' SH. RIAZ AHMED, J.---The above-noted appeals through leave of this Court are being disposed of through this judgment as in all the appeals common questions of law and facts are involved. For the disposal of these appeals, reference to the background of the litigation in these cases will be necessary. The appellant, Central Board of Revenue, thought it necessary to introduce a system for pre-shipment inspection of the goods specified in Schedule I to the Customs Act, 1969 (hereinafter called the Act), to be imported into Pakistan. To achieve the said object, two companies namely, Societe General De Surveillance and Cotecna Inspection SA, were appointed to undertake the said task. The underlying idea behind this pre-shipment inspection at the ports of Pakistan was to determine correct value and quality of goods to be imported into Pakistan, so that the over- invoicing and under-invoicing by the exporters and importers are effectively checked. With a view to giving legal cover to the pre-shipment inspection, by virtue of Tax Adjustment Ordinance (Ordinance (LXXIX of 1996) section 18-B was inserted into the Act. The newly-added section 18-B, reads as under:-- "(18-B) Levy of service charge:-- -The Federal Government may, by notification in the official Gazette, levy a service charge equivalent to two per cent. Ad valorem on all such goods specified in the First Schedule to this Act as are subject to pre-shipment inspection:- ' Provided that for the purposes of Sale Tax Act, 1990, such service charge shall not constitute a part of the value supply."
2 . On 22-10-1996 in pursuance of section 18-B, the following notification was issued:-- "S.R.O.... (1).--In exercise of the powers conferred by section 18-B, of the Customs Act, 1969 (IV of 1969), the Federal Government is pleased to levy a service charge equivalent to two per cent. Ad valorem on all such goods as are specified in the First Schedule to the said Act and are subject to inspection under the Inspection, Valuation and Assessment of Imported Goods Rules, 1994."
' Vide S.R.O. No,1108(1) of 1994, rules. Were framed by the appellants under section 219 read with sections 30, 32, 79 and 258 of the Act read with paragraphs 8 and 23 of the Third Schedule to cater for the pre-shipment inspection of the goods specified in Schedule I to the Act. A number of writ petitions were filed in the Lahore High Court as well as the Balochistan High Court and the High Court of Sindh to call in question the levy of the service charges as envisaged by section 18-B, of the Act. A learned Single Judge of the Lahore High Court vide judgment, dated 25-2-1997 allowed the said writ petitions on the ground that the levy of service charges was ultra vires of the Constitution and such levy could not be equated with customs duty. The Balcchistan High Court vide its judgment, dated 8-5-1997 dismissed the writ petitions holding that the levy of service charges was in accordance with law. Aggrieved by the judgment delivered by the Lahore High Court, the appellants, the Central Board of Revenue and others, sought leave to appeal and the appellant:- aggrieved by the judgment delivered by the Balochsitan High Court as well as the High Court of Sindh also challenged the same through a similar petition seeking leave to appeal and as stated above, leave was granted to the appellants against the judgment of the Lahore High Court as well as against the judgments delivered by the Balochistan High Court and the High Court of Sindh.
3. We have heard the learned counsel for the parties at length. It was vehemently urged by the learned counsel for the respondents in appeals filed by the Central Board of Revenue and the appellants challenging the Balochistan High Court judgment that section 18-B as inserted in the Act levying service charges was ultra vires the Constitution inasmuch as the Federal Legislature had no authority to levy such a charge because the same was not provided either in the Federal Legislative List or in the Concurrent Legislative List in the Fourth Schedule to the Constitution.
Precisely, it was submitted that the service charges cannot be equated with or considered as a customs duty and, therefore, fall outside the purview of Item 43 of the Federal Legislative List. It was further urged before us that the service charge was a fee in lieu of the performance of certain services, but the said services were not being rendered. For the benefit of the importers, but this was a fee, which was being paid to the two companies, namely, Messrs Societe Generale de Surveillance and M/s. Cotecna Inspection, appointed to undertake the task of pre-shipment inspection.
4. On the other hand, these arguments were controverted on behalf of the Central Board of Revenue and it was urged that notwithstanding that the nomenclature of the levy was service charges, but essentially it was a customs duty, which could be validly levied by the Federal Legislature under Item 43 read with Item 53 of the Federal Legislative List in the Fourth Schedule to the Constitution. It was further urged on behalf of the Central Board of Revenue that the Court is required to look into the pith and substance and not the nomenclature for determining its validity.
On behalf of the appellants reliance was placed upon the judgment reported as M/s. Sohail Jute Mills Ltd. And others v. Federation of Pakistan (PLD 1991 SC 329) to canvass that the levy of Iqra surcharge was upheld as a customs duty. It was further urged that under section 184, of the Act, a duty of customs can be levied not only under the Act, but any other law for the time being in force, which include the Tax Adjustment Ordinance, 1996. In this context, it was further urged on behalf of the appellants that it was duty of the Court to explore all possible avenues for upholding the validity of any law passed or action taken by the public functionary. To support this arguments, reliance was placed on the judgment reported as M/s. Nishat Textile Mills Ltd. v. Federation of Pakistan (PLD 1994 Lah. 347).
5.. The controversy arising for determination in these appeals is to ascertain the exact nature of levy as to whether it is a customs duty in contradistinction to the terms 'fee' and 'tax'. As far as fee is concerned, it is distinguishable from tax. The distinction between "tax" and "fee" lies primarily in the fact that a tax is levied as a part of common burden while a fee is paid for a special benefit or privilege. Fees confer a special capacity although the special advantage as for example, in the case of registration fee for documents or marriage licence is secondary to the primary motive or regulation in the public interest. Public interest seems to be at the basis of all impositions, but in a fee it is some special benefit, which the individual receives. It is the special benefit accruing to the individual, which is the reason for payment in the case of fees. In the case of a tax, the particular advantage if it exists at all, is an incidental result of State action." This distinction was elaborated by a Division Bench of the Dacca High Court in the case reported as Abdul Majid and another v.
Province of East Pakistan and others (PLD 1960 Dacca 502) and it was held unless the fee is earmarked or specified for rendering services to the payee, it would amount to a tax and not a fee.
In another judgment, reported as Muhammad Ismail & Co. v. Chief Cotton Inspector, Multan Division (PLD 1966 SC 388), this concept was highlighted. The then Provincial Commissioner of West Pakistan under the provisions of the West Pakistan Cotton (Control) Act (IV of 1949) imposed a fee on unginned cotton received in factories for ginning. The challenge was thrown to the validity of the fee on the ground that under clause (p) of section 30 of the Act entitled the Government to realize fee to meet the salaries of the staff only whereas, rule 26 exceeded that power and authorized the Government to impose fee even to cover the cost of improvement of agriculture relating to the cotton crop grown in West Pakistan. Section 30(p), of the Act, empowered the Government to levy the fee on the occupiers of the cotton ginning, cotton pressing or cotton-seed oil factories, by the cotton dealers or by the managers of companies to cover the expenses incurred by the Government on the administration of the Act. After careful consideration of all the facts, the nature of the Act, section 30 read with rule 26 and the validation clause, this Court agreed with the High Court that the levy was a fee for services to be rendered and could only be realised from the persons, who were benefited by those services. It was found that the occupiers of the cotton ginning factories were benefited, if not directly, at least indirectly by the measures taken for the improvement of cotton under the Act.
6. On the other hand the nature of tax is entirely different. The term "tax" was defined by Chief Justice Lathem of the High Court of Australia in Mathews v. Chicory Marketing Board (1960 CLR 263).
The learned Chief Justice held that tax is a compulsory exaction of money by public authority for public purposes enforceable by law and is not payment for services rendered. A fee may be generally defined to be a charge for a special service rendered to individuals by some governmental agency. In Muhammad Ismail & Co.'s case (supra), it was also observed that a fee may be compulsorily levied as well as tax, but the distinction between them lies primarily in the fact that a tax is levied as a part of the common burden while a fee is a payment for special benefit or privilege. The same view was followed by this Court in the case of M/s. Sohail Jute Mills Ltd. v. Federation of Pakistan and M/s. Nishat Textile Mills Ltd. v. Federation of Pakistan (supra).
7. The next question would be what is the nature of the customs duty? The expression "customs duty" has not been defined in the Act and, therefore, to know its concept, one will have to fall back upon the meaning of the expression given in the dictionaries. According to "Handbook of Legal.
Terms and Phrases Judicially Defined" by M. Ilyas Khan, the customs duty is one of the services of revenue. In Ballentine's Law Dictionary, 3rd Edition, page 300, the customs duty has been defined as the tariff payable on imported merchandise, the levy or tax applied by the Government on the importation of commodities into the country. It is not merely a duty on the act of importation, but a duty on the thing imported. It is not confined to a duty levied while the article is entering the country, but extending to a duty levied after it has entered the country. Black's Law Dictionary, 6th Edition, page 386 defines customs duty as tax on the importation and exportation of commodities, merchandise and other goods; the tariff or tax assessed upon merchandise imported from or exported to a foreign country.
8. It will be advantageous to understand the concept of tax as defined in various dictionaries. In Black's Law Dictionary, 6th Edition, p.1457, the term 'tax' has been defined as a charge by the Government on the income of an individual corporation or trust as well as the value of the estate or goods. The objective necessitating the tax is to generate revenue to be used for the needs of public; a pecuniary burden laid upon individual or property to support the Government and is a payment exacted by the legislative authority. According to this dictionary, the essential characteristics of a tax are that it is not a voluntary payment or donation, but an enforced contribution, exacted pursuant to legislative authority. In Webster's Encyclopaedic Unabridged Dictionary, the tax is a sum of money demanded by a Government for its support or for specific facilities, a burdensome charge, obligation or demand in consideration of the possession or occurrence of income, goods, sales etc. It further-defines it 'to lay a burden on'. In the same dictionary at page 521, 'fee' has also been defined as charge or payment for services as doctor's fee, a sum paid or charged for a privilege, such as admission fee, a charge allowed by law for the services of a public officer. In Stroud's Judicial Dictionary, the terms "tax" has been defined as a compulsory contribution imposed by sovereign authority and received from the general body of subjects or citizens. In Law Lexicon, 2nd Edition at page 847, the fee is defined to be a charge for special services rendered to individual by some Governmental Authority. It is a sort of return or consideration for services rendered and, therefore, it is necessary that the levy of fee should, on the face of legislative provision, be correlated with the expenses rendered by the Government in rendering the services. No doubt both tax and fee are compulsory exactions, but the difference between the two lies in the fact that the tax is not correlated to a particular service rendered, but is intended to meet the expenses of the Government and a fee is meant to compensate the Government for expenses incurred in rendering services to the person from whom fee is collected.
A tax is for the purpose and goes to the general revenue unlike fee. This view was also followed by the Indian Supreme Court in the case reported as The Commissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt (AIR 1954 SC 282). In Wharton's Law Lexicon, 14th Edition, page 407, the fee has been defined as reward or recompense for service while tax at page 978 has been defined as an impost; a tribute imposed on the subjects. It is compulsorily exacted from the citizens for the support of the Government.
9. To sum up, judged in the light of the definitions of fee and tax, the Customs duty is nothing, but a tax because it is imposed upon the importer or exporter on the import and export of goods while fee on the other hand is received for rendering certain services for the benefit of the payees.
10. The crucial question arising for determination is what is the nature of the service charge to be levied in lieu of pre-shipment inspection of the goods intended to be exported from a port and to be imported into Pakistan and whether it is a customs duty and is intro vires of the Constitution. It is abundantly clear that it is a fee, Nit it is not meant for the benefit of the payees, but is meant for the benefit of the two companies named above, who have been appointed to carry out the pre- shipment inspection of the goods. If it is not meant for the benefit of the importers of goods into Pakistan, then can it be charged from the importers to confer a benefit not upon the payees for Government, but to private companies. It was strenuously argued that the levy of service fee under section 18-B, of the Act is in the nature of customs duty because it was levied by section 18-B, which ha's been inserted into the Act. In this behalf, reliance was placed on the judgment reported as.M/s. Sohail Jute Mills Ltd. (supra). In the reported case, by virtue of the Finance Ordinance, 1982 and the Finance Act, ,1985, Iqra surcharge on imported goods was levied and was to be collected as additional customs duty on the importation of goods specified in the First Schedule to the Act at the rate of 5% of the value of the said goods as determined under section 25 of the said Act. The said levy was challenged and it was argued that there was distinction between Iqra surcharge and the customs duty and in lieu of the payment of Iqra surcharge, the appellants were entitled to certain exemptions. This Court repelled the said contention and held that the levy of Iqra surcharge as additional customs duty under the Finance Ordinance, 1982 and the Finance Act, 1985 was legal because the Finance Act expressed it as an additional customs duty as Iqra surcharge on the importation of goods specified in the First Schedule to the Customs Act. It was further observed by this Court that it was an additional tax, which was being imposed in the nature of customs duty.
Reliance was also placed by this Court on section 18 of the Act under which tax could be imposed under any other law'for the time being in force and therefore, the levy of Iqra surcharge by way of additional customs duty under the Finance Act, 1985 was intra vires of the Constitution. Reference, thus, to the. Case of M/s. Sohail Jute Mills Ltd (supra) is of no avail to the Central Board of Revenue because under section 18-B, the levy of service fee has not been defined or expressed as an additional customs duty and is designed for the benefit of the two private companies.
11. Another interesting question in this context that stares into one's face is whether levy of service charges under section 18-B in lieu of the services rendered for pre-shipment inspection would be payable by the importer on such ports in such countries where the offices of these two private companies are located, but what about those ports and countries where their offices are not located. The learned Deputy Attorney-General was unable to give any satisfactory answer to this question.
12. To justify the imposition of service charge under section 18-B of the Act, it was contended on behalf of the appellants that the charge was intra vires of the Constitution in view of Entry 43 read with Entry 54 and Entry 59 of the Federal Legislative- List in 4th Scdule to the Constitution. In this behalf reliance was also placed on the judgment delivered by this Court reported as Sh. Abdul Rahim, Allah Ditta v. Federation of Pakistan (PLD 1988 SC 670), whereby the imposition of regulatory duty was held to be intra vires of the Constitution. It was further contended that while interpreting a piece of legislation, the reference to the nomenclature is not the key to judge the vires of the legislation, but the pith and substance is to be looked into to determine whether the legislative power was exercised in accordance with the Federal Legislative List. In this behalf, reliance was placed upon the judgment reported as (AIR 1939 Federal Court 1) In the matter of the Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938 and the judgment reported as State of Rajasthan v. G. Chawala and another (AIR 1959 SC 544).
13. On the face of it, the argument seems attractive but a deeper analysis in the light of the case- law on the subject renders this arguments in the context of this case as devoid of force. Item 43 of the Federal Legislative List in the 4th Schedule to the Constitution reads as under:-- "Duties of customs, including export duties." Entry 54 of the said list reads as under:-- "Fees in respect of any of the matters in this part, but not including fee taken in any Court."
' Entry 59 of the aforesaid list reads as under:-- "matters incidental or ancillary to any matter enumerated in this part.'
' Emphasis was laid on Item 59 to contend that the service charge under section 18-B, of the Act was intra vires by application of the theory of pith and substance. The facts of the case reported as AIR 1939 Federal Court 1 were that by virtue of section 3(1) of a provincial piece of legislation, known as Central Provinces and Berar Sales of Motor Spirit and Lubrcants Taxation Act, 1938, a tax was levied on every retail dealer on the retail sales of motor spirit and lubricants. The retail dealer was also defined by the Act as any person who, on commission or otherwise sells or keeps for sale motor spirit or lubricants for the purpose of consumption by whom or on whose behalf, it is or may be purchased. Both motor spirit and lubricants were manufactured and produced in India. Motor spirit was subject to excise duty imposed under the Motor Spirit Duties Act, 1917, an Act of the Central Legislature while no excuse duty had been levied on lubricants. Entry 45 in the Federal Legislative List in 7th Schedule to the Government of India Act, 1935, read as under:-- "Duties of excise on tobacco and other goods manufactured or produced in India."
' It was thus contended before the Federal Court of India that the tax imposed by virtue of section 3 of the above named provincial piece of legislation in so far as it may fall on motor spirits and lubricants of India origin is a duty of excise within the meaning of Entry 45 of the Federal Legislative List and, therefore, the legislation amounted to an intrusion upon field of taxation reserved by the Government of India Act, 1935 exclusively for the Federal Legislature. To resolve this controversy a special reference was made by the Governor-General under section 2(13) of the Government of India Act, 1935 to the Federal Court of India. While dealing with this question the Federal Court of India laid down the following rule of interpretation of the Constitution:-- "The provision of an Act like the Government of India Act, 1935, should not be cut down by a narrow and technical construction, but considering the magnitude of the subjects with which if purports to deal, in a very few words, it should be given a large and liberal interpretation so that the Central Government, to a great extent, but within certain fixed limits, may be mistress in her own house, as the Provinces, to a great extent, but again within certain fixed limits, are mistresses in theirs."
' It was further laid down by the Federal Court of India that in an inquiry whether an enactment is ultra vires, the Court must ascertain the true nature and character of the challenged enactment, its pith and substance and not the form alone, which it may have assumed under the hands of the draftsmen. Where there is an absolute jurisdiction vested in a Legislature, the laws promulgated by it must take effect according to the proper construction of the language in which they are expressed, but where the law-making authority is of a limited or qualified character, obviously it may be necessary to examine, with some strictness, the substance of the legislation, for the purpose of determining, what it is that the Legislature is really doing. The Federal Court of India further proceeded t9 observe that in the interpretation of a completely self-governing Constitution founded upon written organic instrument, if the text is explicit, the text is conclusive alike in what it directs and what it forbids. When the text is ambiguous, as for example, when the words establishing two mutually exclusive jurisdictions are wide enough to bring a particular power within either, recourse must' be had to be context and scheme of the Act. To resolve this controversy, the Federal Court of India laid down that the Federal Legislature had the power to impose duties of excuse upon the manufacturer or producer of the excisable articles or at least at the stage of, or in connection with manufacture or production and it extends no further. Thus, the Central Legislature will have the power to impose duties on excisable articles before they become part of the general stock of the Provinces and the Provincial Legislature has exclusive power to impose a tax on the sales thereof. Hence the Provincial piece of legislation, Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938, which levies taxes on retail sales is not ultra vires of the Legislature of the Central Provinces and Berar. Such power vested in the Provinces.
14. Reliance on this case is of no avail to the appellants because on the touchstone of the ratio laid down in this case and by application of the theory of pith and substance, we do not find any justification nor any support from the relevant entries in the Constitution for the validity of the imposition of service charge. The theory of pith and substance was also considered in the case of G. Chawala (supra). While interpreting the various entries in the Federal Legislative List, it was held that these occasionally overlap and are to be recorded as enumeratio simplex of broad categories. Where in an organic instrument, such enumerated powers and if some conflict arises, then it is necessary to examine the impugned legislation in its pith and substance and only if that pith and substance falls substantially within an entry or entries conferring legislative power, only then it can be held to be valid piece of legislation. A slight transgression therefrom would render it invalid. It was also observed that power to legislate on a topic of legislation carries with it the power to legislate on an ancillary matter, which can be said to be reasonably included in the power given.
Applying the dictum laid down in this case as well, the service charged within the meaning of section 18-B can, by no stretch of imagination, be considered as a fee towards the customs duty on import or export. To the I contrary, it is meant to meet the expenses for pre-shipment inspection.
Similarly, reference to the judgment in Abdul Rahim's case (supra), is also of no avail to the appellants inasmuch as it deals with regulatory duty, which was imposed under section 18 of the Customs Act in addition to the customs duty and it was held that it amounted to a customs charge imposed to maintain a proper balance in fluctuating market although the same was described by a different nomenclature, which does not make it distinct from customs duty. Keeping in view the language of section 18(3) of the Act, it was also held that it reinforces the concept of its being an additional customs charge. This Court also concluded that regulatory duty comes within the amount of Item 43 of the 4th Schedule. The theory of pith and substance within the meaning of Entry 59 in the Federal Legislative List was also considered by this Court and in the context of imposition of regulatory duty, it was held that the doctrine of incidental and ancillary power is that every legislature must have incidentally and ancillary power to make sure that legislation with respect to its enumerated powers may be effective. It was also observed that it follows from this doctrine that everyting necessary to the exercise of power is included in the grant of power.
Although the words 'incidental' and 'ancillary' literally mean things of lesser or subordinate degree or of consequential nature, but in legislative interpretation they mean more than this.
15. Considering the case from all angles, although the Federal Legislature is competent to legislate for the imposition of fees within the meaning of Entry 54, in the Federal Legislative List, Fourth Schedule to the Constitution, but again as already discussed hereinbefore, one has to see what is the nature of the legislation and whether the same could have been legislated within the ambit of the powers of the Federal Legislature. No doubt, legislation can be made to impose fee in respect of any of the matters in the Federal Legislative List, but definitely not for pre-shipment inspection, the benefit of which has to go to the companies appointed to carry out the inspection and not to the payees of the fees. The imposition of such fees is not in lieu of services to be rendered for the benefit of its payees.
16. To sum up in the light of the definition and distinction between 'tax' and 'fee' as demonstrated above, the service charge as levied by virtue of section 18-B, inserted into the Act through Tax Adjustment Ordinance, the charge is not a fee, because it is neither meant for benefit of payees nor its collection enables the Government to carry out expense, for the benefit of importer. The world has shrunk into a global village. With the advancement of information and media technology, the determination of prices is an easy task, and the quality of goods to be exported or imported can be checked through the machinery provided by the Customs Act.
17. For the foregoing reasons, we are of the view that the imposition of service charge as imposed under section 18-B, of the Act towards the pre-shipment inspection is ultra vires of the powers of the Federal Legislature. Resultantly, the appeals filed by the Central Board of Revenue fail and are hereby dismissed while the appeals filed by the private appellants are allowed. The parties are left to bear their own costs.
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