1. MUHAMMAD AKRAM, J.-This is an appeal by special leave from the judgment dated 14th February 1968, delivered by a Division Bench of the then High Court of West Pakistan at Lahore, dismissing the writ petition filed by the appellant against the respondents under Article 98 of the abrogated Constitution of the Islamic Republic of Pakistan, 1962.
2. Briefly the relevant facts are these. The appellant, Amin Soap Factory, is a partnership firm and manufactures laundry soap in its factory at Sargodha. It is common ground that at the relevant time this factory was being run without the aid of power, steam or gas. Laundry shop is an excisable item under the Central Excises and Salt Act I of 1944 (hereinafter called the Act). But by virtue of a Notification No. S. R. O. 38(R)/64, dated the 12th June 1964, the -Central Government, in exercise of the powers conferred on it by subsection (1) of section 12-A of the Act, exempted laundry soap, produced without the aid of power, steam or gas from the whole of the excise duty leviable thereon under the Act, with effect from the 13th June 1964. It is not disputed before us that under this notification the laundry soap manufactured by the appellant was exempt from the whole of the excise duty. But afterwards, in supersession of the foregoing notification, the Central Government by means of another Notification No. S. R. O. 1284 (K)/66 dated the 2nd December 1966, in exercise of the powers conferred on it under subsection (1) of section 12-A of the Act, directed that laundry soap produced in a factory operated without the aid of power, steam or gas and the owner of which has no financial interest in any other industrial or commercial enterprise shall be exempt from the whole of the duty leviable under the Act. The second notification was made more stringent than the first one by the imposition of an additional condition for earning the exemption. In this manner the scope of the immunity allowed from the payment of the excise duty was curtailed and made dependent on the fulfilment of two conditions-firstly that the soap should have been produced in a factory, which is operated without the aid of power, steam or gas and secondly that its owner should have no financial interest in any other industrial or commercial enterprise.
3. It is not disputed that the appellant-firm has also got financial interest in an oil-mill for extracting oil from cotton seed. As such under the second notification it did not qualify for exemption from excise duty levied on laundry soap manufactured by it.
4. In these circumstances, the appellant filed a writ petition under Article 93 of the abrogated Constitution of the Islamic Republic of Pakistan (1962) contending that the second notification was ultra vices of the powers vested in the Central Government under section 12-A(1) of the Act. It is alleged that on a plain reading of this section -the exemption from duty is admissible to any goods or class of goods only and is not relatable to any person or class of persons. As such the Government had transgressed its own legislative mandate under the section by imposing a wholly unwarranted and extraneous stipulation in the second notification to the effect that the exemption from duty allowed under the first notification shall be confined only to those persons who have no financial interest in any other industrial or commercial enterprise.
5. As already stated above a Division Bench of the then High Court of West Pakistan dismissed the petition on 14th February 1968 and the judgment is since reported as Messrs Amin Soap Factory v.
6. Government of Pakistan and another (PLD 1968 Lah. 1103). Leave to appeal against the judgment was granted by this Court to consider if the second condition imposed in the impugned notification was ultra vices of the powers of the Central Government given under the statute. It was argued that under section 12-A of the Act there is no power in the Government to limit the exemption to any goods or class of goods by the qualification of the owner or producer thereof.
7. In order to fully appreciate the controversy it is necessary to reproduce here section 12-A of the Act as in force on the date of the impugned notifica--tion on the 2nd of December 1966. It lays down : - "12-A.-(1) The Central Government may from time to time, by notification in the official Gazette, exempt any goods or class of goods from the whole or any part of the duty leviable under this Act.
(2) The Central Board of Revenue may, by special order in each case, exempt from the payment of the whole or any part of the duty leviable under this Act, under circumstances of an exceptional nature to be stated, in such order, any goods on which such duty is leviable."
8. In connection with section 12-A of the Act it was argued on behalf of the appellant before the High Court, as it has been contended before us also, that the imposition of the further condition in the impugned notification that the exemption shall be admissible in respect of laundry soap, only if its manufacturer has no financial interest in any other industrial or commercial enterprise, is in excess of the powers of the Government and altogether void. It was asserted that under section 12-A of the Act the exemption from duty Pertains to the goods or class of goods only but that in the impugned notification the Government has transgressed its powers by invidious distinction made in respect of persons, who have financial interest in some other industrial or commercial enterprises. It was argued that whereas it was open to the Central Government to choose the goods or class of goods for exemption from the duty payable under section 12-A of the Act, it had no lawful authority to change the very nature of this exemption and make it relatable to persons. The exemption allowed under the notification has the effect of operating against persons rather than in favour of the goods or class of goods and runs counter to the very intent of the legislators.
9. In dismissing the petition filed by the appellant, the High Court repelled all these contentions. In its opinion, under section 12-A of the Act it has been left to the discretion of the Central Government to decide as to what goods were to be exempted. It was conceded before the Court that it was within the discretion of the Government to grant exemption. They could have eves completely withheld the exemption in favour of laundry soap. It was, therefore, legitimate to presume that the Central Government could lay down any conditions for the exemption. The condi--tion laid down in the first notification dated 12-6-1964, was that the exemption would operate only in case of factories which are not run by power, steam or gas. A further condition was introduced in the impugned notification that the exemption would apply only to laundry soap manufactured in factories which are not run by the use of power, steam or gas and whose owners have no financial interest in any other industrial or commercial enterprise. In the opinion of the High Court this exemption was in the nature of "privilegis favourabilia" and could be regulated by the Central Government by imposition of conditions. The exemption thus allowed by the Government all along remains in favour of laundry soap and it could not be successfully urged that by virtue of the impugned notification the very nature of this exemption was changed and it was relatable to persons rather than to the goods itself. The intention behind this notification is to protect particular goods manufactured in factories, which are not aided by power, steam or gas and whose owners cannot compete with products from mechanised factories and have no financial interest in any other industrial or commercial enterprise.
10. Here I would like to point out that the validity of the precise notification in question was also challenged for identical reasons before the then High Court of East Pakistan at Dacca in the reported case of Messrs Jamal Soap Factory, Dacca v. Pakistan and two others (PLD 1971 Dacca 19). In dismissing the petition before it a Division Bench of the High Court largely relied on and fully agreed with the judgment of the West Pakistan High Court now under appeal in the instant case before us. Besides this the Court further observed that the impugned condition imposed in the notification in question was reasonable inasmuch as the exemption was limited solely to manufacturers who have no interest in any other industrial and commercial enterprise. In coming to this conclusion the High Court repelled the contention advanced before it to the effect that under this impugned notification the Government had exceeded its powers of delegated legislation conferred under section 12-A of the Act. In the opinion of the Court the impugned notification far from affecting any manufacturer has in granting the exemption to laundry soap conferred benefit on a class of goods on the basis of reasonable distinction which was fully in keeping with the spirit of the time not to make the rich richer. In dismissing the petition before it the High Court preferred to place a liberal and not too technical interpretation on the statute enabling the Government to grant this exemption.
11. In this background we have carefully considered the contentions advanced at the hearing before us in this case. The Central Excises and Salt Act was enacted with a view to consolidate and amend the law relating to central duties on goods manufactured or produced in Pakistan and to salt. The charging section 3(1) of the Act lays down that there shall be levied and collected in such manner as may be prescribed duties of excise on all 'excisable goods' other than salt which are produced or manufactured in Pakistan and a duty on salt manufactured in, or imported by land into any part of Pakistan as, and at the rates, set forth in the First Schedule. The term "excisable goods" is defined in section 2(d) of the Act to mean goods specified in the First Schedule as being subject to a duty and includes salt. The First Schedule to the Act contains a list of excisable goods with the rates of duty levied thereon. Soap is enumerated at No. 23 in the list as an excisable item. It is classified into two categories namely the "Laundry Soap" with the rate of duty prescribed at six rupees per cwt.
12. And "All other soaps" with the duty fixed at fourteen rupees per cwt. These provisions are sufficient to show that generally speaking the incidence of the excise duty is on the excisable goods or class of goods in the hands of their manufacture and producer in Pakistan. It is, therefore, not difficult to conclude that under the scheme of this Act the incidence of the excise duty is not directly A on any person or class of persons. The burden of the duty is directly on the goods, as such, although ultimately the producer and manufacturer of the goods may be the sufferer for the short-fall of the net income and sale proceeds coming to his hands. Under section 12-A of the Act also the power of the Central Government to exempt from excise duty is necessarily confined to and relatable to any goods or class of goods only. Here it will be of some interest to point out that by virtue of the amendments in section 3 and the other related provisions of the Central Excises and Salt Act I of 1944 introduced under the Finance Ordinance XI of 1970, provisions were made for the levy and collection of excise duty on all excisable goods as also on all "excisable services" rendered in Pakistan. Simultaneously a corresponding amendment was also introduced in section 12-A of the Act. So that under it the Central Government could also exempt any services or class of services from the excise duty.
13. Exemption, as applied to taxation, pre-supposes a liability, and is properly applied only to a grant of immunity to persons or property which otherwise would have been liable to assessment.
14. According to Corpus Juris Secundum Volume 84, section 215 an exemption exists by virtue of some constitutional or statutory provisions. The exemptions from taxation are either personal or impersonal. Personal exemptions are those granted directly in favour of such persons as are within the contemplation of the act, and impersonal exemptions are those granted directly in favour of a certain class of property. In this connection learned author has further observed that ordinarily an exemption from taxation is a mere personal privilege, subject to modification or recall by Legislature, although it may be a privilege annexed to particular property under the terms of the creating statute. These tax exemptions are primarily founded on public policy, such as for the encouragement of manufacturing and other industries. In section 216 of the book it is further stated that the Legislature has power to limit the exemption or to grant an exemption on any terms or conditions whatsoever according to its views of public policy or expediency, subject only to the limitation that the exemption and the classification on which it is based shall be reasonable and not arbitrary.
15. It goes without saying that in all cases the admissibility of a claim to exemption from taxation must rest on the special provisions made in this behalf in the relevant law itself. In this behalf the Privy Council In re : ;The Trustees of Tribune Trust ((1939)7ITR415) emphasized that the admissibility of a claim to exemption from income-tax must be determined by the language of the special provisions of the Income-tax Act applicable to the case. In the instant case before us the Central Government has a very wide discretion vested in it under section 12-A of the Act to exempt any excisable goods from the whole or any part of the duty leviable under the Act. In the Collector of Central Excise and Land Customs and others v. Azizuddin Industries Ltd., Chittagong (PLD1970SC439) this Court observed that the exercise of power by the Central Government under section 12-A of the Act to grant exemption as well as power to withdraw the exemption under section 21 of the General Clauses Act is unconditional. There are no limitations or fetters placed on the very wide powers of the Government to exempt any goods or class of goods from the levy of the duty under the Act. It may from time to time, by notification published in the official Gazette, exempt any goods or class g of goods from the whole or any part of the duty leviable under the Act. Indeed it may or may net at all exempt the excisable goods from the levy and there is no compulsion on the Government to allow the exemption. In this context of the very wide powers vesting in the Government, it could also grant the exemption on any terms and conditions according to its own view of public policy and expediency. In these circumstances, in our considered opinion, the High Court was justified in drawing a legitimate presumption that the Central Government could impose any conditions in allowing the exemption to the Laundry Soap from the levy.
16. We are fortified in arriving at this conclusion from an amendment subsequently introduced into section 12-A(l) of the Act by the Finance Act XII of 1967. Subsection (1) of section 12-A of the Act thus amended expressly lays down that "The Central Government may from time to time by notification in the official Gazette, exempt, subject to such conditions, if any, as may be specified therein any goods or class of goods from the whole or any part of the duty leviable under this Act."
17. The amendment was introduced during the pendency of the writ petition out of which this appeal has arisen. The arguments in the case were heard by the High Court on 5th May 1967, and the judgment in the case was announced on 14th February 1968, while the amendment in the section was introduced on 30th June 1967. It appears to us that the amendment thus introduced was classificatory only and had the effect of merely declarting the already existing law in force to set at rest the doubts, if any, on the point.
18. In this connection it is noteworthy that even the first notification dated 12th June 1964, forming the very basis of this case for the exemption enjoyed by the appellant, was itself subject to the condition that the laundry soap was produced without the aid of power, steam or gas. By virtue of the impugned notification dated the 2nd December 1966, the Central Government, in its own wisdom, merely added another and a further condition providing that the exemption shall be admissible to the laundry soap produced by those owners of the factories who have no financial interest in any other industrial or commercial enterprise. Presumably the "raison d'etre" of this exemption allowed by the Government was to stimulate and provide incentive for small scale cottage industry in the manufacture of laundry soap produced without the aid of power, steam orgy gas and the owner of which is by no means an industrial or commercial enterpriser having financial interest in more than one enterprise, and to save the former from the competition of the latter.
19. In order to carry into effect the purposes of this Act the Central Board o#' Revenue have also framed Rules under section 37 of the Act. Inter alia Chapter V of the Central Excise Rules, 1944 deals with the manufactured goods generally. Rule 44 lays down that every manufacturer shall. Before beginning to manufacture excisable goods, declare in the proper form all premises, plant, machinery and fittings intended to be used by him for the manufacture or production of the excisable goods, specifying the purpose for which each room, place, plant, machinery, fittings or equipment is to be used and the mark by which it is to be distinguished and shall also state the quantity of goods which his factory is capable of producing. Similarly rule 96-M of these rules provides for a special procedure in respect of soap produced with the aid of power or steam. All these provisions are designed to maintain a check on the production and manufacture of the excisable goods in the hands of their producers or manufacturers.
20. As already discussed above under the Central Excises and Salt Act the incidence of excise duty is on the excisable goods in the hands of their producer or manufacturer. Likewise under section 12-A of the Act any exemption from duty allowed by the Central Government is referable to the excisable goods or class of goods in the hands of their producer or manufacturer. In the instant case also that under section 3 of the Act read with item No. 23(1) of the First Schedule to the Act the incidence of the excise duty is directly on laundry soap itself. By virtue of the impugned notification the exemption from duty is allowed only to that portion of the laundry soap produced or manufactured in the country, to which it has been made applicable. Indeed under the notification in question the subject--matter of the exemption allowed by the Central Government is the laundry soap manufactured by the small scale producers who have been provided the incentive on their products. Therefore, in our considered opinion the incidence of this exemption allowed under the impugned notification, is directly and squarely on the laundry soap to which it has been made applicable. The producer or manufacturer of the laundry soap covered by the impugned notification benefits by it only incidentally in the money income being the owner thereof. It cannot, therefore, be held that in reality the impugned notification was not referable to the goods or class of goods but to persons or class of persons. Indeed the nature of this exemption allowed under the notification was in no way changed and remained all along attached to the laundry soap only. In our opinion, therefore, the impugned notification is intro vires of the powers of the Central Government conferred on it under section 12-A of the Act.
21. In the result this appeal has no force and is hereby dismissed with costs.
22. DORAB PATBL, J.-I agree.
23. MUHAMMAD AFZAL CHEEMA, J.-I have gone through the judgment proposed to be delivered by my learned brother Muhammad Akram, J. And am in respectful agreement with his Lordship that the appeal merits dismissal. However, I would like to add a few observations without reiterating the background of this case which has been fully traced in my Lord's judgment.
24. The impugned Notification reads as under :- "In exercise of the powers conferred by subsection (1) of section 12-A of the Central Excises and Salt Act, 1944 (1 of 1944) and in supersession of the Ministry of Finance Notification No. S. R. O. 38(R)j64, dated the 21st June 1964, the Central Government is pleased to exempt, laundry soap produced in a factory which is operated without the aid of power, steam or gas and the owner of which has no financial interest in any other industrial or commercial erterprise, from the whole of the duty leviable thereon under the said Act."
25. While challenging the vires of the impugned Notification, learned counsel assailed it on two grounds : "Firstly, that the exemption from payment of Excise duty envisaged by the impugned Notification could only be made relatable to particular goody or class of goods and not to persons or class of persons inasmuch as this would be tantamount to creating an invidious distinction between citizen and citizen, which would be contrary to the prohibition contained in Article 25 of the Constitution.
26. Secondly, that the attachment of the pre-condition for the grant of exemption that the owner of the Factory should have no financial interest in any other industrial or commercial enterprise not only defeats the very object of the Notification but is also impracticable owing to its vagueness."
27. I am in full agreement with the grounds taken by my learned brother in repelling the first contention. Grant of exemption from taxation including levy of Excise duty lies exclusively within the discretionary competence of the Central Government and cannot be claimed by anybody as of right. Different considerations might weigh with the Government in the grant of exemption, such as protection of an indigenous industry, avoidance of hardship to the consumer by keeping the prices within reasonable limits, grant of relief to the small manufacturers or to provide incentive for a E particular industry or business. There is no legal impediment that exemption must invariably relate to goods and not to persons. Sometimes exemption may be confined to a particular area with a view to attract investors through this incentive to set up suitable industries as a measure of development of that region. Whatever the reason behind the giant of exemption in the ultimate analysis, the impact of the incidence of levy of or exemption from Excise duty is on the manufacturer as held by my learned brother Salahuddin Ahmed, J. In Messrs Jamal Soap Factory, Dacca v. Pakistan and two others (PLD 1971 Dacca 19) when his Lordship was a Judge of the East Pakistan High Court. No fault can, therefore, be found with the impugned Notification on the ground that it has made the exemption of laundry soap from payment of Excise duty dependent on the two-fold condition that it should be manufactured without the aid of power, steam or gas and the manufacturer should have no financial Interest in any other industry or commercial enterprise. An exemption could be in favour of a particular class of goods or class of persons or both as is the case here. The object obviously was to give p protection to small manufacturers of unsophisticated hand-made laundry soap in view of their inability to compete with big manufacturers of fine. And high quality machine-made laundry soap usually produced in larger bulk. The argument based on the so-called invidious distinction between citizen and citizen can be straightaway repelled in view of this Court's dictum in Jibendra Kishore etc. v. Province of East Pakistan (PLD 1957 SC (Pak.) 9) and the decisions of the Supreme Court of India in Katht Raning v. State of Saurashtra (AIR 1952 SC 123), Kedar Nath v. State of West Bengal (AIR 1963 SC 404) and Sakhawant Ali v. State of Orissa (AIR 1955 SC 166).
28. Coming to the second contention relating to the imposition o! The condition that in order to qualify for the exemption the manufacturers should have no financial interest in any other industrial or commercial enterprise, learned counsel argued that the expression "financial interest" having remained undefined was much too vague and unless the nature and extent of the interest was specified, the whole object of the proposed concession or relief sought to be granted to the small manufacturers might be defeated. It was argued that a small manufacturer of hand-made laundry soap might have a very nominal interest in an industrial or commercial enterprise, which may even be running at a loss, but it would nonetheless be a financial interest in terms of the Notification though of the negative character and operating to the dual disadvantage of the small manufacturer of crude laundry soap resulting also in the denial of exemption to him.
29. Although apparently, the argument is not without force, yet it can hardly stand a closer scrutiny. It is well-settled that it is not for the Courts G to question the wisdom of the Legislature and their judicial function in this regard is confined only to the interpretation of the law as it is. The Notification as worded admits of no equivocation and thus neither presents any difficulty in its interpretation nor otherwise in its application or enforcement. No fault can, therefore, be found with it on the legal plane even on this score,