1. By an agreement, M/s Inpaktech Industries (Pvt.) Limited, Rawalpindi, hereinafter called the petitioner, had been awarded contract by the Zila Council, Rawalpindi, for collection of Goods Exit Tax, for the financial year 1997-98, commencing from the 16th July, 1997, to the 30th June, 1998, at the consideration of Rs,11,00,00,000 (eleven crore rupees). Earlier to the execution of the said agreement, the Government of the Punjab by its Order No,SOVI(LG)2-73/95, dated the 20th May, 1997, issued under section 149 of the Punjab Local Government Act, 1996, informed the Administrators Zila Councils of the Punjab that the thirty-two items mentioned therein shall be exempt from the payment of Goods Exit Tax with effect from the next financial year or after the date of expiry of contract of the current financial year. In the light of this Order, in the aforesaid agreement between the petitioner and Zila Council, Rawalpindi, clause 15 was incorporated clarifying that the goods specified in the aforesaid Order of the Government of the Punjab shall be exempt from the levy of Goods Exit Tax.
2. 2.The petitioner has, thus, through this Constitutional petition, assailed the abovereferred Order of the Government of the Punjab claiming that under the provisions of section 149 of the Punjab Local Government Act, 1996, where under thirty-two items had been exempted from the levy of Goods Exit Tax, the Provincial Government has no such legal authority and consequently the said Order was void ab initio and accordingly be declared as illegal and without lawful authority.
3. 3.The petition was opposed on behalf of the Government of the Punjab. In particular, the very maintainability of the Constitutional petition was contested on several grounds. Malik Muhammad Kabir, the learned Assistant Advocate-General, contended that under Rule 19 of the Punjab Zila Council (Export Tax) Rules, 1990, and as provided in clause 29 of the agreement executed between the petitioner and Zila Council, Rawalpindi, awarding the contract of collection 'of Goods Exit Tax, in case of any dispute between the contractor and Zila Council, such dispute shall be referred to the Commissioner for arbitration. In view thereof, it was urged that, since an alternate remedy was available, the petitioner could, not invoke the provisions of Article 199 of the Constitution. It was also contended by the learned Assistant Advocate-General that the petitioner had entered into the agreement for collection of Goods Exit Tax knowingly fully well that the aforesaid thirty-two items were exempt from the levy of such tax and in this respect a specific clause was incorporated in the agreement. Hence, at this stage the petitioner neither could challenge the exemption allowed to thirty-two items from taxation nor the company had any locus standi to bring the present Constitutional petition. In this context, it was only Zila Council, Rawalpindi, which could agitate against the exemption of thirty-two items from taxation as its income had been reduced but definitely the petitioner had offered bid for collection of tax keeping in view the availability of reduced number of items for the purpose of taxation.
4. The learned Assistant Advocate-General next referred to rule 10 of the Punjab Local Council (Taxation) Rules, 1980, claiming that under this rule read with section 149 of the Punjab Local Government Act, 1996, the Proviricial Government is empowered to issue tax schedules and in turn the local councils are under an obligation to follow such tax schedules whereby the Government can include or exclude any item for levy of export tax. It would be convenient to reproduce the abovereferred to rule 10 of the Punjab Local Council (Taxation) Rule, 1980, and section 149 of the Punjab Local Government Act, 1996:-- "Section 149. Increase and decrease in tax. --(1) Government may direct a local council-- (a)to levy any tax; (b)to increase or reduce any such tax or the assessment thereof to such extent as may be specified; or (c)to suspend or abolish the levy of any such tax.
(2) If a direction issued under subsection (1) is not complied with within the specified time if any Government may make an order giving effect to the direction."
4. "Rule 10. Model schedules.--(1) Government may frame model tax schedules and where such schedules are framed the Chairman shall be guided by such schedules in frgning his taxation proposals.
(2) Where Government have framed a model tax schedule regarding the tax proposed to be levied, the Chairman shall, in a note appended to the taxation proposals specify whether the model has been followed and where any departure has been made from the model shall give the justification therefor."
5. 5.No doubt that by virtue of section 177 of the Punjab Local Government Act, 1996, the rule-making power vests with the Provincial Government. Under subsection (3) of section 177, (ibid), and section 24 of the General Clauses Act, 1897, the rules made by a local council in pursuance of the Punjab Local Government Ordinance, 1979 (VI of 1979), or by the Government which are not inconsistent with the 1996 Act or the rules made thereunder shall respectively continue and shall be deemed to have been validly made unless rescinded, repealed, amended or re-framed. Nevertheless, it is clear from the aforesaid provisions of section 149 (ibid) that the Provincial Government is empowered to direct a local council, including a Zila Council, to levy any tax, increase of decrease rate of tax, suspend or levy any tax. Likewise, the Government can under Rule 10 of the Punjab Local Council (Taxation) Rules, 1980, frame "a model tax scheduled regarding the tax proposed to be levied" which is required to be followed by the concerned local council and where any departure is made, a justification is required to be given, meaning thereby that whereas the Government has power to issue directions to a local council for levying any tax, increasing or reducing the rate of tax, suspending or abolishing the levy of any tax (which power shall include issuing directions for allowing exemption to any goods from the levy of tax) or for that purpose make a model schedule for taxation, but such directions are required to be implemented by the concerned Local Council. In other words, the Government can only issue directions for taxation but the actual power to levy tax, reduce or increase its rate, suspend, exempt or abolish any tax, may be in pursuance of such directions, lies only with the local council or as in the present case, with the Zila Council, Rawalpindi.
6. In this context, even the Punjab Local Council (Taxation) Rules, 1988 or the Punjab Zila Council (Export Tax) Rules, 1990, do not contain any such provision empowering the Provincial Government to levy any tax on the subjects within the competence of local council, exempt, reduce or increase the rate of tax by itself. There is no doubt that, the Government has the power under Rule 10(3) of the Punjab Local Council (Taxation) Rules, 1988 and under section 179 of the Punjab Local Government Act, 1996, to get its directions implemented in letter and spirit, but the fact remains that the authority to implement such directions vests with the local council only.
7. 6.In Mukhtar Ahmed Shaikh v. Government of Sindh (PLD 1991 Karachi 372), wherein the vires of the Notification dated 14-5-1990 issued by the Housing Town Planning, Local Government and Rural Development Department, Government of Sindh allowing exemption to certain machinery and equipment from levy of octroi was in issue, the High Court of Sindh relying upon the judgment of the Supreme Court in Civil Appeal No,39-K of 1984 held that the Provincial Government had no authority to issue notification allowing exemption from payment of octroi. Similar view was taken by the High Court of Sindh in Jawaid Ahmed v. Province of Sindh (1993 CLC 1746).
8. 7.The contentions similar to the claim of the learned Assistant Advocate-General as to the maintainability of the Constitutional petition were raised before the High Court in the case of Mukhtar Ahmed Shaikh (supra) and the High Court had come to the conclusion that the Constitutional petition was not liable to dismissal because it related to contractual liability as the question involved in the writ petition was the vires of Notification dated 14-5-1990. In the present case as well, the petitioner has not assailed the contract or claimed any relief against Zila Council, Rawalpindi, but has only challenged the authority of the Provincial Government to exempt certain goods from the levy of Goods Exit Tax. In view thereof, the matter need not to be referred for arbitration under rule 19 of the Punjab Zila Councils (Export Tax) Rules, 1990, as neither any dispute between the Zila Council and petitioner is pending nor any relief has been claimed by the petitioner under the contract for collection of tax executed between the parties. The relief claimed by the petitioner through this petition thus certainly falls within the purview of Article 199 of the Constitution.
9. 8.The claim of the petitioner that under section 149 of the Punjab Local Government Act, 1996, whereunder the so-called Notification No,SOVI(LG) 2-73/95, dated the 20th May, 1997, was issued by the Local Government and Pural Development Department. Government of the Punjab, was without lawful authority is not without force. The said provisions do not empower the Provincial Government to allow exemption on any goods from the levy of Goods Exit Tax directly by itself as the power to allow such exemption vests with the concerned local councils, including Zila Councils.
10. Nevertheless, the Provincial Government is fully authorised to issue directions to the Zila Council for granting exemption from taxation to such goods as it may direct. The Provincial Government is also empowered under the statute and the rules made thereunder to get its instructions' and directions allowing such exemption implemented in letter and spirit.
11. 9.As regards the objection of the Provincial Government that the contract for collection of Goods Exit Tax was awarded to the petitioner keeping in view the reduced number of the items liable to taxation, the striking down of the aforesaid Notification would not provide any unnecessary financial advantage to the petitioner. Nor the declaration of Notification No,SOVI(LG)2-73/95, dated 20-5-1997, being without lawful authority will ipso facto entitle the petitioner to forthwith commence collecting Goods Exit Tax on the goods which were included in the aforesaid letter/notification. The contract for collection of Goods Exit Tax was awarded to the petitioner for specific goods. If now the goods which were earlier exempted from taxation also come within the taxation net, recovery of tax thereon shall be the exclusive domain of Zila Council as such goods were not included, for the purpose of tax collection, in the contract executed between the petitioner and Zila Council, unless the Zila Council authorises the petitioner for collection of tax on these items as well on such terms and conditions as are settled between them.
10. In view of the above discussion, the present petition is allowed and the impugned Letter/Notification No,SOVI(LG)2-73/95, dated 20-5-1997, issued by the Local Government and Rural Development Department, Government of the Punjab, is declared to have been issued without any lawful authority and of no legal effect. There shall, however, be no order as to the costs.