' MRS. KHALIDA RACHID, J.---We propose to dispose of Writ Petitions Nos.1122 of 1995 and 1189 of 1995 by this common order as both have arisen out of the same circumstances and involved common question of law and facts.
2. Petitioner, Frontier Ceramics, a Public Ltd. Company, registered under the Companies Ordinance, 1984, has set up a Project having a factory located at Jamrud Industrial Estate, Peshawar for the manufacturing of ceramics tiles and sanitary wares After completion of the project the petitioner vide Letter No, FCL/2041, dated 11-8-1986 requested the Assistant Collector, Customs (respondent No, 3) for permission to commence trial production, expectedly in the middle of September, 1986.
The Assistant Director Development Directorate of Industries and Commerce Development, accordingly issued a certificate dated 30-9-1986, certifying commencement of the trial production of ceramic tiles by the petitioner unit with effect from 30-8-1986. Through Letter No,FCL/2040 dated 15-4-1987, the petitioner informed Assistant Collector Customs that factory had started the trial production of the sanitary ware and the actual date for its commercial production would be communicated in the course. Consequently, the petitioner through letter dated June 2, 1988 again informed the Assistant Collector Customs about the commencement of the commercial production of ceramics tiles and sanitary wares with effect from July, 1988.
3. By virtue of section 3 of the Sales Tax Act, 1990 every registered person in the course of furtherance of any taxable activity carried on by him shall be charged, levied and paid tax known as sales tax at the rate of 12.5% of the value of taxable supplies made in Pakistan and on goods imported into Pakistan. However, respondent No, 1 (Ministry of Finance and Economic Affairs, Government, of Pakistan) vide Notification No,SRO/529(1)/88, dated 26-6-1988 was pleased to direct that all goods produced or manufactured by such industries which are set up between 1-7- 1988 and 30-6-1991 in the Province of Balochistan and the N.-W.F.P shall be exempted from the taxes payable under the aforesaid Act
4. Pursuance to the said Notification the petitioner vide Letter No,FCL/2941, dated 15-8-1998 addressed to respondent No,2 (Central Board of Revenue) requested therein for the exemption of sales tax for a period of eight years commencing from 1-7-1988 on the plea that the unit went into commercial production after the cut off date i,e,, 1-7-1988.
5. In reply thereof, the Second Secretary of respondent No,2 by letter dated 26-11-1988 clarified to the petitioner that through amended Notification S.R.O. No,857 (1)/88, dated 26-9-1988 the expression 'set up' shall mean the date on which the industry goes into production including trial production.
6. The petitioner through letters, dated 16-6-1992, 10-2-1993 and 17-7-1993 requested respondent No, 1 for the withdrawal of Notification No,857(1)/88, dated 26-9-1988 and allow the petitioner exemption on the sales tax. Further requesting refund of the sales tax amounting to Rs,121,192,973 paid between 1986 till September, 1993. But the respondents did not accede to the request.
' The petitioner being unsuccessful before respondent No 1 in getting relief, lodged a complaint before Wafaqi Mohtasib (Ombudsman), who after taking cognizance of the matter vide order dated 22-2-1995 concluded that commercial production by the petitioner actually commenced with effect from 1-7-1988 and the industry having been set up on said date was entitled to the exemption for the sales tax in terms of Notification dated 26-6-1988 and hence the Notification dated 28-9-1988 was declared mala fide perverse unjust oppressive and ineffective against the rights of the petitioner-respondent No,2 (C.B.R.) aggrieved of order of Mohtasib preferred representation under Article 32 of President's Order 1 of 1983 before the President of Pakistan. The representation was allowed and recommendations of the Ombudsman dated 22-2-1995 were set aside by the President of Pakistan on the basis of order dated 26-10-1995.
7. Displeased with the refusal of the respondents to grant relief in the shape of exemption of sales tax in terms of Notification S.R.O1529 (1)/88, dater 26-6-1988 the petitioner invoking Constitutional jurisdiction of this Court, filed Writ Petition No, 1122 of 1995 while aggrieved of the order of the President of Pakistan dated 26-10-1995 preferred Writ Petition No,1189 of 1995.
8. We have heard Mr. K.M.A. Samdani, Advocate for the petitioner and Mr. Shahzad Akbar Khan, Deputy Attorney-General assisted by Mr. Abdul Rauf Rohaila, Advocate, for the respondents. Both the petitions were taken up and argued simultaneously, however, the arguments were addressed mainly in Writ Petition No, 1122 of 1995.
9. Arguing Writ Petition No,1122 of 1995 Mr. K.M.A. Samdani, Advocate appearing for the petitioner contended that impugned notification dated 26-9-1988 and letter dated 28-1-1992 are based on relevant grounds and involved the exercise of powers and improper motives and administrative excesses continuing his submissions, the learned counsel maintained that the imposition and collection of sales tax purportedly on the alleged definition of the word 'set-up' as defined and explained in S.R.O. No,857(1)/88, dated 26-9-1988, is unconstitutional, illegal and ultra vires, and the Act and hence is inapplicable to the case of the petitioner and liable to be struck off, Referring to the definition of word 'set-up' the learned counsel submitted that the word 'set up' is neither defined in Sales Tax Act, 1951 nor the Rules framed thereunder. Therefore, 'setting up' in its generic meaning could be construed to mean obtaining industrial sanction from DI Is, opening of L.C. For machinery, completion of building and fixture and going into commercial production, i,e,, when the products of the industry are regularly manufactured and sold in the open market for earning revenues. He insisted that the goods under trial production were neither of good quality nor of such quantity so as to make regular marketing possible. It was also urged that impugned Notification dated 26-9-1988 cannot be given retrospective effect as exemption being a concession cannot be withdrawn retrospectively, therefore, demand notice dated 31-10-1995 is illegal, mala fide, without jurisdiction and ineffective against the rights of the petitioner. Giving explanation for the delayed start of commercial production of the petitioner's unit, the learned counsel submitted that due to change in the policy of the Government that no industrial unit coming into production after January, 1984 is to be given natural gas connection if it uses gas as fuel, the petitioner had to convert to furnace oil in midstream which caused delay in commencing the commercial production as furnace oil firing created many problems in smooth running of the unit which resulted into suspension of operation of plant for want of supply of the natural gas till August, 1986.
10. Arguing Writ Petition No, 1189 of 1995, Mr. Samdani, Advocate submitted that the representation preferred by respondent No,2 (Central Board of Revenue) under Article 32 of the President's Order No, 1 of 1983 against the order of the Ombudsman before the President of Pakistan was not maintainable as the C.B.R. Does not come within the ambit of aggrieved person as defined in Article 2 of President's Order, 1983 and therefore, order of the President being coram non judice is not sustainable. It was further argued that the impugned order was passed by the President at the back of the petitioner. He was condemned unheard, therefore, order was not only violative of natural justice but also passed in utter disregard to the accepted principle of Islamic Jurisprudence.
11. Mr. Abdul Rauf Rohaila advocating for the respondents vehemently opposed the contentions advanced by the learned counsel for the petitioner. He urged that the petitioner has commenced commercial production much before the crucial date of 1-7-1988 and finished goods to the tune of Rs,64 millions were marketed during the financial years 1986-87 and 1987-88 whereupon the sales tax of Rs,1,414,000 and Rs,6,691,000 respectively were paid by the petitioner to the Government of Pakistan on the sales of the marketed goods. Repelling the arguments of the learned counsel for the petitioner advanced in Writ. Petition No,1189 of 1995 Mr. Rohaila also submitted that respondent No, 2 had rightly preferred representation before the President of Pakistan and that the learned Ombudsman had no authority to stuck down the lawfully issued statutory order.
12. For the proper appreciation of the claims and counter-claims agitated by the learned counsel for the parties, we may refer to Notification, S.R.O. No,529(1)/88, dated 26-6-1988 and impugned S.R.O. No,857(1)/88, dated 26-9-1988, which are reproduced as under:- "S.R.O. No,529(1)/88.---In exercise of the powers conferred by sub-clauses (1) and (2) of section 7 of the Sales Tax Act, 1951 (III of 1951), the Federal Government is pleased to direct that all goods produced or manufactured by such industries which are set up between the 1st July, 1988 and the 30th June, 1991, in the following areas shall be exempt from the tax payable under the said Act:
(i) Province of Balochistan except in Hub Chowki area.
(ii) The North-West Frontier Province.
(2) Sale tax under the said Act shall also not be levied on such goods produced or manufactured by the industries set up in the Federally Administered Tribal Areas, Northern Areas administered by the Administrator. Northern Areas Kashmir during the period specified above.
(3) This Notification shall be effective for a period of eight years commencing from the 1st July, 1988.
(Sd.)
(IRTAZA ZAIDI), ' C No 2(9) ST/88 Part V. Additional Secretary.
' S.R.O. 857(1)/88.---In exercise of the powers conferred by subsections (1) and (2) of section 7 of the Sales Tax Act 1951, the Federal Government is pleased to direct that the following amendment shall be made in this Ministry's Notification No,S.R.O. 529(1)/88, dated the 26th June, 1988.
' In the aforesaid notification after the paragraph the following explanation shall be added, namely: ' Explanation: ' For the purposes of this notification the expression "set up" shall mean the date on which the industry goes into production including trial production which date shall be intimated in writing by an intending manufacturer to the authorized officer of Central Excise and Sales Tax at least fifteen days before commencing such production.
(Sd.)
(IRTAZA ZAIDI), C. No 16(42) ST/88 Additional Secretary".
12. The moot question that fell for determination, depends on the interpretation of expression 'set up' used in the original Notification dated 26-6-1998. Admittedly, neither the Sales Tax Act, 1990 nor the Rules framed thereunder provides the definition of the word 'set up'. It is well-settled that when the word 'set up' is not defined in the Act itself. It must be taken to have been used in its ordinary meaning. Thus, in the absence of the meaning of the term from the statute, we may make reference to its dictionary meaning. According to Chamber's twentieth Century Dictionary, the word 'set up' means "bodily carriage and physique configuration arrangement, structure, situation", Collins Compact English ,Thesaurus defines it "to arrange, begin, compare, establish, find, initiate, install, institute, make provision for, organize, pre-arrange, prepare". Oxford English Dictionary defines the word 'set up' as organize or start, establish in some capacity, make arrangement, prepare".
13. In view of above definitions, the word 'set up' would ordinarily mean when the business is established and the Unit is ready for production. In this context, reference may be made to the ruling of Bombay High Court where similar issue was raised and dealt with in "Western India Vegetables Products v. Commissioner, Income Tax (AIR 1955 Bombay 13). The assessed Company, whose business was that of running an oil mill after receiving a certificate of commencement of business from the Registrar of Joint Stocks Companies, on 20-4-1946, purchased a groundnut Oil Mill in a working condition on 1-11-1946. The company was assessed to tax on its business profits for the assessm ent year 1947-48. The Income Tax Officer disallowed the deductions claimed under section 10(2) of the Income-tax Act, 1922 incurred prior to the purchase on 1-11-1946 on the ground that the company nad started business when it purchased the Oil Mill on 1-11-1946 and therefore, the previous year of the company commenced from the date of purchase and ended on 31-3-1947.
On appeal the appellate authority fixed 20-4-1946 as the date on which a certificate of commencement of business was granted to the Company while the Income Tax Appellate Tribunal fixed 1-9-1946 as the date .On the basis that some time should be allowed to the assessed company prior to the purchase of the raw material. However, in reference application before the High Court, the High Court took a view that for purpose of business the previous year defined in subsection (2) 11 begins from the date of setting up of the business. While discussing the difference between the expressions 'set up' and to 'commence' observed that 'the distinction is this that when a business is established and is ready to commence business then it can be said about that business that it is set up but before it is ready to commence business it is not "set up". It was finally declared that the company could be set to commence business on 1-11-1946 the date on which the Oil Mill was purchased.
14. This principle was also discussed in Ramaraju Surgical Cotton Mills Limited v. Commissioner of Wealth Tax (AIR 1963 Madras 19) where the issue raised was whether the expenses incurred on the construction of new Spinning Unit, established by assessed company till 30-9-1956, prior to the commencement of the Wealth Tax Act, 1957 were exempt under section 5(1) (xxi) of the Act. The Wealth Tax Officer rejected the claim of the assessed company for the reason that this exemption applies only to the new Units set up after the commencement of this Act and that as the applicant Unit was set up prior to the commencement of the Act, the assessed company was not entitled to the exemption. The Madras Hip Court, taking guidance from the abovementioned Bombay High Court ruling observed that Unit is said to be set up after the building was constructed, machinery was installed and the Unit was fully equipped to go into production. It was, thus, held "the proper meaning to be assigned to the expression 'set up' in section 5(1)(xxi) of the Act would be ready to commence business". On appeal filed by Commissioner Wealth Tax before the Supreme Court, the Supreme Court of India (AIR 1967 SC 509) agreeing with the view taken by the Madras High Court dismissed the appeal and observed "the Unit cannot be said to have been set up unless it is not ready to discharge function for which it was being set up. It is only when the Unit has been put into such shape that it can start function as a business or manufacturing organization that it can be said that the Unit has been set up". It was thus held that as the Unit started its production after the commencement of the Act it shall be deemed to have been set up after the enforcement of the Act.
15. In light of above discussion, it has been made clear that the expression 'set up' applies when unit is ready to commence production or start manufacturing goods. The petitioner factory is said to be set up when it was ready for production and manufacturing of goods. The petitioner-company admittedly went into production in June. 1986, much prior to the targeted date i,e, 1-7-1988 it had marketed its goods to the tune of Rs,64 millions whereupon it had paid duties of Rs,8.105 million to the Customs Authorities. Though the petitioner alleged that they have started commercial production after the cut-off date which was communicated to the respondent (A C concerned) through letter dated 2-6-1988 but the said letter, dated 2-6-1988, regarding the commencement of the commercial production cannot be considered to be a valid document for a very simple reason that this letter was never received and acknowledged by the respondents. The petitioner even otherwise could not prove that this letter was in fact sent and communicated to the respondents.
16. As for the plea of the learned counsel for the petitioner that it was only a trial production and the trial production is covered by the exemption which cannot be withdrawn unilaterally by subsequent impugned notification, dated 26-9-1988, as the petitioner had acquired a vested and valuable right in terms of previous and unamended notification this argument does not seem to have much force.. The subsequent impugned notification did not mean to withdraw exemption "it only provides explanation to the word" "set up" in order to avoid any complications or misinterpretation of the expression "set up".
17. If for a minute, the claim of the petitioner is accepted to be correct that the petitioner went into trial production before the crucial date i,e,, 1-7-1988 it does not appeal to reason nor acceptable by any stretch of imagination that the Unit remained in trial production for two years especially when it admittedly marketed its produced goods during the financial year 1986-87 and paid sales tax to the Customs Authorities to the tune of Rs,1.414 million. Similarly, it paid sales tax of Rs,6.691 million for the financial year of 1987-88 on the goods worth Rs,64 millions produced by the Unit before 1-7- 1988.
18. It may be reminded here that sales tax is an indirect tax which is collected from the consumers through manufacturer at manufacturing or wholesale points. At the time of fixing the price of a product the sales tax has always been included in the sale price of the product to be charged from the end consumer. Suppliers and manufacturers work as agent to the Government. A trust is put in the suppliers and manufacturers by the Government to transfer the collected revenue to the Government treasury. The petitioner unit collected the sales tax from the consumer and paid to the Government (respondents) after having been set up and commercially marketed the goods.
19. Reverting to the contention of the learned counsel for the petitioner that the unit was unable to go into commercial production due to lack of supply of natural gas is not acceptable, since the supply of gas was not for the full year, but conditional, to the availability of natural gas during summer season. The petitioner unit was producing goods worth millions of rupees before issuance of original Notification No, 529(1)/88, dated 26-6-1988 and sales tax was being paid since 1986, the unit admittedly ran on the furnace oil and manufactured goods, worth millions of rupees which were sold in the open market and on which the sales tax of millions of rupees was paid.
20. We are also not inclined to agree with the learned counsel for the petitioner that the goods produced during the trial production were not of marketable quality which were lying in the form of heaps of waste in the factory premises and were duly inspected by Judicial Officer (Mr. Justice (Retd.) Muhammad Akram Khan) an Advisor to Ombudsman, was the proof of trial production. The Judicial Officer inspected the factory premises on 5-12-1994 much after the actual production started in 1986. The left over wastage could very rightly be considered normal remnants or waste of full fledged production. The produce of the Unit is of delicate in nature, therefore, it may leave, as much waste after the production of over eight years.
21. Coming to Writ Petition No, 1189 of 1995, it may be stated at the very outset that learned Wafaqi Mohtasib had no authority, whatsoever to declare lawfully issued notification/statute as void, illegal and perverse. Powers of the learned Mohatasib are provided in section 9 of the President Order 1 of 1983 which reads as under:-- "9. Jurisdiction, functions and powers of the Mohtasib.---(1) The Mohtasib may on a complaint by an aggrieved person on a reference by the President, the Federal Council or the National Assembly, as the case may be, or on a motion of the Supreme Court or as High Court made during the course of any proceedings before it or of his own motion, undertake any investigation into any allegation of maladministration on the part of any Agency or any of its officers or employees: ' Provided that the Mohtasib shall not have any jurisdiction to investigate or inquire into any matters which---
(a) are sub judice before a Court of competent jurisdiction or Judicial Tribunal or Board in Pakistan on the date of the receipt of a complaint, reference or motion by him. ' or
(b) relate to external affairs of Pakistan or the relations or dealings of Pakistan with any foreign State or Government. ' or
(c) relate to or are connected with the defence of Pakistan or any part thereof, the Military, Naval and Air Forces of Pakistan, or the matters covered by the laws relating to those forces.
(2) Notwithstanding anything contained in clause (1), the Mohtasib shall not accept for investigation any complaint by or on behalf of a public servant or functionary concerning any matter relating to the Agency in which he is, or has been working in respect of any personal grievance relating to his service therein.
(3) For carrying out the objectives of this Order and, in particular for ascertaining the root causes of corrupt practices and injustice, the Mohtasib may arrange for studies to be made or research to be conducted and may recommend appropriate steps for their eradication.
(4) The Mohtasib may set up regional officers as, when and where required."
22. The plain reading of the aforesaid provisions of law suggests that Wafaqi Mohtasib is only empowered to deal with the cases of maladministration. The word 'maladministration' is defined in Article 2(2) of the Order which is reproduced as follows: "(2) 'maladministration' includes---
(i) a decision, process, recommendation, act of omission or commission which---
(a) is contrary to law, rules or regulations or is a departure from established practice or procedure, unless it is bona fide and for valid reasons; or
(b) is perverse, arbitrary or unreasonable, unjust, biased, oppressive or discriminatory; or
(c) is based on irrelevant grounds; or
(d) involves the exercise of powers, or the failure or refusal to do so, for compute or improper motives such as, bubery, jobbery, favoritism, nepotism and administrative excesses; and
(ii) neglect, inattention, delay, incompetence, inefficiency and inaptitude, in the administration or discharge of duties and responsibilities."
23. The issuance of notification cannot be termed as maladministration because it could not be said to have been issued for a particular person or in a particular case it was issued for and applied to all those concerned. In the above provisions of law. It is nowhere provided that the learned Ombudsman has the authority to declare any legally issued notification as perverse, illegal or arbitrary and discriminatory.
24. However, we agree to the proposition of the learned counsel for the petitioner that Government (C.B.R.) is not a person as contemplated under section 32 of the President Order 1 of 1983 and, therefore, C.B.R. '-as no authority to file representations before the President of Pakistan against the recommendations decisions of the Mohtasib. Admittedly, the word 'any person' has not been defined in the Presidential Order itself. Under clause (39) of the General Clauses Act, the word 'person' "shall include any company or association or body of individuals, whether incorporated or not". The expression 'person' includes not only natural person but also a juristic person. Chamber's Twentieth Century Dictionary defines it as "a living soul or self-conscious being a personality, a human being". According to Cochran's Law Dictionary, 'person' means anybody capable of having and becoming subject to rights. a human being also called natural person (2) An artificial person, or corporation". In conclusion none of the above definitions suggests word person includes the State. It refers only to an individual.
"In the case of The Kapur Textile Finishing Mills v. Province of East Punjab (AIR 1954 Punjab 49) where the question was whether the state is entitled to claim protection under section 43 of the East Punjab Public Safety Act (5 of 1949) it was held that the word 'person' in section 43 did not include the word 'State', therefore, there was no bar to a suit against the State. Similar question was raised in Andhra Pradesh High Court in case Sadar-e-Aali Zaria Nazim v. Athar (AIR 1957 Andh. Pra. 714), the Honourable Judge Jagonmohan Reddy, to whom appeal was referred on difference of opinion between Qamar Hasan and Kumarayya, JJ., on the maintainability of the suit filed by the respondent against the appellant, who taking guidance for the observations of Lord Black Burn in Pharmaceutical Society v. London and Provincial Supply Association (1880) 5 AC 857(J) observed that 'in my view, on a reading of section 2 (43), (Hyderabad General Clauses Act) the office or the Government Department is not a person not only because it is not included in the said definition but because it is neither a natural person nor an artificial person, nor a legal person. If this is so, how can the Nazim Umoor-e-Mazhabi be considered either as a natural person or as an artificial person or a legal person or a corporation sole?"
25. The question that Government (C.B.R.) is not a person as contemplated under section 32 of the President Order 1 of 1983 and therefore, C.B.R. Has no authority to file representation before the President of Pakistan against the recommendations would only be forceful, if passed within the jurisdiction of Ombudsman. Since the learned Ombudsman had no right to annul lawfully issued statutory order, therefore, the order of the President being coram non judice is not of any help to the petitioner.
26. Consequent upon all what has been discussed above, we see no force in the writ petitions which are hereby dismissed with no order as to costs.