' Z. A. CtANNA , J.-This judgment will dispose of Constitutional Petitions Nos. 257/1976 and 529/1976, which have been heard together and in which mainly common points have been canvassed.
2. In retition No 257/76, the petitioner is Lipton (Pakistan) Ltd., a company engaged in the business of tea blending ano packing in Pakistan. The company owns premises at West Wharf where inter alia it carries on the business of tea blending and packing. There are also godowns in the area whore tea is stored. This property is assessed to property tax under the Sand Urban Immovable Property Tax Act, 1958, hereinafter referred to as the said Act. The gross annual rental value, to which we will refer for the sake of brevity as G. A. R. V. Of this property was provisionally determined in the year 1968 at Rs, 2,05,608. The petitioner filed objections to the proposed draft value and in consequence the G. A. R. V. Was reduced to Re. 95,087.40 by the Assessing Authority, by his order dated 6-6-1968.
3. It appears that in the year 1968 the petitioner commenced reconstruction on his West Wharf property. The demolition and reconstruction appears to have been done by stages. As a result of the demolitions and repairs the G. A. R. V. Of the petitioner's premises was confirmed at Rs, 89,611.70, by the Assessing Authority, vide his order dated 5-2-1970. Thereafter, certain additional constructions were raised by the petitioner and in respect of these additional constructions the G.
A. R. V. Was fixed at Rs, 92,217 by the Assessing Authority by his order dated 22-5-1971. An appeal was preferred by the petitioner against this additional assessment but the same was dismissed. A revision application was also made to the Director-General, Excise and Taxation, but the same also was dismissed. It may however, be mentioned that in this order it was held that all the premises were factory premises and were to be assessed at the rate of 25 paisa per square foot.
4. Certain other oonstructions were thereafter raised by the petitioner on its premises and in respect of these further constructions, the G. A. R. V. Was separately fixed at Rs, 77,441, by an order of the Assessing Authority dated 30-6-1971. This order further refers to the previous G. A. R. Vs. For the remaining property of the petitioner at West Wharf and the G. A. R. V. Of the entire property was assessed at Rs, 2,29,029.
5. It appears that the petitioner paid property tax on the basis of the above G. A. R. V. Of Rs, 2,29,029, from 1971 up to 1975. However, on 9.7-1975 a notice was served upon the petitioner that it was proposed to reassess its West Wharf Property at the G. A. R. V. Of Rs, 13,90,236. The petitioner filed objections against this notice and also sent 3 letters in this connection to the Assessing Authority.
Ultimately, on 30-10-1975, the petitioner received another notice intimating him that it had come to the notice of the Director-General; Excise and Taxation, that its West Wharf property was under assessed, and required him to appear before the Director-General on 11-11-1975, to show cause as to why the assessm ent of the said property be not enhanced. The petitioner filed a number of objections Inter alio alleging that far from the property be under-assessed It was in fact over- assessed and it was entitled to a refund. However, the Director-General, by his order dated 29-3- 1976, rejected the objections of the petitioner and ordered that the property tax be assessed on the enhanced G. A. R. V. Of Rs, 13,90,236, on the basis of the commercial formula. It is this order of the Director-General and the consequent demand notices which were served on the petitioner to pay property tax on the revised G. A. R. V. That have been assailed in this petition.
6. It may be explained here that the Directorate of Excise and Taxation, Karachi, in 1967-68, for the purposes of property assessm ent, carried out a survey and exercise and on the basis thereof categorised properties according to their use, location and type of construction and different formulae have been applied for assessment of different types and categories of properties.
According to this policy, commercial properties in Karachi were divided into four categories ranging from Al to C, according to the area in which the property was located. Further, each category was sub-divided into 4 classes ranging from first class, in which fell construction of excellent quality, through second class (good) and third class (fair), to fourth class (ordinary). The scale for ascertainment of the G. A. R. V. In respect of each category and class was different, but the common feature in respect of property categorized as commercial was that the assessment was to be determined on the basis of the specified rate per Sft. Of covered area. So far as industrial property was corcerr ed, the formula adopted was that G. A. R. V. Was to be fixed, after allowing the prescribed depreciation, at-
(a) 4% of the present market value of the land; and
(b) 5% of the cost of buildings worked out on the following scale:- (I) Office buildings: Re.
0.78 per Sft. (11) R. C. C. Sheds t Re.
0.20 per Sft.
(iii) Sheds with Abbestos sheet or G. L, Re.
0.15 per Sft.
(iv) Subsidiary accommodation: Re.
0.4 per Sft.
7. In respect of godowns, the formula provided that the standard rate of assessment for R. C. C.
Structures would be Re.
0.25 per Sft. Per month but variation could be made on the basis of location and type of construction. However, the formula specifically provided that if the godowns form part of an industrial unit the formula laid down for the industrial property would be applied.
8. Mr. Salim Akhtar, the learned counsel for the petitioner in Petition No, 257/1976, has assailed the order of the Director-General, Excise and Taxation, of 29-3-1976, on the following grounds I-
(i) that the Director-General has no power to suo month revise the G. A. R. V. Of any premises as has been done in the instant case;
(ii) that the Director-General had no power to review the orders of his predecessor passed on 31-7- 1971;
(iii) that G. A. R. V. Cannot be amended with retrospective effect, as has been done by the impugned order;
(iv) that the finding that the property in question of the petitioner is commercial property and therefore the valuation for commercial property was to be applied is without any basis and is in direct conflict with the evidence on record.
9. In regard to the first issue, namely, the power of the Director-General to suo motu revise the G. A.
R. V. Of any property, it may be mentioned that subsection (2) or section 10 of the said Act empowers the Commissioner or any other officer appointed by the Government in this behalf, on his own motion at any time, to call for and examine the record of the proceedings of or any order passed by, an authority subordinate to him for the purpose of satisfying himself as to the legality or propriety of the same, and to pass such ordei in reference thereto as he may consider fit. It is not disputed that the Director-General has been notified by the Government to exercise revisional powers under the subsection. In fact, the learned Advocate-Geeeral produced before us the Government notification in this behalf. This subsection gives powers of the widest amplitude to the Director-General to suo rnotu revise the order of any authority subordinate to him, if in his opinion, the order suffers from any illegality or impropriety. If, therefore, any G. A. R. V. Has been ascertained or determined by an authority sutrrdivate to the Director-General, he is fully competent, in exercise of his revisional powers under this section, to suo motu revise the same, if such determination of the G. A. R. V. Suffers from any illegality or impropriety. We find, therefore, no substance in this contention of the learned counsel for the petitioner and would repel the same.
10. The next contention of Mr. Salim Akhtar, the learned counsel for the petitioner, is based upon the order dated 31-7-1971, by Mr. M. J. R. Khan, the then Director-Geaerel, Excise and Taxation, Sind. The material part of his order reads as follows t- "In this case I have perused the report of the Excise and Taxation Officer, 'B ot C' Divisions, Karachi, who was appointed to enquire into the facts of the case. The contents of the report are accepted and it is hereby ordered that the property Unit No, Eh11I-A-17-A belonging to Mesrss Lipton (Pakistan) Ltd., may henceforth be treated as an industrial unit. No retrospective effect should be given to this order. The appeal made against the assessment rates is not accepted which may continue as before."
(11)As we have already pointed out, section 10(2) of the said Act empowers the Director-General only to revise the orders of an authority subordinate to him. No power of review has been conferred upon the Director-General. In these circumstances the learned Advoeate-General conceded that the District-General could not revise or review th orders passed by his predecessor. He, however, contended that the above order of Mr. M. J. R. Khan was only in respect of the property constructed by the petitioner in May 1971, the G. A. R. V. Whereof had heen assessed at Rs, 92,217, and in respect of which he had first filed an appeal and then a revision to the Director-General. The learned Advocate-General further submitted that the dir; ction of Mr. M. J. R. Khan that the property in question was only henceforth to be treated as an industrial unit should be construed as directing that it should be so shown in the neat valuation list which was to be prepared after the period of the existing valuation list had expired. He fieally contended that the fact that Mr. M. J. R. Khan had rejected the appeal (the revision application) against the assessment rates of me petitioner's additional construction and had directed that the same may continue indicate that he had accepted the position that even this property of the petitioner was to be assessed on the basis of the formula applicable to commercial buildings. We find ourselves unable to accept the contentions of the learned Advocate-Genera'. It is true: as contended by him. That the petitioner had filed an appeal before the appellate authority and also the revision application questioning only the G. A. R. V. Of Rs, 92,217.30, in respect of the additional construction raised by it in 1971, but the order of Mr. M. J. R. Khan is not based only on the revision application of the petitioner but is founded mainly on the report of the Excise and Taxation Officer, which report ho seems to have accepted is full. The learned Advocate-General has made that report available to us. The relevant portion of this report reads as follows:- "During the course of assessm ent of the remaining portion of the whole of the factory area, Messrs Lipton (Pakistan) Ltd , contended that their property in question should be considered as an industrial unit and assessed likewise.
' Their contention was considered, and the assessment was made in accordance with the prescribed industrial formula. All factories have warehouses for keeping raw materials and also for the finished goods. Other factories in this area have been assessed at the prescribed industrial formula rates as a whole. None of the factories has been assessed partly at commercial formula rate.
' It is, therefore, requested that this property unit as a whole may please be considered as an industrial unit."
6. It is clear from the above report that it was being recommended that the entire West Wharf property of mesrss Lipton (Pakistan) Ltd. Be treated as industrial property, and since Mr. M. J. R.
Khan had accepted this report it necessarily follows that he was directing that the entire property, and not only the portion of the property of the petitioner in respect of which the revision application had been filed, should be treated as an industrial unit. It is true that he did not accept the revision application in respect of the assessm ent rates, but since the assessment rates even in respect of the portion of the property in regard to which the revision application had been filed before him had been assessed on the formula for commercial buildings, his orders to this extent are not quite consistent. Apparently, he was misled by the report of the Excise and Taxation Officer into believing that the portion of the property of the petitioner in respect of which the revision application was filed had been assessed according to the formula for industrial units and not commercial units.
This explanation appears to us to be all the more plausible, since the petitioner did not appear before him. However, since this order of Mr. M. J. R. Khan has not been assailed before us and in fact it is this order which is the sheet-anchor of the petitioner in Constitution Petition No: 257/1976, the petitioner cannot complain against the assessment rates confirmed by this order.
7. It was also contended by Mr. Salim Akhtar that G. A. R. V. Cannot be amended with retrospective effect. The learned Advocate-General, on the other hand, pointed out that according to the scheme of the said Act, first a draft valuation list is to be prepared and published, in respect oft which objections are invited and heard. Even after the valuation list finalized, the Assessing Authority has been empowered to make amendment in the valuation list in order to bring the list in accord with existing circumstances. Furthermore, the entries in the valuation list are subject t appeal and revision under section 10 of the said Act. Obviously, if any entries in the valuation list are modified in accordance with the provision_ of section 9 or 10 of the said Act, such modifications or amendment would ordinarily take retrospective effect from the date when the valuation list came into force, except in those casts where the amendments or modifications aro the result of suhsequent events, such as construction of ne buildings after the completion of the valuatba list, destruction of damage to or alteration of any building since the last valuation, propriety change in the ownership or use of any building, such as when a building is self-occupied or is used for a school or a charitable trust, etc. Since the tax is to be collected on the basis of the valuation list, if an entry in the valuation list is modified, then the tex would ordinarily be leviable for the whole of the assessm ent period in accordance with the new entry in the valuation list, except of course in special cases, some of which have been mentioned. By us above.
8. Mr. Salim Akhtar finally contended that the finding of the Director-General in the impugued order that the property in question was commercial property and was to be assessed on the basis of the formula for such preperty is on the basis of no evidence. It has become somewhat,unnecessary to deal with this point in view of our finding that the new Director-General was not competent to review or revise the order of Mr. M. J. R. Khan holding the property in question of the petitioner as being industrial property. It may, however, be pointed out that the successor of Mr. M. J. R. Khan took the view that the mixing, blending and packing of tea cannot fully qualify as an industrial and manufacturing process as it is more akin to commercial activity. he also took note of the fact that tea-blending and packing activities were being undertaken in a small part of the premises and that the neighbouring properties were being assessed on the basis of the commercial formula. We find ourselves unable to agree with the finding of the Director-General that tea mixing, blending and packing activities properly do not qualify as an industrial or manufacturing process. In the D Factories Act, 'factory' has been defined to include any premises where 20 or more esoikers are working and in any part of which a manufacturing process is carried on. The definition of 'manufacturing process' in the said Act includes any process "for making, altering, repairing, ornamenting, finishing or packing, or otherwise treating any article or substance with a view to its use, sale, transport, delivery or disposal". It is obvious that the process of tea blending and packing in the petitioner's factory, which is carried on with the aid of power, is 'manufacturing process' and Its premises a 'factory' for the purpose of the Factory Act. In fact, it was on this basis that the petitioner's premises have been registered as a factory under the Factories Act, 1934, and necessary certificate issued to it in this behalf. We have already referred to the report of the Excise and Taxation Officer, 1971, which he made after visiting the premises in question and wherein be has recommended that the entire property, as a whole, may be considered as an industrial unit in view of the manufacturing operations being carried on there. We are, therefore, of the opinion that apart from .Revising or reviewing the order of his predecessor, eehich the new DirecterGeneral was not competent to do, the impugned order suffers from the further defect that it has, by ignoting the material facts and on the basis unwarranted assumptions, held that the property in question was not an industrial unit and was to be assessed on the basis of the formula for commercial buildings.
9. The learned Advocate-General contended that even if we were to hold that the premises in question were an industrial unit then also the G. A R. V. Determined for such premises should not be disturbed, since it was based on the rent prevailing for neighbouring buildings of a similar type, but there appears to be nothing on the record to show what was the G. A. R. V. Of the neighbouring properties used for a similar purpose. Since the property in question is owned by the petitioner itself the actual rent of the premises cannot be known, nor does any enquiry appear to have been held to ascertain what may be the gross annual rent at which such premises may be let. According to clause (e) of rule 6 of the Rules framed under the said Act, for preparation of the draft valuation list, it is necessary that an enquiry should be made about the gross annual rent earned or which could reasonably be expected to be earned in respect of the property during the financial year immediately preceding the current financial year. No such enquiry appears to have been held in the case. Even if we were to consider the ad hoc formula laid down by the department for ascertainment of the G. A. R. V., the premises would have to be categorized as an industrial unit and the G. A. R. V. Of the premises would have to be determined in accordance with the formula for industrial unit. However, as already pointed out, since Mr. M. J. R. Khan had approved the assessm ent at certain rates for the premises of the petitioner and his order has not been questioned by the petitioner, the rates approved by him cannot be disturbed by us in these proceedings.
10. In Constitutional Petition No, 529/76, the petitioner is M. M. Ispahani Ltd., which like the Lipton (Pakistan) Ltd,, is a company engaged in the industry of tea-blending and packing. It appears that this petitioner, in 1953, had a ground floor construction at West Wharf, which was being used as godowns, offices and for blending and mixing of tea, In 1968, the Assessing Authority assessed these premises at the rate of Re.
0.50 per Sft. For office accommodation and Rs, 20 per Sft. For godown accommodation. The petitioner filed an appeal to the Director, Excise and Taxation, who, by his order dated 30-7-1968, reduced the G. A R. V. Of the office accommodation from 50 paisa to 20 paisa per Sft. And the godown accommodation from 20 paisa to 12 paisa per Sft. Subsequently, towards the end of 1971, the petitioner constructed an upper floor over the existing ground floor, and this upper floor was assessed by the Assessing Authority at 85 paisa per Sft. The petitioner filed an appeal against this assessm ent to the Director, Excise and Taxation, who reduced the assessment to 40 paisa per Sft.
On the basis of what he considered as a general rate prevailing in the locality. It may be mentioned that this order was only in respect of the first floor, while the assessment of the ground floor continued as before and in respect of which there was no dispute. The petitioner, however, was not satisfied with the reduction granted him by the Director and therefore preferred a revision application to the Director-General, who, by his order dated 22-4.1975, remanded the case of this petitioner for re-categorisation. By the same order he also ordered that a suo moro reference may be made in respect of the Lipton (Pakistan) Ltd.
11. The Assessing Authority, on the basis of the above order of the Director-General, assessed the entire property of the petitioner, that is both the ground floor and the first floor at the rate of 85 paisa per Sit with retrospective effect. Against the above order, the petitioner filed an appeal, but it was dismissed. The petitioner then filed a revision application to the Director-General, but the same also was dismissed by an order dated 17-6-1976. It is these 3 orders of the Assessing Authority, the Appellate Authority and the Director-General that have been impugned in this petition.
12. Mr. Ahmed Mian Soomro, the learned counsel for the petitioner, has assailed the impugned orders of the Excise and Taxation Department on the following arounds:-
(I) That the remand order of the Director-General did not authorise the Assessing Authority to re- categorize the assessm ent in respect of the ground floor of the petitioner, which had already been finalised by the Director, by his order dated 13-7-1964.
(ft) That the petitioners property has been wrongly categorized as commercial property when in fact it is an industrial establishment and should be so assessed.
13. The first contention of the learned counsel for the petitioner is based on the fact that his appeal to the Director and the revision application to the Director-General, was only directed against the assessm ent of the first floor which was constructed towards the end of 1971 and there was no dispute at all in respect cf the assessment relating to the ground floor which had been finalised by the Director, by his order dated 13-7-1968. As such according to the learned counsel, the remand order of the Director-General. Mr. Salman Farooqi, could only be in respect of the first floor and not in respect of the ground floor. The memo. Of petition filed before Mr. Salman Farooqi has not been produced before us but a perusal of his order shows that the only contention raised before him was the justification for the assessm ent of the petitioner's property at 40 paisas per Sft. Against the rate of 20 paisa per Sft. Applied to the property owned by Messrs Lipton (Pakistan) Ltd. It was in these circumstances that the Director-General remanded the case to the Assessing Authority for re-categorization of both the properties after physical assessment. There is nothing to show that Mr Salman Farooqi directed or even intended that the assessment in respect of the ground floor, about which there was no dispute, should be re-opened. No doubt, under section 10 2) of the said Act, he bad the power to suo /ecru revise the assessment even of the ground floor or direct that a further enquiry be made in respect of it, but we are unable to find anything specific in the order of Mr. Salman Farooqi, directing that the categorization of the ground floor of the petitioner may also to be revised. However, this does not ber the Director, in exercise of his suo motu revisional power under section 10(2) of the said Act, at any time to revise the assessment in respect of the ground floor of the petitioner if he comes to the conclusion that illegality or impropriety has been committed in determining the assessment therefor. It was therefore, open to Mr. M. M. Usmani, the successor of Mr. Salman Farooqi, to revise the assessment of even the ground floor of the petitioner, of course in accordance with the provisions of the law.
14. So far as the second contention of the learned counsel for the petitioner is concerned, namely, that the petitioner's property has been wrongly assessed to assessment on the formula for commercial establishments, when in fact it is an industrial establishment, the case of this petitioner is similar to that of Lipton (Pakistan) Ltd. Company. Like the latter Company, tile petitioner is engaged in the busines of tea-blending and packing and further has also been registered as a factory under the Factories Act, 1934. In view of this position, the petitioner's premises cannot be assessed on the formula for commercial establishments, notwithstanding the fact that neighbouring properties may be assessed according to that formula. Accordine to section 5 of the said Act, the annual value of any building is to be ascertained by estimating the gross annual rent at which the building may be let or might reasonably be expected to be let. There is no evidence that the property in question of the petitioner could reasonably be expected to be let at the rate of 85 paisa per Sft. It may be pointed out that a part of this property consists of lavatories and staircases, which, in the case of the Lipton (Pakistan) Ltd., have been excluded in computing the G.
A. R. V., but have not been so excluded in the cam of this petitioner. Furthermore, according to the impugned order of the Director-General, a joint inspection was conducted of the premises of the petitioner, is the presence of a representative of the petitioner, and this inspection revealed that en area of 19,500 Sft. Was covered by temporary sheds, etc. We find it difficult to believe that these sheds could reasonably be expected to be let at the rate of 85 paisa per Sft. In any case, since the department after a careful analysis, have prepared a formula f Jr ascertaining the G. A. R. V. Of commercial establishments, industrial establishments, godowns, etc. That formula should be followed, unless it is unreasorable or otherwise does not apply. It may be pointed out hero that even according to the formula for commercial establishments the G. A R. V. Of the upper floor is to be assessed at 10% less than the G. A R. V. Of the ground fixer, but in the case of the petitioner even this has not been done. In any case, we are of the opinion that the determination of the G. A R. V. Of the petitioner's premises on the basis of the formula for commercial establishments is not in accordance with the law or even the practice of the department.
15. For the reasons discussed by us above, we would quash the impugned orders of the Director- General, dated 29,3-1975, as being without any lawful authority and would restore the orders of Mr. M. J. It Khan dated 31-7-1971. If Mesrss Lipton (Pakistan) Limited have paid any property tax on the basis of the orders which we have quashed, and which is in excess of the property tax payable under the orders of Mr. M. J. R. Khan, the same should be refunded. So far as Constitutional Petition No, 529/1976 is concerned, we would similarly quash the 3 impugned orders, dated 4-10-1975, 3.4- 1976 and 17-6-1976, of the Assessing Authority, the Director and the Director-General, Excise and Taxation, and remand the case to the Director-General for assessing this petitioner's property in question in accordance with the formula for Industrial Units. In the circumstances of the case, there will be no order as to costs.