products were given the same treatment in the matter of grant of exemption till 10th July, 1989. The whole of Sales Tax on both products was exempted under Notification dated 25th June, 1981 which was then' amended vide Notification dated 26th June, 1988 to exclude INGOTS and Billets alongwith other items from the purview of exemption notification.
Again in the exemption notification dated 3rd June, 1989 both these products were not included and on both INGOT and Billet Sales Tax @ 12-1/2 per cent per Tonne was payable.
It was only since 10th July, 1989 that Sales Tax on INGOT was made payable @ Rs.375 per Metric Tonne while on bars, rods, angles, shapes and Sections of Iron and Steel which are re-rolled end- products, Sales Tax was chargeable at the rate of Rs. 175 per Metric Tonne but on 'billet' which is at best a semi-finished product, sales tax is payable at the rate of 12-1/2 per cent per Tonne. So if the price of Billet is Rs.8,500 per metric tonne, the sales tax @ 12--1/2 % would be Rs.1,062.50 per tonne.
12. The different treatment came to be accorded since June and July 1989 by the Federal Government in exercise of the delegated power vesting under Section 12-A of the Central Excises and Salt Act, 1944 and Section 7 of the Sales Tax Act, 1951. In this context the plea that scientifically and technically and as per Pakistan Custom Tariff which follows Brussels Nomenclature and Harmonized Commodity Description and Coding System both these products have been classified under separate heading and as separate items, is not relevant. Again though INGOT may be a primary product produced by old blast furnace system' and 'billet' is a semi-finished product produced by modern continuous casting process but both the products are undisputedly used for re-rolling into bars, rods, angles, shapes and Sections or for the manufacture of forging and other finished products.
13. The other important feature to be noted is that steel industry in the country is in its infancy. There are only four Mills; (1) Pakistan Steel Mills, Karachi (2) P.E.C.O. Lahore, the public companies and two private sector companies, namely, the petitioner and Punjab Steel Mills, Shabdara, which are producing Billet in Pakistan. The plea that the petitioner imports about 70% of the entire quantity of scrap imported in the country for production of billet was not specifically controverted. .
14. Moreover, nothing was brought on record to show the total production of billet by the four producers or either of the four producers, the total production of Ingot and as to how many are the Ingot producers and as to what were the circumstances which necessitated according of different treatment to the two products. In fact the Finance Ministry not only failed to file a written statement but also no record or rile was produced to show the exercise if any undertaken by it and to establish that pertinent and relevant causes, reasons or factors were considered by the relevant quarters for coming to the conclusion that INGOT and Billet merit not to be given the same treatment as was being done in the past. The Assistant Collector, respondent No.3, who has filed the written statement, neither claimed access to any such record of the Ministry nor disclosed any material, cause, reason or circumstances justifying the change in the policy of the Federal Government except for advancing the assertion that principles of progressive taxation and free competition are being followed. It was further alleged without any supporting affidavit or material that prices of billet and its end-products are higher to the extent of Rs.1,000 to Rs. 1,500.00 per M.Ton than the prices of INGOT and its end-products. It is pertinent to note that according to the petitioner the additional burden levied, in the prevailing circumstances would be Rs.2,425.00 per metric ton.
15. With the aforenoted . factors in view, I proceed to examine the contentions of the parties. The contention of the learned counsel for the petitioner noted in para. 5 above to the effect that the delegated legislative power has been abused, may now be considered. The levy of excise duty as well as sales tax on two products at different rates was assailed as discriminatory, unreasonable, irrational and prejudicial to the public interest. It was asserted that legislative power was used to victimize the petitioner in a manner inconsistent with the fundamental right granted under Article 18 of the Constitution which ensures free competition. It was added that the respondent- Government without keeping in view the relevant factors and the purposes for which the power vests in it, has exercised the power in most mala fide manner and that the discriminatory treatment given through the notifications amounts to denial of equality.
15-A. Learned counsel in support of the aforenoted submission, relied on; (a) Articles 4, 18 and 25 of the Constitution of Islamic Republic of Pakistan; (b) the principle that the exercise of delegated legislative power like any other administrative or executive power can be subjected to judicial review on the ground of Wednesbury reasonableness. The plea that discretion vesting in the Government, whether in the Matter of tax or in the executive field is to be exercised in a reasonable way was sought to be supported by citing the following judgments-
(i) Associated Provincial Picture Houses Limited v. Wednesbury Corporation.(1947 AER 680); and
(ii) Congress v. Home Office, (1976) 1 AER 697).
The question in the case of Congress v. Home Office was as to the exercise of discretion by the Minister with reference to the statutory discretionary power to issue and revoke licences. Every person having the colour television was required by law to get a licence which was issued for 12 months more or less. The fee upto 31st March, 1975 was Lb.12 but from First of April, 1975, it was increased to Lb.18 but it did not become law until 1st April, 1975 by which date the Department could only charge Lb.12 for licence. On and after that date it was bound to charge Lb.18. This gave many people who already held a licence a bright idea. The licences so obtained would be valid for a few days but the new licences would last them for nearly the next 12 months. In this way extra Lb.6 which they were required to pay if they had obtained the licences after Ist April, 1975. The Home Office objected and demanded payment of extra Lb.6 on the threat of revocation of new licence.
The demand was thus challenged. The relevant observations on the question of discretionary statutory power read:-- "Now for the carrying out of the statutory provisions. Undoubtedly those statutory provisions give the Minister a discretion as to the issue and revocation of licences. But it is a discretion which must be exercised in accordance with the law, taking all relevant considerations into account, omitting irrelevant ones, and not being influenced by any ulterior motives. One thing which the Minister must bear in mind is that the owner of a television set has a right of property in it; and as incident to it, has a right to use it for viewing pictures in his own home, save in so far as that right is prohibited or limited by law. Her Majesty's subjects are not to be delayed or hindered in the exercise of that right except under the authority of Parliament. The statute has conferred a licensing power on the Minister; but it is a very special kind of power. It invades a man-in the privacy of his home, and it does so solely for financial reasons so as to enable the Minister to collect money for the Revenue."
16. The case of Council of Civil Service Unions and others v. Minister for the Civil Service (1984-3 AER 935) was relied upon to point out three grounds on which administrative action can be subjected to judicial review. Lord Diplock in his judgment described three grounds as under:-- "The first ground I would call 'illegality' the second 'irrationality' and the third 'procedural impropriety' By 'illegality' as a ground for judicial review I mean the decision-maker must understand correctly the law that regulates his decision-making power and must give effect to it By 'irrationality' I mean what can by now be succinctly referred to as Wednesbury reasonableness, (See Associated Provincial Picture Houses Limited v. Wednesbury Corporation(1947) 2 ALL ER 680, (1948) 1 KB 223). It applies to a decision which is so outrageous in its defiance of logic or of accepted moral standards that no sensible person who had applied his mind to the question to be decided could have arrived at it 'Irrationality' by now can stand on its own feet as an accepted ground on which a decision may be attacked by judicial review. I have described the third head as 'procedural impropriety' rather than failure to observe basic rules of natural justice or failure to act with procedural fairness towards the person who will be affected by the decision. This is because susceptibility to judicial review under this head covers also failure by an administrative tribunal to observe procedural rules that are expressly laid down in the legislative instrument by which its jurisdiction is conferred, even where such failure does not involve any denial of natural justice."
17. In the case of Commissioner of Customs and Excise v. Cure and Deeley Limited, the vires of Purchase Tax Regulations, 1945 and powers under Section 33(1) of the Finance Act, 1940 by the Commissioner of Customs and Excise were examined. The observations relied upon read as under:-- "To my mind a Court is bound before reaching a decision on the question whether a regulation is intra vires to examine the nature, object, and scheme of the piece of legislation as a whole, and in the light of that examination to consider exactly what is the area over which powers are given by the section tinder which the competent authority is purporting to act. In taking that view I respectfully apply the line of approach adopted by Lord Greene, M.R. In the cases previously cited, where he referred to the need for the acts of the competent authority to fall within the four corners of the powers given by the legislature."
18. Learned counsel also cited the case of United States v. Eugene Frank Robe (389 US 258)
(Lawyers Edition 508) for the purpose of highlighting the approach with which the use of legislative discretion in cases where liberty and exercise of fundamental freedoms are involved is to be examined. In this case caution was given that the need for a legislative judgment is especially acute here, since it is imperative when liberty and the exercise of fundamental freedoms are involved that constitutional rights not be unduly infringed.
19. Articles 4, 18 and 25 of the Constitution of Islamic Republic of Pakistan, relied upon read as under:--
4. Right of individuals to be dealt with in accordance with law etc. --(1) To enjoy the protection of law and to be treated in accordance with law is the inalienable right of every citizen, wherever he may he, and of every other person for the time being within Pakistan.
(2) In particular---(a) no action detrimental to the life, liberty, body, reputation or property of any person shall be taken except in accordance with law; (b) no person shall be prevented from or be hindered in doing that which is not prohibited by law; and (c) no person shall be compelled to do that which the law does not require him to do.
18. Freedom of trade, business or profession.-- Subject to such qualification, if any, as may be prescribed by law, every citizen shall have the right to enter upon any lawful profession or occupation, and to conduct any lawful trade or business: Provided that nothing in this Article shall prevent--- (a)..........................................................................................................
(b) the regulation of trade, commerce or industry in the interest of free competition therein; or (c)..........................................................................................................
25. Equality of citizens.--(1) All citizens are equal before law and are entitled to equal protection of law.
(2) There shall be no discrimination on the basis of sex alone.
(3) Nothing in this Article shall prevent the State from making any special provision for the protection of women and children.".
20. Learned counsel with a view to point out the scope and contents of these Articles, relied upon the case of E. P. Royappa v. State of Tamil Nadu (AIR 1974 SC 555) from Indian jurisdiction. It was observed therein as under:-- "Articles 14 and 16 strike at arbitrariness in State action and ensure fairness and equality of treatment. They require that State action must be based on valid relevant principles applicable alike to all similarly situate and it must not he guided by any extraneous or irrelevant considerations because that would he denial of equality. Where the operative reason for State action, as distinguished from motive inducing from the antechamber of the mind, is not legitimate and relevant but is extraneous and outside the area of permissible consideration, it would amount to mala fide exercise of power and that is hit by Articles 14 and 16. Mala fide exercise of power and arbitrariness are different lethal radiations emanating from the same vice; in fact the latter comprehends the former. Both are inhibited by Articles 14 and 16."
21. This view was then reaffirmed by the Indian Supreme Court in the case of Smt. Maneka Gandhi v.
Union of India and another (AIR 1978 SC 597), in Ramana Dayaram Shetty v. The International Airport Authority of India and others (AIR 1979 SC 1628) and again in Ajay Hasia etc. v. Khalid Mujib Sehravardi and others (AIR 1981 SC 487). In the last mentioned case, it was also observed as under:- - "The doctrine of classification which is evolved by the Courts is not paraphrase of Articles 14 nor is it the objective and end of that Article. It is merely a judicial formula for determining whether the legislative or executive action in question is arbitrary and therefore constituting denial of equality. If the classification is not reasonable and does not satisfy the two conditions referred to above, the impugned legislative or executive action would plainly be arbitrary and the guarantee of equality under Article 14 would be breached. Wherever therefore there is arbitrariness in State action whether it be of the legislature or of the executive or of an authority under Article 12, Article 14 immediately springs into action and strikes down such State action. In fact, the concept of reasonableness and non-arbitrariness pervades the entire constitutional scheme and is a golden thread which runs through the whole of the fabric of the Constitution."
22. The other case from Indian jurisdiction cited is Indian Express Newspapers (Bombay) Private Limited v. Union of India and others (AIR 1986 S.C. 515).
In this case the petitioner-company and their employees who were engaged in the business of editing, printing and publishing newspapers, periodicals, magazines etc. Challenged the validity of the imposition of import duty on newsprint imported from abroad. Under the Finance Act, 1981; the auxiliary duty of 30% ad valorem was payable in addition to customs duty under Customs Act, 1962 and by Notification issued under the aforesaid Act the customs duty was reduced to 10% ad valorem and auxiliary duty was reduced to 5% ad valorem in case of newsprint used for printing newspapers, books and periodicals. During the pendency of the case, the Customs Tariff Act, 1975 was amended levying 40% ad valorem plus Rs,1,000 per M.T. As customs duty on newsprint and the auxiliary duty payable on all goods subject to customs duty was increased to 50% ad valorem.
However, by reason of exemption notification duty at a flat rate of Rs,550 per M.T. And auxiliary duty of Rs,275 per M.T. Were payable on newsprint. So in all Rs,825 per M.T. Was thus levied. The imposition of the import duty, it was contended, has the direct effect of crippling the freedom of speech and expression guaranteed by the Constitution as it has led to the increase in the price of newspapers and the inevitable consequence is reduction of their circulation. It was also added that the method adopted by the Customs Act, 1962 and the Customs Tariff Act, 1975 in determining the rate of import duty has exposed the newspaper publishers to Executive interference and that there was no need to impose customs duty on the newsprint which had enjoyed the total exemption from its payment till March 1st, 1981. It was also argued that the capacity to bear the duty is an essential element in determining the reasonableness of the levy and that the continuance of the levy is violative of Articles 19(1)(a) and 19 (1)(g) of the Constitution. The observations specifically relied upon read as under:-- "75. In India arbitrariness is not a separate ground since it will come within the embargo of Article 14 of the Constitution. In India any enquiry into the vires of delegated legislation must be confined to the grounds on which plenary legislation may be questioned, to the ground that it is contrary to the statute under which it is made, to the ground that it is contrary to other statutory provisions or that it is so arbitrary that it could not be said to be in conformity with the statute or that it offends Article 14 of the Constitution.
76. That subordinate legislation cannot be questioned on the ground of violation of principles of natural justice on which administrative action may be questioned has been held in Tulsipur Sugar Company Limited v. Notified Area Committee, Tulsipur, (1980) 2 SCR 1111; (AIR 1980 S.C. 882); Rameshchandra (1981) 2 SCR 886: (AIR 1981 S.C.1127) and in Bates v. Lord Hailsham of St. Marylebone, (1972) 1 WLR 1373. A distinction must be made between delegation of a legislative function in the case of which the question of reasonableness cannot be enquired into and the investment by statute to exercise particular discretionary powers. In the latter case the question may be considered on all grounds on which administrative action may be questioned, such as, non- application of mind, taking irrelevant matters into consideration, failure to take relevant matters into consideration, etc. Etc.On the facts and circumstances of a case, a subordinate legislation may be struck down as arbitrary or contrary to statute if it fails to take into account very vital facts which either expressly or by necessary implication are required to be taken into consideration by the statute or, say, the Constitution. This can only be done on the ground that it does not conform to the statutory or constitutional requirements or that it offends Article 14 or Article 19(1)(a) of the Constitution. It cannot, no doubt be done merely on the ground that it is not reasonable or that it has not taken into account relevant circumstances which the Court considers relevant."
23. As against the above-noted contentions, learned Standing Counsel fur the Federation and other respondents argued that exemption from tax is a matter of grace and is granted by the Government taking into consideration various factors which are not subject to enquiry, investigation or jurisdiction of this Court as it cannot enter into the enquiry about controversial facts of trading, market, condition, prices or cost of production etc. The first case referred was that of AlSamrez Enterprise v. The Federation of Pakistan (1986 SCM R 1917). In this case a passage defining the nature and purpose of exemption in the Corpus Juris Secundum, 1954 Edition Volume 84, para. 215, page 411 was quoted and on the basis thereof, it was observed that the concept of exemption presupposes a liability and is a grant or immunity from the payment of duty which would otherwise be attracted in respect of the goods and that it has accordingly been held that 'non-liability' and 'exemption' are different concepts, the first connotes that the subject was never in the tax net, while the latter connotes that it was but has been permitted to escape.
24. There is no cavil to the proposition that exemption exists only by virtue of constitutional or statutory provisions and that the right to immunity is not inherent in the persons or property exempted and it cannot be claimed as a matter of right but in the constitutional set-up, where fundamental rights are guaranteed, to be treated in accordance with law is recognized as inalienable right of a citizen, I do not accept the proposition that grant of exemption from tax is a matter of grace as the statutory functionaries while framing rules or notifications with a view to lessening the burden of the tax through grant of exemption from tax are not showing grace as a king, dictator or an absolute ruler would do in his pleasure but are discharging the functions assigned to them not in their pleasure but for achieving the objectives of the law and in public interest.
25. While dealing with the exercise of such legislative powers, the learned Judges in the Indian Supreme Court case of Indian Express Newspapers (Bombay) Private Limited v. Union of India and others (AIR 1986 SC 515) in para. 77 observed that:- "We do not, therefore, find much substance in the contention that the Courts cannot at all exercise judicial control over the impugned notifications. In cases where the power vested in the Government is a power which has got to be exercised in the public interest as it happens to be here, the Court may require the Government to exercise that power in a reasonable way in accordance with the spirit of the Constitution. The fact that a notification issued under S. 25(1) of the Customs Act, 1%2 is required to be laid before Parliament under Section 159 thereof does not make any substantial difference as regards the jurisdiction of the Court to pronounce on its validity.
26. Even with regard to classification theory vis-a-vis, equality clause, it was pointed out in the case of Ajay Hasia etc. v. 'Khalid.Mujib Sehravardi and others (AIR 1981 S.C. 487) by the Indian Supreme Court as under:- "Article 14 must not be confused with the doctrine of classification. Unfortunately, in the early stages of the evolution of our constitutional law, Article 14 came to be identified with the doctrine of classification because the view taken was that Article forbids discrimination and there would be no discrimination where the classification making the differential fulfils two conditions, namely (i) that the classification is founded on an intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group; and (ii) that the differentia has a rational relation to the object sought to be achieved by the impugned legislative or executive action."
That plea as to classification, as will be shown in the later part of the judgment, is not really relevant in the instant case. The question is, whether the power to grant exemption has been exercised reasonably and with a view to achieve the objectives of the law itself, and, whether the exercise of power is beyond the reach or power of judicial review vesting in this Court and if this power vests, what is the scope and extent of power of judicial review.
27. The learned Standing Counsel relied end the statement of law contained at pages 411 and 412 of Corpus Juris Secundum (1954 Edition) which has been quoted above. At page 413 of the same volume, it is stated that "exemptions are not based on the favouring of particular persons or corporations at the expense of tax-payers generally, or granted on any idea of lessening the burdens of individual property owners, but are based on the accomplishment of public purposes, and are granted on the theory that they will benefit the public generally or as a reward or compensation for services rendered in the performance of some function deemed socially desirable. It has been stated that exemptions are favoured on the theory that the concession is due to quid pro quo for the performance of service essentially public by which the State is relieved pro tanto from performing, and thus, where the exemption from taxation serves the public, and not a private interest, it cannot be regarded as a gift or donation of the public credit to, or in aid of, the individual, association, or corporation in whose favour the exemption is declared, but without that concurring prerequisite, an exemption becomes essentially a gift of public funds and indefensible both under public policy of equal taxation and under the constitutional safeguard of illegal taxation." Again at page 417 it is stated that "the legislature cannot delegate to the executive or administrative agencies or officers the power to exempt from taxation or to exercise uncontrolled discretion with respect to exemption, and as far as the power may be delegated the delegation must be regulated by some definition of policy and purpose".
28. Moreover test of reasonableness has been consistently applied by the Courts in England, United States and India. In the case of Indian Express Newspapers (Bombay) Private Limited v. Union of India and others (supra) the observations made by Lord Greene in the case of Associated Provincial Picture House Limited v. Wednesbuy Corporation (1948) 1 KB 223) were specifically relied upon and thereafter observations made read as under:-- "It is true the discretion must be exercised reasonably. Now what does that mean? Lawyers familiar with the phraseology commonly used in relation to exercise of statutory discretions often use the word `unreasonable' in a rather comprehensive sense. It has frequently been used and is frequently used as a general description of the things that must not be done. For instance, a person entrusted with a discretion must so to speak, direct himself properly in law. He must call his own attention to the matters which he is bound to consider. He must exclude from his consideration matters which are irrelevant to what he has to consider. If he does not obey those rules, he may truly be said, and often is said to be acting 'unreasonably'. Similarly there may be something so absurd that no sensible person could ever dream that it lay within the powers of the authority. Warrington L.J. In Short v. Poole Corporation (1926) 1 CH 66 gave the example of the red-haired teacher dismissed because she had red hair. That is unreasonable in one sense. In another sense it is taking into consideration extraneous matters. It is so unreasonable that it might almost be described as being done in bad faith; and in fact all these things run into one another."
' After quoting these observations, the conclusion recorded was that the claim of the Government that impugned notifications are beyond the reach of the administrative law cannot be accepted without qualification even though all the grounds that may be urged against an administrative order may not be available against them. I fully agree with these observations.
29. Before proceeding further, I would like to add a note of caution to the effect that the precedents from the foreign jurisdiction, Indian, English or American on the questions of constitutional law, administrative law and public law, have to be approached and applied keeping in view the difference in the phraseology, scheme, intent and content of the respective Constitutions and the laws prevailing in these countries and also the fact that we, in this country are to be guided by our own constitution and our own ideology. The provisions contained in our Constitution as compared to other Constitutions are more pervasive, wide in content and scope and intended to promote and preserve our own ideology. Besides Articles 4 and 25 which have already been reproduced, we have Article 2-A, which must receive particular attention. Article 2-A provides that the principles and provisions set out in the "Objectives Resolution" reproduced in the Annex are hereby made substantive part of the Constitution and shall have effect accordingly. Then comes Article 3 which provides that State shall ensure the elimination of all forms of exploitation and the gradual fulfilment of the fundamental principle, from each according to his ability, to each according, to his work. In my humble understanding these Articles read alongwith fundamental rights guaranteed in the Constitution are in no way less in meaning and import then the 'due process of law' clause contained in the American Constitution. Keeping in view the all pervasive intent, meaning and the scheme of Constitution the rights guaranteed therein are to be secured and preserved. The organs of the State as well as its functionaries while performing its functions, legislative, administrative or executive, have to be careful that none of the fundamental rights are thus curtailed, infringed or in any manner violated. I may also add that even the judgments delivered by superior Courts in Pakistan under 1956 Constitution or during the period when the fundamental rights were not enforceable, are to be approached and understood keeping in view the aforenoted features of the present Constitution.
30. I may add that the observations made in the case of Jibendra Kishore Achharyya Chowdhury and others v. The Province of East Pakistan (PLD 1957 SC 9) are also to be understood keeping in view the new features, the scheme and content of Constitution of 1973 as well as the context that theory of classification is not to be confused with the "equal protection of law" contained in Article 4 which now further stands reinforced by Article 25. It is also pertinent to note the observations with regard to the scope and content of Articles 11 and 12 of 1956 Constitution made by Cornelius, J, in the case of Messrs East and West Steamship Company v. Pakistan (PLD 1958 SC 41). These observations are as under:- "As has already been remarked, the fundamental right of freedom to conduct any lawful trade has been given by the citizens of Pakistan to themselves and may be regarded as an essential condition of their relationship among themselves, and with the State. The State has been directed inter alia by Article 29 of the Constitution to provide for all citizens within the available resources of the, country facilities for work and adequate livelihood, trade is a form of livelihood which has received particular notice and protection in the Constitution under Article 12 (Article 18 of 1973 Constitution) and it is, therefore, only reasonable that the power of the State to regulate a trade by means of a licensing system should be construed in the light of the duty imposed upon the State by Article 29 (Article 38 of 1973 Constitution) to provide for all citizens facilities for adequate livelihood. It is also a general duty imposed upon the State that it shall endeavour to secure the well-beings of the people and as has been seen above under conditions of free enterprise the wellbeing of the people requires that the conduct of trade carried on by individuals should not be interfered with so long as it is being lawfully carried on If the proviso to Article 12 (Article 18 of Constitution of 1973) be held to mean what the learned Attorney-General contends for, a result might follow which may be expressed somewhat in the following manner. The people of Pakistan first declare that those of them who wish to engage in trade, or are engaged in trade shall be free to enter or continue in their trade and to conduct that trade according to their discretion and choice, so long as it is lawful. In the next breath, the people of Pakistan proceed to say that the State, namely the Executive, to which they entrust the power vested in themselves, to be exercised for the advancement and well-being of the nation, may, in the guise of a licensing system, interfere in the minutest detail with every process and practice which any citizen-trader of Pakistan may be required to perform or follow in the conduct of his trade. The freedom which the citizens had guaranteed to themselves is thus placed entirely at the disposal of the Executive to respect or destroy as it pleases Manifestly, this is an interpretation which cannot be sustained. The people of Pakistan cannot be thought to have declared a Fundamental Right only to provide immediately after for its destruction by the Executive authority at its unrestrained discretion. Therefore, it is necessary in interpreting Article 12 that the substantial Fundamental Right of freedom of lawful trade should be preserved in the 'push-and-pull' of interpretation as against the powers vested in the Executive. As has already been pointed out above, the Executive was enjoined in clear terms to act for the well-being of the people and so as to provide them with facilities to earn adequate livelihood for themselves e.g. By conducting lawful trade according to their discretion and choice, as befits an economy based on the principle of free enterprise It follows, therefore, that the power of regulating by a licensing system is not to be regarded as co-extensive with the power of control secured to a tradesman in respect of the implements and equipment of his trade and every operation that is required by the procedure of his trade. In principle also, the words of a proviso are to be construed strictly and confined to the special case which its words enact; it would be wrong to construe those wounds as being co-extensive with those used in the purview, particularly where the effect might be of bringing about a repeal of the purview. Therefore, it seems to me, that it is incumbent upon a Court to interpret the words of the first proviso to Article 12 in a limited sense, in contrast with the plenary sense in which the words of the main portion of the Article are to be understood. In my opinion, that limited sense is adequately expressed, in the extract which I have cited above from Halsbury's Laws of England in relation to the Statutory Regulation of Professions and Trades."
31. The case of Al-Samrez Enterprises (supra) is of no help to the respondents as the question of violation of fundamental rights was not involved therein. The other two judgments relied upon were Colony Sarhad Textile Mills v. Superintendent Central Excise and Land Customs (1979 SCM R 640) and Shafaq Lamps Corporation and another v. Pakistan and another (NLR 1983 Tax 43). In the case of Shafaq Lamps Corporation (Supra) the validity of the Notification granting exemption under Section 12-A of the Central Excises and Salt Act, 1944 was unsuccessfully challenged as the Court came to the conclusion that the exemption granted was under the authority of provisions contained in Section 12-A of the Act and that classification by no means can be described as arbitrary, unreasonable or discriminatory. It will be seen that the contention was examined in the context of Section 12-A of the Act only. The pleas raised on the basis of Article 4 of the Constitution and with reference to case of Mayflower Farms v. Ten Fyck (297 US 366) and para. 474 of 12th Volume of the American Jurisprudence were not examined in detail. Moreover, it was held that the reasons which prompted the Government in allowing the exemption were not artificial. In the instant case the file containing the reasons which prompted the Government to accord different treatment to the two products was not produced nor in this respect the Court was taken into confidence at all.
The case of Sindh High Court, Messrs Balagamwala Oil Mills Limited. Karachi v. Pakistan (PLD 1982 Kar. 233) also does not help the respondents. The Notification exempting the milk powder from customs duty was held to be in accordance with Section 19 of the Customs Act with the observations that the Government had the power to exempt milk powder and while doing so, it could also impose such conditions, limitations, restrictions as it would have thought fit to impose.
Further under the said provisions, the Government could exempt the goods wholly or in part. Here the Government choose to exempt it from the date of the notification and not from any other date and that on the perusal of the declaration of the President of Pakistan or the notification impugned in this petition, it cannot be said that it was intended to have any retrospective effect for no such intention is manifest even in the slightest degree from the language employed in the notification.
The observations as regards Article 4 of the Constitution made were that it would suffice to say that under Article 4 every individual is required to be dealt with in accordance with law and we have no doubt that the petitioner has been dealt with in accordance with law. It is pertinent to note that the arguments based on Article 25 of the Constitution were held and disposed of with the observation that: "Firstly the Article stands suspended, secondly we would surely say that it did not, for from the date of notification all importers have been treated equally and there is no discrimination between them."
It will, therefore, be seen that in this case, the provisions of Articles 4 and 25 as such were not deeply considered in the context of the pleas raised before me.
33. The other case relied upon by the learned Standing Counsel was the case of Messre Amin Soap Factory v. Government of Pakistan and others (PLD 1976 SC 277) wherein it was held that the grant of exemption from taxation including the levy of excise duty lies within the discretionary competence of the Federal Government and the same cannot be claimed as of right by anybody and that no limitation can be placed on the very wide power of Government to exempt any goods or class of goods from levy of duty under the Act. The power of the Government in this case was examined with reference to Section 12-A of the Act only. This case as such is of no help as the delegated legislative power in the context of the infringement or interplay of fundamental rights was not examined.
34. One of the main pleas in this case was that different treatment to the products which are physically same and are similar or are put to the same use, would be violative of the equality clause and that where objects, persons or transactions essentially similar, are treated by the imposition of different rate of tax, discrimination may result on account of refusal to make a rational classification. Both Ingots and Billets were being treated alike for the purposes of charging sales tax and excise duty till June/July, 1989. It cannot be disputed that taxability is to be determined by the Legislature under Article 77 of the Constitution and such power to remove the unfairness can be delegated as would entail enquiry into the assessment of changing factors which necessitated reduction of burden at the proper time and to the proper extent. Moreover, the grant of exemption with the view to remove an unfair burden in exercise of delegated legislative power in a constitutional set-up has to be subjected to the rule of reasonableness and free from arbitrariness. In the instant case, it was not shown that since June/July, 1989 what changes took place in the market or what relevant factors were considered for according different treatment to the two products which hitherto before were being taxed at par. It is true that the burden to show that the legislative power and discretion has been exercised unreasonably lies on the party making such assertion but this burden is not a fixed burden and may shift in the circumstances of the case on to the Government to show that the power was exercised consistently with the provisions of law and acting reasonably and on the basis of relevant consideration. In the instant case, neither any file was produced to show the exercise, if any, which might have been undertaken by the relevant quarters for granting exemption from the payment of sales tax and excise duty at different rates or for granting exemption of sales tax not only at different rates but also for specific period of two months and then extending the Notification or the exemption granted for a period of two months from time to time.
35. No doubt the State has wide powers in selecting the persons or objects that it will tax and that a statute is not open to attack on the ground that it taxes some persons and objects and not the others but challenge can successfully be made on the basis that within the range of selection the law operates unequally. Law will obviously be operating unequally if the classification made cannot be justified on the basis of valid classification. For the purpose of valid classification, what is required is not some imaginary or unsubstantial difference but a reasonable and substantial distinction having regard to the purpose of law. In the instant case, the fact cannot be lost sight of that Ingots and Billets both the products were being classified as one and the same product not only for the purpose of excise duty but also for the levying the sales tax. The definition of `Steel Ingot' given in the First Schedule to the Central Excises and Salt Act, 1944 covered both Ingot and Billet. Even if some change has been brought about by Finance Act, 1988, still the matter of granting exemption has to be resolved on principles keeping in view the relevant considerations including the resultant effect on the consumers, increase in cost of construction of buildings and increase in rents of buildings.
36. Now some of the other pleas may be noticed. It was argued that the purpose of exempting 'Ingot' wholly from payment of Excise duty and charging of Sales tax at lesser rate, is to protect the Ingot producers who are many in number and who are meeting 80% of the market requirement but are in need of protection against the modern, well-equipped and financially sound billet producers. It was argued that the parties like the petitioner who because of modern technology are earning huge profits, are not being put out of market and that different rates of duty in the case of two products is not hindering or adversely affecting the petitioner and as such there is no violation of Fundamental Right No,18. These pleas cannot be accepted at their face value as the learned Standing Counsel was not even aware as to how many are the ingot producers and what is the annual production of the ingot or billet. In addition to these factors the interest of consumers, the effect of prices in the market and also some of the factors which are germane to question, whether exemption at all and if so to what extent is to be allowed, are to be kept into consideration while granting exemption from tax. This exercise appears not to have been done by the concerned quarters. In fact the Court was not at all taken into confidence as regards these matters as the respondents were suffering under the misconception that this Court has no authority to go into even the reasonableness of the impugned actions. It is true that the Central Excises and Salt Act, 1944 as well as Sales Tax Act, 1950 give the Government a wide power to grant exemption from the levy of excise duty and sales tax. It is, however, to be understood that while such power to grant exemption is available with the Government but the same is to be exercised on overall consideration of all the relevant factors including those mentioned above with the view to promote public interest. It has been demonstrated in the paras above that since June/July, 1989 the change was brought about by the functionaries of the Government which had come into power recently and in the circumstances the imposition of additional burden imposed and according of different treatment should have been shown to have been made after due consideration of relevant matters and in the interest of the steel industry and consumers. Such an exercise was not shown to have been undertaken and in the absence of sufficient material justifying the impugned levy the same stands vitiated.
37. The net result of the above discussion is that different treatment given to `Billet' the product of the petitioner-Foundry, is arbitrary and unreasonable and as such the additional burden placed is violative of equal protection of laws guaranteed by Article 4 read with Article 25 of the Constitution of Islamic Republic of Pakistan and as such the charging of excise duty and sales tax at the rates given in the letter, dated 5-7-1989 on the basis of the aforesaid Notification is without lawful authority.
38. Even for another reason as well the excise duty sought to be charged under the aforesaid Notification cannot be held to be legal. The position as to levy of excise duty depicted in one of the paras above is that excise duty at the rate of Rs,600 per tonne is payable on iron and steel billets and sheet bars etc. While whole of the excise duty on Ingots has been exempted. This result has been achieved through notification SRO-555(1)/89, dated 3-6-1989 by omitting the word 'Ingots' from the Notification No,SRO-614(1)/88, dated 14-7-1988, The Notification No,SRO-555(1)/89, dated 3-6-1989, as will be shown hereunder, is legally ineffective in law to achieve the purpose for which it was issued. It will be recalled that prior to the enforcement of Ordinance III of 1988, Item 09.04 of First Schedule to the Central Excises and Salt Act, 1944 read as 'Steel Ingots' which entry by the Ordinance III of 1988 was substituted to read 'Ingots Billets' slabs and sheet bars' and the excise duty levied was Rs,2,000 per ton. On the very date of enforcement of this Ordinance III of 1988, the Notification No,SRO614(1)/88 issued reads as under:-- "(1) Iron & Steel ingots, billetsExcise duty slabs and sheet bars. Rs,600 per ton.
(2) Others." Nil.
39. The aforesaid Ordinance III of 1988 substituting the entries of First Schedule pertaining to Item 09.04 was repealed by Ordinance XXIII of 1988 promulgated on 5-11-1988. Section 1(2) of this Ordinance provides that the Ordinance shall come into force at once and shall be deemed to have taken effect on 26-10-1988. Thus it will be seen that Ordinance III was repealed before even the expiry of four months period within which an Ordinance is required to be laid before the National Assembly or both the Houses, depending on the nature of the Ordinance, under Article 89 of the Constitution of Islamic Republic of Pakistan. The effect of repeal of Ordinance III of 1988 in view of the provisions contained in Article 89 of the Constitution read with Article 264 of the Constitution, would be that the Notification No,SRO-614(1)/88, dated 14-7-1988 would cease to be effective from 26-10-1988 when the repealing Ordinance XXIII of 1988 is to be deemed to have come into force.
The Notification No,SRO-555(1)/89, dated 3-61989 thus sought to omit the word 'Ingots' from the Notification dated 14-7-1988 which was legally then not existing. The exercise done was, as such, an exercise in futility. The Ordinance III of 1988 and Notification No,SRO.614(1)/88, dated 14-7-1988 would thus be effective for a period commencing from 14-7-1988 to 26-10-1988. This Ordinance III of 1988 had the effect of amending the entry pertaining to Item 09.04 of First Schedule to the Central Excises and Salt Act, 1944 for the aforesaid limited period and after the repeal by virtue of repealing Ordinance as well as by virtue of Article 89 of the Constitution, this Ordinance ceased to be part of the Statute Book.
40. I am aware that in some of the Indian cases e.g. State of Maharashtra v. The Central Provinces Menganese Ore Co. Ltd. AIR 1977 SC 879 and Laxmibai v. The State AIR 1951 Nag. 94 notification was treated as having revived on the notification which substituted it, was declared to be abortive and having failed to achieve any change in law. But the provisions contained in Articles 89 and 264 of our Constitution are different from the provisions contained in the relevant Articles of Indian Constitution. The effect of withdrawal or repeal of an Ordinance before the period of four months has to be determined with reference to the provisions contained in Article 264 of the Constitution.
The Ordinance repealed without laying it before the National Assembly amounts to withdrawing the same and to this situation the provisions of Article 264 of the Constitution N equally apply. The notification issued with reference to the Ordinance after its repeal would also cease to operate except for the transactions past and closed but on its ceasing to be effective due to repeal, the earlier notification which stood substituted would not revive. This is clear in view of clause (a) of Article 264 which reads: "264. Effect of repeal of laws.--Where a law is repealed, or is deemed to have been repealed, by, under or by virtue of the Constitution, the repeal shall not, except as otherwise provided in the Constitution,--
(a) revive anything not in force or existing at the time at which the repeal takes effect."
In support of aforesaid view reference may be made to the judgment of Division Bench of this Court in the case of Zul Ullah Khan v. Govt. Of Punjab PLD 1989 Lah.
554.
41. Even the view of the legislature appears to he the same as recorded by me above to the effect that on repeal of Ordinance III of 1988 the amendment in the Schedule of the Central Excises and Salt Act, 1944 ceased to be operative as the same very provision was re-enacted through fresh legislation. This was done by Finance Act, 1988 (Act VI of 1988). Section 2 of the Act provides: "(i) for item No,09.04 in column 1 and the entries relating thereto in columns 2 and 3 the following shall he substituted namely:-- "09.04 Ingots, Billets, Slabs Two thousand and Sheet bars. Rupees per tonne."
Thereafter Notification No,SR0-555(1)/89, dated 3-6-1989 was issued but the same being an exercise in futility as shown above another Notification for exemption will have to be issued as Federal Government never intended to collect the excise duty on Billet and Ingot as levied by the Finance Act, 1988. The other effect of the repealing Ordinance XXIII of 1988 would he that from 26- 10-1988 till 26-12-1988, the Ingots, Billets, slabs and sheet bars cannot he treated to be forming part of the First Schedule of the Central Excises and Salt Act and no excise duty would thus he leviable on these products. These products again appeared in the First Schedule w.e.f, 26-12-1988 and the rate of duty would be Rs,2,000 per tonne as provided by Act VI of 1988. So a notification of exemption after considering the relevant factors and acting reasonably will have to be issued as the Federal Government apparently intended at best to charge Rs,600 per tonne as excise duty on Billet.
42. At this stage, notice may he taken of another plea of the learned Standing Counsel. He argued that no relief can he granted by this Court as Notification No,SRO-614(1)/88, dated 14-7-1988 and Notification SRO-555(1)/89 dated 3-6-1989 were expressly not challenged in this petition. It is true that these two notifications have not been particularly mentioned in the petition but the explanation given by the learned counsel for the petitioner was that despite repeated written requests, neither the notifications nor the basis for the instructions issued vide impugned letter were provided. It is also pertinent to note that neither this objection in precise forth was taken in the written statement nor copies of the notifications were attached therewith. It was only during the arguments that the learned Standing Counsel referred to these notifications and on direction of the Court provided the copies of the same to the Court. In these circumstances as well as on account of the fact that additional burden placed as intimated vide impugned letter was challenged, the technicalities cannot prevent this Court from exercising its Constitutional jurisdiction and affording relief which otherwise petitioner is found entitled to receive.
43. For the reasons given above, it is hereby declared that:
(a) The levy, charging and collecting the excise duty and the sales tax at the rates intimated vide letter, dated 5-7-1989 is illegal and without lawful authority;
(b) The notification SRO-555(1)/89, dated 3-6-1989 which seeks to amend the aforesaid notification dated 14-74988 is an exercise in futility as on 3-6-1989 the notification, dated 14-7-1988 was not legally in existence;
(c) The Notification SRO-734(1)/89, dated 10-7-1989 and the subsequent notifications extending the operative period of said notification arc illegal and without lawful authority;
(d) As the need to grant exemption from the payment of excise duty and sales tax on both Ingot and Billet stands accepted, the Federal Government shall reconsider within two months the question of grant of exemption of excise duty and sales tax on Billet with effect from 3rd of June, 1989 and 10th of July, 1989 respectively in the light of the observations made above and shall take necessary steps to implement the decision so reached.
(c) Till such re-determination as directed and the payment of any amount of excise duty and sales tax, if any, found due under fresh decision, the security given by the petitioner shall remain in force and shall be available for recovery of the amount due.
44. The petition is accepted accordingly with costs.