' SAAD SAOOD JAN, J.---These arc 11 appeals by special leave from the judgment of the Sindh High Court dismissing and in one case partly accepting the Constitution petitions preferred by the appellants. These have been heard together as a common question of law has been raised in them.
2. Except in CA. No,14-K, the appellants are owners of hotels, liquor bars and restaurants. They have been asked to pay excise duty in respect of the services they render in providing rooms, liquor and other refreshments to their clients. They have called in question the liability of the levy on a number of grounds including the law by which the services provided by them have been brought under tax.
3. Before examining the various contentions raised on behalf of the appellants it will be of advantage to refer to the relevant legislation. The demand of excise duty made upon the appellants is founded on the provisions of the Central Excises and Salt Act, 1944 (hereinafter referred to as the Act). In this Act the charging. Provision is contained in section 3. Under subsection
(1) of this section, prior to the promulgation of Finance Ordinance, 1969 (No,XVI of 1969), hereinafter referred to as the Ordinance, the excise duty was available on excisable goods produced or manufactured in Pakistan. The list of excisable foods was given in the First Schedule to the Act. The Ordinance amended the subsection making excisable services also subject to the levy of the duty.
It added a new clause as clause `(dd)' to section 2 to define `excisable services'. According to this clause 'excisable services' meant 'services, facilities and utilities, specified in Part II of the First Schedule as being subject to a duty of excise'. Item 13.01 of Part II of the First Schedule identified 'the excisable services' as follows:--- ' All services, facilities and utilities, including catering, supplies and merchandise provided or rendered by any 15% of the charges.
"Services rendered by Hotels and Restaurants.--- ' Explanation.---`Hotel' means an establishment, organization or place where rooms or suites of rooms arc let out on rent, whether or not it has any arrangement for catering or provides any other services, facilities or utilities, by whatever name called. B. All services, facilities and utilities, including supplies and merchandise, provided or rendered by a restaurant 15% of the charges.
' Explanation---`Restaurant' means an establishment, organisation or place where food or drinks are sold, whether or not it provides any other services, facilities or utilities, by whatever name called, and includes a night club and cabaret."
Certain hotels were granted exemptions from payment of the excise duty but except in CA. No,149 these excemptions are not relevant to the appeals before US.
4. The main contention on behalf of the appellants in these appeals was that the Ordinance, inasmuch as it brought the excisable services to tax, was beyond the competence of the Central Legislature and as such it was ultra vires to that extent. It was stated that the duty of excise primarily and fundamentally was relatable only to production or manufacture of goods and that its scope could not be expanded to encompass matters which did not entail production or manufacture of goods. In support of this contention reliance was placed on law lexicons and some judgments of the Federal Court of India.
5. The expression 'duties of excise' has no precise content. In its narrowest sense it is used in contradistinction to the expression 'duties of customs' thus the levy on goods imported into the country would fall under the heading 'duties of customs' whereas the goods locally produced or manufactured for home consumption would fall under the heading 'duties of excise'. In a comparatively larger sense 'duties of excise' would relate to levy made at any stage falling between the production or manufacture of goods and their sale to the ultimate consumer. In a still wider sense it would cover a diverse variety of indirect taxes which have no nexus with the production or manufacture of goods. Similarly, the word 'excise' has no precise or definite meaning.
Thus, in the matter of the Central provinces id Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938. AIR 1939 FC 1, Gwyer, C.J. Observed:--- " 'Excise' is stated in the Oxford Dictionary to have been originally `accise', a word derived through the Duty from the late Latin accecrsar, to tax; the modern form, which ousted `accise' at an early date, being apparently due to a mistaken derivation from the Latin excidere, to cut out. It was at first a general word for a toll or tax, but since the 17th century it has acquired in the United Kingdom a particular, though not always precise, signification. The primary meaning of 'excise duty' or duty of excise' has come to be that of a tax on certain articles of luxury (such as spirits, beer or tobacco) produced or manufactured in the United Kingdom, and it is used in contradistinction to customs duties on articles imported into the country from elsewhere. At a later date the licence fees payable by persons who produced or sold excisable artilces also became known as duties of excise; and the expression was still later extended to licence fees imposed for revenue, administrative, or regulative purposes on persons engaged in a number of other trades or callings.
Even the duty payable on payments for admission to places of entertainment in the United Kingdom is called a duty of excise; and, generally speaking, the expression is used to cover all duties and taxes which, together with custom duties, are collected and administered by the Commissioner of Customs and Excise.
' In the same case Sulaiman, J. Observed: "Thus, in England they have a fairly wide range. Even a dog tax, a vehicle tax, a hawker's licence tax, tax for wine licences and pawnbrokers. Licenses have been recognized in England to come within the range of excise duties, although in their nature they are licensees. Again, in England excise duty is levied on the amount of the purchase of intoxicating liquor supplied in or to a club or on behalf of a club to its members (ibid., Vol.28, para. 639). A duty of excise is payable on all payments for admission to any place of entertainment (ibid., para. 681). Indeed all dues realized through the Commissioners of Customs and Excise arc treated either as customs or excise duties."
' In Corpus Juris Scandum, Volume 84, the following passage occurs under the heading--`Excise Taxes':--- "Although an 'excise' in its original sense was something cut off from the price paid on a sale of goods as a contribution to the support of the Government, an excise tax in the modern sense is any tax not falling within the classification of a poll or property tax, and embraces and includes every form of burden or taxation not laid directly on persons of property, and every form of charge imposed by public authorities for the purpose of raising revenue on the performance of an act, enjoyment of a privilege, or the engaging in an occupation. Furthermore, where the tax is imposed directly by the legislature without an assessment, and its sum is measured by the amount of business done or the extent to which the conferred privileges have been enjoyed or exercised by the taxpayer irrespective of the nature or value of the tax-payer's assets, it is regarded as an excise. Thus, while the term 'excise tax' is often used synonymously with the term `privilege' or 'license taxes' and may partake of the nature of a license tax, as discussed in Licenes paragraph 1C, it has a broader meaning than the term 'license tax' and, using the term in its broad meaning as opposed to a property tax, it includes taxes sometimes designated by statute as privilege taxes, license taxes, occupation taxes, and business taxes."
6. In the matter of the Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, ibid, the Federal Court of India did take the view that the expression 'duties of excise' as occurring in the Federal Legislative List had been used in its primary and fundamental meaning of a tax on articles produced or manufactured in India and intended for home consumption; but, then, the Court was interpreting the Government of India Act, 1935, and the opinions recorded by it have to be understood in the background of distribution of powers between the Federal and Provincial Legislatures as set out in that Act. On the other hand, in all the Constitutional dispensations that have obtained in Pakistan, the provisions relating to distribution of power have been different. In the said case Gwyer, C.J. Was himself careful to point out: "But there are few subjects, on which the decisions of other Courts require to be treated with greater caution than that of Federal and Provincial powers, for in the last analysis the decision must depend upon the words of the Constitution which the Court is interpreting; and since no two Constitutions are in identical terms, it is extremely unsafe to assume that a decision on one of them can be applied without qualification to another. This may be so even where the words or expressions used are the same in both cases; for a word or a phrase may take a colour from its context and bear different sense accordingly."
' It will be noticed that under the Government of India Act, 1935, the competence of the Federal Legislature to levy excise duty was of a limited nature inasmuch as except in the case of tobacco it was relatable to the production or manufacture of goods. On the other hand, the power to levy taxes on the sales of goods belonged to the Provinces. The question for consideration before the Federal Court was whether the Provincial Legislature could levy taxes on the retail sale of motor spirit and lubricant on the retail dealers in view of the competence of the Provincial Legislature to levy taxes on sales of goods. In Pakistan immediately after Independence the power to levy tax on sales of goods was conferred upon the Federal Legislature. Thus, the controversy which arose before the Federal Court became irrelevant in the context of the Constitutional dispensation that obtained in Pakistan.
7. Under the 1956 Constitution the distribution of power between the Centre and the Provinces was different from that made in the Government of India Act, 1935, or that adopted by India in its post- Independence Constitution. Thus, whereas under the Government of India Act, 1935, duties of excise primarily related to production or manufacture of goods, it was not so in the Constitution of 1956 where the relevant entries were as follows: ...Duties of excise (including duties on salt, excluding alcoholic liquor, opium and other narcotics)....Taxes on sales and purchase...(see item 26 of the Federal List).
' A comparison of the relevant entries in the Government of India Act and the Constitution of 1956 will show that under the latter Constitution the Central Legislature had much a larger field in which to levy duties of excise. With regard to power of taxation the Constitution of 1962 followed the scheme of 1956 Constitution (see clauses (b) and (l) of item 43 of the Third Schedule). It is, therefore, difficult to subscribe to the contention of the appellants that under the dispensation of 1962 Constitution the Central Legislature could not levy duty of excise in areas which did not involve manufacture or production of goods.
8. There is another aspect of the matter also. When the President promulgated the Finance Ordinance, 1969 the country was under the state of Martial Law and the Constitution of 1962 stood abrogated. By operation of Article 3(1), Provisional Constitution Order, 1969, the country was being governed not strictly but 'as nearly as may be' in accordance with the abrogated Constitution. The validity of the Ordinance is, therefore, to be seen in the light of the Constitutional dispensations that prevailed at the time of its promulgation.
9. The argument that the Central Legislative could not bring excisable services to tax necessarily implies that this subject fell within the Provincial field or in other words it was the Provincial Legislature alone which could levy a tax on excisable services. Now, the Constitution of 1962 had its own peculiar provisions relating to the distribution of State power between the Centre and the Provinces. It contained only one list (see Third Schedule). In respect of the subjects mentioned in this list, the Central Legislature had the exclusive power to make laws. As regards subjects which were not included in the list they fell in the Provincial field. However, the Provincial Legislatures were not given the exclusive power with regard to them. This feature of the Constitution was noticed by Cornelius, C.J., in the case of Province of East Pakistan v. Sirajul Huq Patwari (PLD 1966 SC 584) when he observed that the exclusiveness was reserved to the Center in respect of matters specified in the Third Schedule but no exclusive legislative powers were reserved to the Provincial Legislatures.
In fact clause (2) of Article 131 specifically permitted the Central Legislature to make inroads into the provincial field whenever the national interest of Pakistan in relation to the security of Pakistan, planning of co-ordination or achievement of uniformity so required.
10. There was another noticeable feature of the distribution of the state power in the Constitution of 1962. It made the Central as well as the Provincial Legislatures the sole Judges of their respective competence to make laws and a specific provision was made to oust the jurisdiction of the Courts in this regard. Thus Article 133 provided: "Responsibility of legislatures to make laws within legislative power,-
(1) The responsibility of deciding whether a legislature has power under this Constitution to make a law is that of the legislature itself.
(2) The validity of a law shall not be called in question on the ground that the legislature by which it was made had no power to make the law."
' In the event both the Central and Provincial Legislatures elected to legislate in the same field and an inconsistency appeared between the laws made by them, Article 134 provided that the conflict should be resolved in favour of the law made by the Central Legislature. No doubt, in the case of Province of East Pakistan v. Sirajul Huq Patwari ibid, observations were made by this Court that the Court could look into the validity of a law made by the Central Legislature in pursuance of the power conferred by clause (2) of Article 131 by examining whether the preconditions laid down therein had been fulfilled or not but these observations have no relevance to the appeals before us as in the Constitutional petitions preferred by the appellants the validity of the Ordinance was not challenged on this ground. We are, therefore, unable to hold that the Ordinance inasmuch as it brought the excisable services to tax was not a valid piece of legislation. It may be mentioned here that the word 'legislature' as defined in Article 242 of the Constitution of 1962 included the President also.
11. The Martial Law was lifted in 1972 and was immediately followed by the Interim Constitution.
Article 288 of this Constitution provided: "Notwithstanding anything in this Constitution, all taxes and fees levied under any law in force immediately before the commencing day, shall continue to be levied until they are varied or abolished by Act of the appropriate Legislature."
Similarly, when the permanent Constitution came into force in 1973, Article 279 thereof contained a similar provision. In view of these provisions the competence of the Federal Government to collect duty on excisable goods under the Ordinance cannot be challenged till such time as the appropriate Legislature makes a provision to the contrary.
12. Section 4(3) of the Act prescribes the manner for the determination of value for the purpose of levying duty on excisable services. It reads as follows: "Where under this Act any services, facilities and utilities are subject to duty at a rate dependent on the charges therefor and--
(a) any such services, rendered or provided free of charge or at a concessional rate, the duty shall be levied and collected on the amount which would have been charged for such services, facilities and utilities had they not been rendered or provided free of charge or at a concessional rate; and
(b) the amount with reference to which the duty shall be levied shall be the total amount charged for all services, facilities and utilities provided or rendered, including charges for supplies or merchandise therewith."
' A perusal of clause (b) of this subsection would show that the amount with reference to which the duty is to be levied consists of two elements, namely,---
(1) amount charged for all services, facilities and utilities provided or rendered; and
(2) charges of supplies or merchandise therewith.
' Thus if a bottle of beverage costs Rs,8 to an owner of a restaurant or hotel and he charges Rs,10 from its customers, he has to pay duty on the amount of Rs,10. Now, the cost of the bottle includes the excise duty which has already been paid by the manufacturer thereof before he sells it to the owner of the restaurant or hotel. To include the cost of the bottle in the amount with reference to which duty for excisable services is payable by him does amount to double taxation. It was contended on behalf of the appellants in Civil Appeals Nos.137-K, 138-K and 149-K that the double levy of excise duty was illegal. The contention is clearly without any merit in so far as nonalcoholic drinks are concerned as double taxation by itself is not illegal for there is nothing in the Constitution of 1962 which would militate against an article being taxed under the same head at two stages.
Thus, the levy could not be challenged on the ground simpliciter that duty had already been paid at an earlier stage. However, so far as alcoholic drinks are concerned the matter stands on a different footing. Under item 43(b) of the Third Schedule of 1962 Constitution duty of excise on alcoholic liquor was specifically reserved for the Provincial field. In the absence of any compelling reason we would be reluctant to construe clause (h) of section 4(3) of the Act in a manner that would include the cost of alcoholic liquor in the amount with reference to which excise duty might be charged by the Federal Government, otherwise it would be indirectly permitting the Federal Government to levy a tax which by express language of the Constitution belonged to another Government.
13. It was stated at the Bar that while submitting a bill to a customer certain amount by way of service charges was included therein. On the language of item 13.01, Part II of the First Schedule, it was only this extra amount which could form the basis for the levy of duty for excisable services.
This contention is clearly untenable. The said extra amount is, charged by the restuarants or hotels in lieu of tips for the attendants. On the other hand, section 4(3) of the Act sets out the manner in which the amount with reference to which the duty may be charged is to be computed. The Schedule has to be read with the specific provisions of section 4(3).
14. The appellants in Civil Appeals Nos. 101-K to 107-K were selling alcoholic liquor for consumption on their premises. It was urged on their behalf that they did not provide any services to the consumers and as such they did not render any excisable services and for that reason the demand of excise duty from them was illegal. There is no merit in this contention. The appellants did provide services to their clients by affording them the facility of consumption of liquor in their premises and as such they cannot avoid the liability to pay excise duty.
15. Hotels which charge less than a certain amount as daily rent have been exempted from payment of excise duty. The amount has been varying with different financial years. It was contended on behalf of the appellant in Civil Appeal No,149-K that the said exemption was discriminatory in nature inasmuch as it had put the appellant at a disadvantage. We find no merit in this contention. Quite obviously in granting the exemption the intention was not to burden with the duty such hotels as were visited by less affluent classes. The learned counsel was unable to show that fixation of the amount in this regard was arbitrary or that the classification of the hotels in this regard was unreasonable.
16. Civil Appeals Nos. 14-K and 15-K are directed against the same judgment of the High Court. Civil Appeal No, 14-K has been filed by the Assistant Collector while Civil Appeal No, 15-K has been preferred by M/s. Midway House Limited. M/s. Midway House limited runs a hotel near the Karachi Airport. It rents rooms to different classes of its clients at three different rates. The Assistant Collector has charged excise duty at the highest rate for the reason that the lower rates had been offered by way of concession and for that reason they fall within the mischief of clause (a) of section 4(3) of the Act. The High Court set aside the order of the Assistant Collector holding that the renting of rooms at different rates did not amount to concession. The Assistant Collector being dissatisfied had come in appeal to this Court. The view taken by the High Court stands affirmed by a judgment of this Court reported as Government of Pakistan v. Hashwani Hotel Ltd. (PLD 1990 SC 68) and for that reason we are unable to accept the contention of the Assistant Collector.
17. The hotels situate in the Province of Sindh are subject to the levy of property tax under a Provincial enactment. The property tax is levied on the basis of the number of rooms in a hotel. The Midway House recoups. The amount of tax from its clients. Sometimes a room is let out more than once to different clients in a single day. It recovers the bed tax from each client separately. While computing excise duty the Department has also included the extra bed tax recovered from a client.
This computation has been challenged by the Midway House. Its case is that very often many of its rooms remain unlit but nevertheless it has to pay the tax to the Provincial Government. The extra bed tax which is recovered on a particular day from its clients is adjusted against the day when the room remains unoccupied; in the circumstances the extra tax recovered from a client is not collected on account of services rendered by it but is intended to create a reserve for meeting its liability to the Provincial Government. There is merit in this contention for the excisable duty is leviable with reference to the services rendered and not with reference to tax which the owner may keep in reserve for payment to the Provincial Government by way of tax.
18. For the reasons stated above, the appeals are dismissed. With the following modifications that while computing the amount under section,4(3) of the Act, the cost of alcoholic liquor should be excluded and the extra bed tax charged for a day by a hotel is not to be included in the amount with reference to which the duty is to be levied. The parties shall bear their own costs.