The petitioners through these Constitutional petitions have challenged the vires of rates of octroi fixed by respondent No.1 on RBD Oil etc.
2. The writ petition No.4591/89 raises exactly the same question and the same item is involved.
While Writ petitions Nos.7573/89 and 4602/89 raise substantially the same question of law. The distinguishing features shall only be incorporated towards the end of next para. As legal points involved in all these writ petitions are the same, therefore, the same arc being decided by this single judgment.
3. The relevant facts are that Faisalabad Municipal Corporation passed the resolution on 7-5-1988 whereby it proceeded to revise the prevalent rates of octroi payable on import of goods for consumption; use or sale within the octroi limits. A public notice was got published in newspapers intimating the public as to the proposals and inviting objections thereto. The grievance of the petitioners is that the oils etc. Were earlier covered by item No.42 and octroi duty payable was Re.0.10. The same was proposed to be enhanced to Re.0.13. However, the respondent No.1 subsequently passed resolution on 25-6-1988 and in this resolution changed the whole classification of the goods and also further enhanced the octroi charges. The oils which were previously covered by item No.42 in the old Schedule with Re.0.10 duty now formed part of item- 10- B and rate was enhanced to Re.0-15 per k.g. While in Writ Petition No.753/89, the taxable item is Iron and Steel pipes. The same were covered by item No.91-A previously. The octroi was charged at the rate of Rc.0.06 per k.g. And in the public notice it was proposed to be enhanced to 0.08 per k.g. But in the impugned schedule these articles formed part of item No. 53 and the rate was fixed at Re.0.15 per k.g. Now coming to writ petition No.4602/89, it covers marble slabs. The same was previously covered by item No.52 and the rate of duty was Re.1.30 per 100 k.g While marble tile was covered by item No.55 of the old schedule and rate of octroi was Re. 0.00 per k.g. The grievance of the petitioners is that in the new schedule both the items have been grouped together in item No.55 and the same are assessable at the rate of Re. 0.08 per k.g. The grievance of the petitioner is that respondent No.1 has prescribed one and the same rate for the raw material i.e. Pieces of marble stone and Finished goods, i.e. Marble tile, which is unreasonable. Besides this the rate has been increased from Rs.1.30 per 100 k.g. To Rs.8.00 per 100 k.g. The increase is out of all proportions.
This was followed by notification of the Schedule of octroi in the official Gazette. The petitioners have impugned this imposition of higher rates through these Constitutional petitions.
3.The, petitions were admitted to regular hearing and notices were issued to the respondents, who have entered appearance and contested the petitions.
4.The learned counsel for the petitioners in support of the petitions has argued that res6ondent No.1 had no jurisdiction or authority to levy a rate higher than that notified in the public notice. It is added that if this course is allowed then this will defeat the very purpose of intimating the citizens as to future taxes, their rates and will defeat the purpose of inviting objections. It is added that this is all mala tide and aimed at becoming rich at the cost of citizens. The argument is clarified with the submission that the system of collecting of octroi charges through lease was introduced in order to stop corrupt practices in collecting the octroi charges by the Municipal employees and to make maximum funds available to the local bodies for development programmes but this has given rise to a greater menace because now the effective group of city fathers gets the lease and then adopts all means to raise maximum funds. It is submitted that the present case is glaring example of this malpractice. In this case rights of collection of octroi were put to auction on 8-3- 1988 with the old Schedule in force. The bidders made their bids keeping in view old Schedule but the octroi rates on various items were enhanced unreasonably and illegally. This way on the one hand Corporation did not get any benefit of this increase. On the other hand the citizens have been made to part with substantial amounts. The argument in nutshell is that the Municipal funds could have benefited only if the enhancement was made earlier and auction subsequently. But mala fide it was done in the reverse order.
The next submission is that according to the instructions of the Government there can be increase to the extent of 10% in a year and 25% in three years period but in the present case the enhancement in all the cases is against these instructions. The learned counsel in this behalf has referred to pages 15 and 31 of the minutes of the meeting of respondent No.1 dated 25-6-1988.
5. On the other hand, learned counsel for respondent No.1 has argued that according to Rule 7 of the Taxation Rules, the respondent No.1 is fully competent to increase, decrease or modify the rates after receipt of the objections. It is argued that modification includes enhancement. It is added that the petitioners have an alternative remedy by way of representation to Government under section 139 of Ordinance 1979. Since the petitioners have failed to avail proper remedy, therefore, petition is rendered incompetent. In this behalf reference is made to PLD 1983 Lahore 4(14 Golden Industries Ltd. v. Province of Sind and two others (PLD 1983 Karachi 76) and Mst. Rushda Zareen v.
Muhammad Saleh (PLD 176 Lahore 1327). The next submission is that the letter of the Govt. As to restriction on enhancement pertains to the Schedule as a whole and not particular items. In this behalf reference is made to the case reported as Muhammad Rafiq and others v. Administrator, Municipal Committee etc. (N.L.R. 1980 SCJ 523). The arguments are concluded with the submission that the petitioners had been paying octroi at the enhanced rate with effect from 1st July, 1988 and at that time was Transworld Marketing (Private Limited), therefore, the petitioners are now estopped to object to the rate.
6. The learned counsel for respondent No.2 adopting the arguments of learned counsel for respondent No.1 added that Rule 7 of the Taxation Rules gives absolute discretion to the Corporation to enhance the rate of octroi charges and that the Government has not placed any restriction as to enhancement on individual items. 1t is submitted that his client only took over from 1st of July, 1989.
7. The learned counsel for the petitioner, while replying to the arguments of the learned counsel for the respondents, submitted that the provisions of Rule 4 are mandatory and for any of enhancement or imposition of new taxes there has to be a resolution of the Committee followed by proposals and their notification to the public for objections and thereafter finalisation of the proposals in the light of the objections received from the public. It is submitted that this exercise was completed in respect of the original proposals but thereafter the first proposals were dropped while a fresh resolution specifying higher rates was passed on 25th June, 1988. This was immediately followed by notification in the official Gazette. The rates adopted in the second resolution were neither notified to the public nor objections were invited from the public, therefore, the same are illegal, ultra vires and mala fide. The arguments are concluded with the submission that respondent No.1 has itself admitted in the minutes of the meeting at pages 15 and 31 that the Govt. Has imposed a restriction on the enhancement of rates on individual items. In the end it was submitted that the petition is fully competent in view of the submissions made above.
8.I have given my anxious consideration to the arguments of the learned counsel for the parties.
The admitted position is that the taxation proposals were formulated in resolution No. 1058 dated 7-5-1988 and public notice was issued in respect of the same on 14-5-1988. According to the proposals the oils etc. Were covered by item No. 42 and it was proposed to enhance octroi from 0.10 per k.g. To 0.13 per k.g. But the respondent No.1 subsequently proceeded to place the oils in item No. 10 (b) and resolved to charge octroi at the rate of 0.15 per k.g. Vide resolution dated 26-6-19M. It is submitted that this schedule was notified in the official Gazette dated 29-6-1988. The question for determination, therefore, is whether the respondent No.1 could impose an octroi rate over and above the proposed rate. In order to answer the legal question reference has to he made to the relevant provisions of the Punjab Local Councils (Taxation) Rules, 1980. According to rule 3 while framing annual budget or revising the budget Local Council or its Chairman shall review the financial position and if it calls for any change in the tax structure he shall draw up taxation proposal. The taxation proposal shall be separate for each tax and to be framed in form of a draft tax notification indicating the class of persons or category of the property proposed to be taxed and the rate of the proposed tax. In pursuance of this rule the respondent No. 4 passed the resolution dated 4-5-1988. The formulation of the perposal is to be followed by issuance of a public notice inviting objections m respect of the taxation proposals. The notice is to specify the main features of proposal, class of persons or description of property to be effected, amount or rate of tax to be imposed, whether rate has been increased, reduced or modified etc. Then comes the hearing of objections and suggestions to the preliminary taxation proposals in accordance with the rule 5. Thereafter the special meeting of the Local Council is to be convened as required under rule 6 wherein the Local Council shall consider the taxation proposals. It may decide to proceed with the tax proposal with or without modification or it may reject it by majority vote. The draft notification shall be put to vote and if approved by majority of the members, taxation proposal shall stand sanctioned by the Local Council as per rule 8. The last step is the publication of notification in official Gazette and also publishing of tax notification in form of public notice. It is clear from the perusal of rules 3 to 9 that following ate the stages going through which a proposal matures into a tax:-- (a)framing of tax proposals; (b)public notice inviting objections as per rule 4; (c)hearing of objections. By Sub-Committee and formulation of its report; (d)convening of the special meeting, consideration of the, tax proposals and its sanction; and (e)the publication of notification in the official Gazette and public notice.
9. Now coming back to the case in hand. The public notice was issued on 14-5-1988 informing the public that the octroi rate is being enhanced from 0.10 to 0.13 but while adopting the proposals (for RBD oils) the rate was fixed at 0.15 paisas. The learned counsel for the petitioners submitted that the respondent No. 1 has no jurisdiction or authority to fix the rate higher to the rate proposed. In this behalf, the learned counsel has referred to rule 4. On the other hand, the learned counsel for the respondents submitted that according to rules 6 and 7 the proposal can be modified, therefore, the action of the respondent No. 1 in further enhancing the rate to 0.15 as against proposal of 0.13, is legal.
The fate of the question whether the action of the respondent No. 1 is legal or otherwise depends on whether the stages as referred to above are mandatory or not. In my humble view the stages (a) to (e) are mandatory and if any step is missing that will vitiate the taxation itself. In this behalf reference can be made to the judgment of Hon'ble Supreme Court in the case of PLD 1967 SC 113
299. The relevant portion about the importance of compliance with the formalities, steps or pre- requisites in case of proposals was dealt as under:-- "The main object of this section appears to be that the rate-payers must be given adequate notice with sufficient detail in order to enable them to object to the proposed tax or duty. This cannot, it is true, be effectively done unless the classes of persons or properties proposed to be taxed and the rates at which the tax is proposed to be levied are also known. But it does not require simultaneously publication of both the rules as well as the schedule, provided both are published and the rate-payers are given sufficient opportunity of objecting to them. To make the tax effective, however, both must be published and until both are published the tax cannot be enforced. Indeed, section 77 after both the rules and the schedule has been approved by the Provincial Government under section 76:"
The respondent No.1 has clearly defeated the purpose of Rule 4 while enhancing the rates of the items in dispute.
Now for instance the objections were invited as to the enhancement of the rate to Re.0.13. Neither any public notice in respect of enhancement to Re.0.15 was issued nor objections invited nor considered by Sub-Committee, therefore, at least two material stages are missing in the link. The proposition can be looked at from another angle that enhancement beyond Re.0.13 will be considered as a fresh proposal and respondent was under legal obligation to comply with the whole procedure. This way even there was no proposal to start process.
10.The respondent No.1 while enhancing octroi rate beyond Re.0.13 in fact' frustrated, defeated and set at naught the provisions of rules 4 and 5. It is clear from rule 3 (3) and rule 4 (b) and (c) that not only the class of the persons or category of property likely to be affected has to be indicated but the rate is also to be specified. Clause (c) of Rule 4 further clarifies that not only the rate but it is also to be notified whether it is being increased, reduced or modified. Therefore, the respondent No.1 had no jurisdiction or authority to fix a higher rate than notified in the public notice. Of course the respondent is competent to pass it as a fresh tax after observing all the formalities. It is a cardinal principle of interpretation of fiscal statutes that the same are to be construed strictly. In this behalf, it is sufficient, to refer to the case Managing Director, Pakistan. Agricultural Storage and Service Corporation Ltd. Lahore and another v. Nawab Din and 2 others (1981 CLC 284). The relevant para reads as under:-- "Before dealing with the question in issue, one might as well refer to the fact that the dispute is about imposition of tax and the principles applicable for construction of taxing statutes are in the words of Rowlatt, J. (in Cape Brandy Syndicate v. I.R.C. (1921) 1 KB 64 (71) about whom Viscount Simon, I.C. Said as quoted in Craies on Statute Law,7 Edn., paged113, that his outstanding knowledge was coupled with a happy consciousness of phrase, "that in a taxing Act one has to look at what is clearly said. There is no room for intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used". Craies quotes Lord Parker of Waddington having said in 1914 that "The Finance Act is a taxing statute and if the Crown claims a duty thereunder it must show that such a duty is imposed by clear and unambiguous words". "It is not the function of a Court of Law to give to words a strained and unnatural meaning", said Lord Simons in I.R.C. v. Wolfson (1949) 1 All ER 165 `because only thus will a taxing section apply to a transaction which, had the Legislature thought of it, would have been covered by appropriate words'."
Coupled with this an act is to be performed strictly in accordance with the law or not at all. This is more true in the cases where taxes are imposed or rights of the citizens are curtailed. The tax or rate fixed in violation of a law or rules will be deemed to be imposed illegally and without lawful authority. In this behalf reference can be made to the cases of Pakistan Tobacco Co. Ltd. v. Karachi Municipal Corporation (PLD 1967 S.C. 241) and Shershah Industries Ltd. v. Government of Sind and 4 others (PLD 1982 Karachi 653). Now reference is made to the judgment of Division Bench of High Court in the case of Burshane (Pakistan) Ltd. v. Cantonment Executive Officer, Cantonment Board of Korangi Creek, Karachi and 3 others (PLD 1983 Karachi 517) which practically fully covers the proposition in hand. The petitioner through Constitutional petition had challenged the notification issued by Cantonment Board levying octroi on empty LPG Cylinders. The main contention of the petitioner was that the impugned notification was issued without complying with the mandatory requirements of sections 60 to 62 of the Cantonments Act. The said provisions are para materia to the Taxation Rules of 1980. According to section 60 tax proposals are to be formulated through a resolution and thereafter a notice to be published as prescribed in section 255 of the Act specifying the tax imposed, persons to be made liable for tax and the rate of tax to be levied. The learned Judges held that the octroi levied was without lawful authority. The relevant portion of the judgment reads as under: "In view of the above legal position we are of the view that the Board before levying a tax was bound to follow the procedure prescribed under sections 61 and 62 of the Act. We are further of the view that even in the cases where the existing tax was sought to be revised by the Board to the disadvantage of the residents of the Cantonment area then in that case also the Board had to comply with the requirements of the sections 61 and 62 of the Cantonments Act".
It is, therefore, held that enhancement of rate of octroi duty over and IF above the proposed duty is illegal and violative of the tax rules.
12. The next question is what should be the rate charged. The proposal matures into a tax when published in the official Gazette. Since the proposals u formulated in 1988 in respect of items of the petitioners were not published m official Gazette, therefore, the respondents cannot charge even at those rates. The moment present schedule to the extent of the items challenged by the petitioners is struck down the old schedule of 1984 automatically stands restored.
13. The respondent No.1 in its resolution dated 25-6-1988 at pages 15 and 31 has clearly referred to Government's letter O.S.O.V.I. (LG) 1 (26)/78 dated 21-6--1978 to spell out the restrictions as to the limit of enhancement. It was argued on behalf of the respondents that these limits pertained to overall budgetary provisions and not individual items. In this behalf, the learned counsel for the respondents have referred to the judgment of Hon'ble Supreme Court in the case of N.L.R. 1980 S.C.J.
523. It is further submitted that this is not applicable now. I have gone through the letter and before proceeding any further it is relevant .To refer to the said letter. The relevant portion reads as under:- "The said Committee inter alia recommended that the Local Councils be allowed to increase the rates of existing taxes/fees. It recommended that such taxes which had not been revised over theth last three years may be enhanced by 25% and those which had been revised- within the last three years by 10%."
It is clear from the words used that `such taxes which had not been revised' that it deals with the individual items not over all provisions of budget. I have gone through the case of relied by the learned counsel for the respondents and find that there is no mention of the letter under reference.
It is admitted position that the last schedule in force is of 1.984, therefore, it was permissible for the respondent No.1 to enhance the rates upto 25%. I am confirmed in my view that while enhancing the rate of octroi duty the respondent No.1 has not made a reference to the total collection under this head. Even otherwise the collection having been- let out the enhancement under the head of octroi duty will be immaterial because it will not go to the funds of the Local Council.
14. This is not all. The respondent No.1 has clearly interpreted this letter as to enhancement of rate of octroi on individual items. In this behalf, besides the portions referred to earlier the following portion of the minutes of special meeting held on 25,6-1988 is relevant:- This also disposes of the objection of the learned counsel for respondents that this letter is no longer applicable. The impugned enhancement in the octroi rate being beyond the permissible limit, is therefore, illegal.
15. The petition was mainly resisted on the grounds of delay, laches and alternative remedy. The learned counsel for the respondents in support of the argument have referred to the provisions of section 139 of the Punjab Local Government Ordinance, 1979. It is added that the petitioners have been paying octroi at the enhanced rate for a period of about a year, therefore, the petitions suffer from laches and arc liable to be dismissed. On the other hand, the learned counsel for the petitioners had referred to Annexure `D' whereby the Government showed its inability to interfere in the matter and directed the respondent No.1 to proceed in accordance with the taxation rules. The learned counsel for the petitioners submitted that the petitioners and others, affected by arbitrary and illegal enhancement in the octroi rates of various items, protested to the respondent No.1.
There was strike but all these efforts did not bear any fruit. On the other hand, the Government showed its inability in the matter. The learned counsel for the petitioner on the point of maintainability of writ petition has referred to the cases of M/s. Khayal Muhammad and Sons v.
Chairman, Municipal Committee, Jbelum and 3 others (PLD 1985 Lahore 545), Capt. Siraj Ali v.
Director-General Civil Aviation Authority and another (1989 CLC 1026), Muhammad Hanif Khan v.
Pakistan and 2 others (1982 CLC 139() and Municipal Committee, Multan v. Burmah Shell Storage and Distributing Co. Of Pakistan Ltd. And another (PLD 1976 Lahore 726). While on the point of ]aches reference is made to cases of Aziz Hussain and others v. Settlement Commissioner and others (N.L.R. 1980 (Civil) 666) and Muhammad Mubarik Khan v. Settlement and Rehabilitation Commissioner, Multan and Bahawalpur Division, Multan and 3 others (1980 CLC 1980).
16. The respondent No.1 proceeded in an illegal manner. The public protested against the same and paraded the streets but the respondent No.1 remained unmoved. Thereafter the Government was moved but it also, failed to discharge its legal obligation under section 139 of the Punjab Local Government Ordinance, 1979 and simply advised, vide its memo dated 2-1.1-1982, the respondent No.1 to proceed in accordance with the Taxation Rules of 1980. It is, therefore, clear that the petitioners have no remedy except to file the Constitutional petition. The question of alternative remedy has been dealt with at length in the cases of Shershah Industries Ltd., Managing Director, Pakistan Agricultural Storage and Service Corporation Ltd., Lah. And another and Pakistan Tobacco Co., Ltd. In addition to the cases relied by the learned counsel for the petitioners. 1 respectfully following the view expressed in holding that there is no merit in the objection of the respondents that since the petitioners could have moved the Provincial Government for reduction in the tax, therefore, these petitions are not competent. Even otherwise the powers available with the Government under section 139 of the Punjab Local Government Ordinance; 1979 are of supervisory nature. The question of laches does not arise as the petitioners and others were continuously agitating the issue.
17. Now comes the question of relief. The enhancement in the rate of octroi is clearly illegal and without jurisdiction. The respondents are fleecing the amounts from the public illegally.
Commissioner, Faisalabad to open a special account in the name of Municipal Committee in one of the Branches of Habib Bank Ltd. The same to be operated by Commissioner as per instructions of this Court. The daily income of the respondent No.2 is also attached from today. The same to be put in the special account. In case the respondent No.2 deposits a sum of Rs.5,00,000 rupees live lacs) in the special account within three days then the order as to the attachment of daily income shall stand automatically withdrawn. The respondent No.1 is directed not to refund security to the respondent No.2 but to deposit security after expiry of tenure of contract on 30-6-1990, also, in the special account.
18. The Commissioner to issue public notice inviting claims for refund from the citizens, who have paid octroi for these items at the enhanced rate after 30-6-1989 and for over-payments upto this date parties can pursue their remedy in proper forum. The claims to be submitted within three weeks of public notice and settled expeditiously in any case before 31-7-1990 and Commissioner to submit final report to the Registrar of this Court by 6-8-1990.
The result is that these petitions are allowed with costs.