IFTIKHAR MUHAMMAD CHAUDHRY, J.--These appeals with leave of this Court are directed against the judgment of Peshawar High Court, dated 20th October, 1997 passed in appeals filed by Pakistan Tobacco Company Ltd. Etc. And N.-W.F.P. Through Secretary Law and others, which are being disposed of by this common judgment as identical questions of law for interpretation by this Court are involved.
2. It is not necessary to note facts of each case in detail except that private appellants deal in 'Tobacco' business and they have established their Factories for this purpose in different Provinces of country except the Province of Balochistan. It is a known fact that the Province of N.-W.F.P. Is a major grower of Tobacco crop, therefore, appellants dealing with such business purchase Tobacco from this Province to cater their requirements. As such, Tobacco is transported from the Province of N-W.F.P. Down in the other Province including Punjab and Sindh. The movement of Tobacco towards other Provinces takes place from Districts Haripur, Mansehra, Abbottabad, Nowshera, Kohat, Laki Marwat and D.I. Khan of N.-W.F.P. In view of movement of Tobacco to other Provinces, in the year of 1996, by means section 11 of North-West Frontier Province Finance Act of 1996 (hereinafter referred to as "the Act"), N.-W.F.P. Government levied "Tobacco Development Cess", which reads as under:-- "11. 'Tobacco Development Cess'.--There shall belevied and collected a development cess on Tobacco at the rate of one rupee per kilogram at the District Council exit points of the Districts of Haripur, Mansehra, Abbottabad, Nowshera, Kohat, Lakki Marwat and D.I. Khan. The cess will be collected by the concerned District Councils and credited into Government Treasury."
3. Subsequently, in 1997, above section 11 was re-constructed by means of Finance Act, 1997 .Which reads as under:-- "11. 'Tabocco Development Cess'.--There shall be levied and collected a development cess on tobacco at the rate as Government may, from time to time, by Notification in the Official Gazette, specify. The cess shall be collected at the District Council exit points of the Districts of Haripur, Mansehra, Abbottabad, Nowshera, Kohat, Lakki Marwat and D.I. Khan by the concerned District Councils and credited into Government Treasury."
4. Appellants challenged vires of above provision of the Finance Act, 1997 (hereinafter referred to as the Act) by invoking Constitutional jurisdiction of Peshawar High Court, Peshawar seeking relief to the effect that section 11 of the Act and all actions consequent thereto including levy and collection of so-called "development cess" be declared to be ultra vires, un-Constitutional, without jurisdiction, unlawful and also of no legal effect.
5. A leaned Division. Bench of Peshawar High Court vide impugned judgment, dated 20th October, 1997 disposed of the writ petitions in following terms:-- "18. The upshot of what has been discussed above is that Writ Petition Nos.653/96. 654/96, 655/96, 728/96, 1239/96, 1371/96 and 1372/96 are hereby dismissed while Writ Petitions Nos.1448/97 and 1449/97 are accepted to the extent only that 25 paisas per kilogram of tax imposed by the Executive is void, unlawful and without jurisdiction. Barring the enhancement of 25 paisas per kilogram of tax, section 11 of the Finance Acts of 1996 and 1997 are held to be lawful and not ultra vires the Constitution."
6. Against the afore-noted judgment, leave to appeal was granted in view of order passed by this Court in the case of Messrs Habib Sugar Mills v. Government of Sindh (1996 SCMR 1409). It is noteworthy that appeals arising out of these Petitions, bearing No,260 and 261 of 1995, have been decided vide judgment, dated 30th June, 2001 whereby cases were remanded to the Secretary to Government of Sindh Housing, Town Planning, Local Government and Rural Development, without dilating upon the points on which leave to appeal was granted. Therefore, in the instant appeals question regarding interpretation of Article 151(3) of the Constitution of Islamic Republic of Pakistan (hereinafter referred to as "the Constitution") will be decided independently.
7. Syed Ali Zafar learned Advocate Supreme Court contended that under Article 151 of the Constitution, the Provincial Legislature is not competent to promulgate law, imposing "Tobacco Development Cess" recoverable by the District Councils on the exit points of various Districts leading towards other Provinces because on account of this provision of law restriction has been imposed upon the free trade and commerce in between different Provinces. He stated that Provincial Legislature has in fact imposed cess tax on the movement of Tobacco in order to prohibit or restrict its export from the Province of N.-W.F.P. To other Provinces, therefore, section 11 of the Act is ultra vires the Constitution. In support of his arguments, he referred to number of cases decided by superior judiciary of the country as well as from Indian jurisdiction.
8. Mr. Sardar Khan, learned council adopted the arguments advanced by Syed Ali Zafar, Advocate Supreme Court. However, he added that 99% Tobacco for consumption and use throughout the country is grown in the Province of N.-W.F.P. But as far as the names of Districts which find mention in section 11 of the Act, their rate of growth of Tobacco is comparatively low but they have been included into section 11 of the Act for collecting cess/tax on the movement of Tobacco which is transported to the other Provinces and in this manner, restriction is imposed on the movement of Tobacco by imposing cess under the garb of Tobacco Development against the spirit of Article 151
(3) (a) (b) of the Constitution.
9. Barrister Jehanzeb Rahim, Advocate Surpeme Court has appeared on behalf of official respondents and admitted that "Tobacco Development Cess" is not being recovered by the District Councils, where growth of Tobacco is more than the Districts, names of which find mention in section 11 of the Act. He further made statement at the bar that "Tobacco Development Cess" is being recovered on the movement of Tobacco and purpose was not to allow flow of Tobacco towards Punjab without paying nominal development cess because except such of recovery of development tax, Government is not getting anything in this behalf despite providing facilities to the purchasers and transporters etc. He stated that recovery of "Tobacco Development Cess" cannot be construed as prohibition or restriction on the trade and commerce between the Province of N.-W.F.P. And Provinces. Therefore, section 11 of the Act is not violative of the provision of Article 151 (3) of the Constitution.
10. Mr. Rashid-ul-Haq Kazi, learned Advocate-General, N.-W.F.P., fully subscribed to the arguments of Barrister Jehanzeb Rahim as far as it relates to interpretation of Article 151 of the Constitution is concerned. Besides it he independently addressed arguments in support of appeals filed by the Provincial Government of N.-W.F.P. Against the impugned judgment to the extent whereby delegation of powers under section 11 of the Act to executive to fix the rate of cess/tax has been declared as un-Constitutional being excessive delegation by the Provincial Legislature to the executive Government is concerned. He contended that executive authorities have enhanced the "Tobacco Development Cess" from Re.1 per kg. To Rs,1.25 per kg. And as increase in the cess in reasonable, therefore, learned Division Bench of High Court may have not declared latter portion of section 11 of the Act as excessive delegation of powers by the Legislature to executive Government.
11. As in instant case constitutionality of section 11 of the Act has to be determined at the touchstone of Article 151 of the Constitution, therefore, latter is reproduced hereinbelow in extenso:-- "151 . --(1) Subject to clause (2), trade, commerce and intercourse throughout Pakistan shall be free.
(2) [Majlis-e-Shoora (Parliament)] may by law impose such restrictions on the freedom of trade, commerce or intercourse between one Province and another or within' any part of Pakistan as may be required in the public interest.
(3) A Provincial Assembly or a Provincial Government shall not have power to--
(a) make any law, or take any executive action, prohibiting or restricting the entry into, or the export from, the Province of goods of any class or description, or
(b) impose a tax which, as between goods manufactured or produced in the Province and similar goods not so manufactured or produced discriminates in favour of the former goods or produced outside the Province discriminates between goods manufactured or produced in any area in Pakistan and similar goods manufactured or produced in any other area in Pakistan.
(4) An Act of a Provincial Assembly which imposes any reasonable restriction in the interest of public health, public order of morality, or for the purpose of protecting animals or plants from disease or preventing or alleviating any serious shortage in the Province of an essential commodity shall not, if it was made with the consent of the President, be invalid."
12. By now it is well-settled that while interpreting the Constitutional provisions, approach of the Court should be dynamic, progressive, and liberal. Keeping in view the changed situation, which is intended to be catered by existing provision of the Constitution or by new legislation. Reference may be made to Pir Sabir Shah v. Shad Muhammad Khan, Member. Provincial Assembly, N.-W.F.P.
And another (PLD 1995 SC 66) wherein Ajmal Mian. J. (as then he was) in his separate note has reiterated above universally recognized principle. Reaffirmed in number of judgments of this Court.
Therefore, same is being adhered to in this case as well.
13. A perusal of sub-Article (1) of Article 151 of the Constitution indicates that it does not provide absolutely free trade, commerce and intercourse throughout Pakistan i,e, inter-Provincial trade because under sub-Article (2) of Article 151 of Constitution. Majlis-e-Shoora (Parliament) has been empowered to impose such restriction on freedom of trade and commerce or intercourse between one Province and another or within any part of Pakistan, as may be required in public interest. For example if on account of shortage of food grains in any part of Pakistan or Province and to prevent/control its flow. Majlis-e-Shoora can impose such restriction, in the public interest. But presently we are not confronted with this proposition as we have noted hereinabove that according to view-point of learned counsel appearing for respondents "Tobacco Development Cess" is being charged on the exit point of those Districts which have their outlet in other Provinces including Punjab, Balochistan and Azad Jammu and Kashmir. Therefore, under sub-Article (3) of Article 151 of the Constitution, proposition for consideration would be "whether by levying/collecting of development cess on Tobacco, Provincial Government of N.-W.F.P has violated these Constitutional provisions". A study of sub-Article (3) reveals that in terms of its clause (a). The Provincial Assembly or Provincial Government has been divested from making any law or to 'take any executive action prohibiting or restraining the entry into or the export from the Province, of goods of any class or description. Plain reading of the words employed in this sub-Article would indicate that authority of promulgating a law would be of a Province, in order to ensure free trade.
Commerce and intercourse throughout Pakistan under Article 151(1) would not be available if such law has prohibited or restrained or hindered activities of the trade commerce etc. Clause (a) of sub-Article (3) of Article 151 of the Constitution will be examined with reference to definition of phrase "prohibiting or restraining" used therein in ordinary dictionary meaning. As per Black's Law Dictionary (5th Edition), the origin of the word 'prohibition' is 'prohibit' which means to 'forbid by law: to prevent: etc.'. Similarly in the World Book Dictionary by Scoot Fetzer Company, Chicago, word 'prohibit' has been defined as to forbid by law or authority: to prohibit the sale of alcoholic beverages: picking flowers in this park is prohibited: to prevent: hinder.' With reference to these definitions the word 'prohibition' has been used as the act of prohibiting or forbidding: ,prohibition against swimming in the city's reservoirs: a law or laws against making or selling alcoholic liquors:' etc. The meaning of phrase 'prohibition' defined hereinabove in two dictionaries persuades us to infer with reference to the scheme of section 11 of the Act that if the Government of N.-W.F.P. Had placed a ban on the export of Tobacco to the other Provinces then the appellants could have presented successfully the case of complete violation of the Constitution. Next important phrase used in clause (a) of sub-Article (3) of Article 151 of the Constitution is ' restriction'. It has been defined in Black's Law Dictionary (5th Edition) to be 'a limitation often imposed in a deed or lease respecting the use to which the property may be put' Whereas according to World Book Dictionary 'restriction' means 'something that restricts: limiting condition or rules: the restriction on the use of the playground: no fighting: no damaging property: the act or fact of restricting or the condition of being restricted:' In view of the definition of the word 'restriction' defined hereinabove, it would be seen whether section 11 of the Act has completely restricted export of Tobacco to the other Provinces or the restriction on its export is of such a nature which can be removed by making nominal token payment of "Tobacco Development Cess", being charged by a Government which is providing facilities on the movement of the goods including roads, bridges, security, etc. At this juncture it is to be noted that Province of N.-W.F.P. Is rich in growing Tobacco and it has lead/edge in this field over the other Provinces. Before proceeding ahead, it is also to be borne in mind that in the N.- W.F.P. Finance Act, 1996, cess on Tobacco was collected at the rate of Re.1 per kg. Subsequently, by means of the Act of 1997, the executive Authorities in exercise of their delegated power enhanced it to Rs,1.25 per kg.
13. Now it would be examined whether the provision of section 11 of the Act violates the Constitutional provision embodied in clause (a) of sub-Article (3) of Article 151 of the Constitution.
This Article of the Constitution remained under consideration before High Courts of Karachi and Lahore with reference to Provincial Laws applicable over there. In pursuance of which the tax was being levied under different nomenclatures. Some of the judgments cited in this behalf by Syed Ali Zafar, learned counsel for the appellants are being discussed hereinbelow:--
1. Kotri Association of Trade & Industry v. Government of Sindh and another (1982 CLC 1252)
Name of Provision of Law examined in view of Article 151 of the Constitution.--(i) Section 60 (1) of Sindh Local Government Ordinance (XII of 1979)
(ii) Sindh Council (Imposition of Taxes) Rules, 1979.
Contention(s).--In-this case one of the contentions was that export tax levied by some councils on the export simpliciter of goods from the limits of these councils. (Local Councils) tantamount to a restraint on the free movement of goods and as such it is violative of Article 151 of the 1973 Constitution.
Conclusion.--Article 151 (1) read with the other three sub-Articles of Article 151 leads to the conclusion that Article 151 (1) does not restrict a Provincial Legislature to impose restriction or taxes on movement of goods within the province. Export tax cannot be struck down on the plea that it violates Article 151 of the 1973 Constitution as in our view it is not violative of the said Constitutional provision.
2. M/s Khyber Electric Lamps Manufacturing, Ltd. And others v. Chairman, District Council, Peshawar and another (1986 CLC 533)
Name of Provision of Law examined in view of Article 151 of the Constitution.--Section 134 of North- West Frontier Province Local Government Ordinance (IV of 1979).
Contention(s).--These are writ petitions filed by petitioners before Peshawar High Court, calling in question the Notification, dated 31st December, 1980 issued by the Chairman, District Council, imposing export tax on goods being transported out of the province throughout in the country. It was contended on behalf of the petitioner that Article 151 of the Constitution had guaranteed the trade, commerce and intercourse through Pakistan shall be free but by levying export tax the respondent had violated this provision inasmuch as free movement of goods had been restricted by unwarranted act of taxation. It was also contended that per se was tantamount to restriction on the freedom of trade and such a restriction could not be imposed at all.
Conclusion.--It was held that impugned notifications were not violative of any provision of law or statutory rules. The writ petitions were dismissed with costs.
3. Arshad Akram & Co. And 8 others v. Divisional Superintendent, Pakistan Railways, Rawalpindi and 5 others (PLD 1982 Lahore 109)
Name of provision of Law examined in view of Article 151 of the Constitution.--West Pakistan Foodstuffs (Control) Act (XX of 1958) read with Punjab Government Notification No SOF-II (484)
B/79, dated 3rd October, 1979.
Contentions(s).--In this petition, the petitioners have called in question the validity of the communications issued by the Railway and Food Departments, banning the dispatch of consignments of rice from Rawalpindi to N.-W.F.P. And their action in this respect, is sought to be declared without lawful authority. It was contended on behalf of the petitioners that under Article 151 of the Constitution, inter-provincial trade and commerce and intercourse throughout Pakistan is free and only the Parliament or the Federal Legislature can impose such restrictions on the freedom of trade and Movement of goods from one province to another as may be required in the public interest, therefore, if under the notification, a ban was intended to be imposed on the movement of rice, from the Punjab Province to other Province, it would be violative of Article 151 rendering the notification liable to be struck down.
Conclusion.--The correct legal position thus appears to be that it is not within the competence of the Provincial Government to pass an order, which may hamper the inter-Provincial trade, commerce and intercourse or interfere with the movement of goods from this province to other provinces. Any such restriction on the movement of rice, would obviously be hit by Article 151 unless it is saved by sub-Article (4). Thus the Provincial Government can only control intra-Province and not inter-Province movement of rice.
4.Mirpurkhas Sugar Mills Ltd. v. District Council Tharparkar and 2 others (1990 MLD 317)
Name of Provision of Law examined in view of Article 151 of the Constitution.--Section 62 (2) of Sindh Local Government Ordinance (XII of 1979)
Contention(s).--In these cases, petitioners asserted the action of the District Council, Tharparkar and Khairpur in imposing export tax and/or toll on petitioners' produce namely sugar, leaving the physical limits of the relevant District Councils and meant for delivery on destinations in the other provinces in the Islamic Republic of Pakistan. In view of the provision of Article 151 of the Constitution, which guarantees trade, commerce and intercourse throughout Pakistan to be free, subject, however, to the power of Parliament to impose, by law, such restrictions on the freedom of trade; commerce or intercourse between one province and another, or within any part of Pakistan, as may be required in public interest. Conclusion.--Issue invoked was found to be complex. As far insofar as Rawangi Mehsool/export tax and/or toll are introduced with a view to generate revenues for the relevant councils, in the context of various public works entrusted to them and chargeable on points of exit, from the relevant geographical limits, are concerned there can hardly be any exception. However, it was observed that contravention would, however, occur one goods produced or manufactured in one province are intended and proposed to be taken beyond such province into one or more other provinces in the federation. In that specific context such measures of taxation are, positively, prohibited by the Constitution. But, then, who is to be determined and how is it to be determined that goods manufactured or produced within the limits of a particular council, or other local authority functioning under the Sindh Local Government Ordinance, 1979, sought to be taken within Pakistan but beyond the limits of the Province of Sindh itself ? Next, once such determination is made how are evasions of due incidents of the tax within the province to be guarded against unscrupulous traders? ... .. ...Learned counsel from both sides agreed and conceded that there are no such or similar rules in relation to the goods produced and manufactured in this province and intended to be taken out beyond the provincial limits for consumption or use in other parts or provinces of the federation.. On the basis of the observation made in the judgment, the Government of Sindh was directed to issue necessary directives or to frame due rules with a view to give effect to the conclusions reached in these petitions.
5. Sayphire Textile Mills Ltd. And 9 others v.
Government of Sindh and others (PLD 1990 Karachi 402)
"Name of Provision of Law examined in view of Article 151 of the Constitution.--Sections 60, 64 and 120 of Sindh Local Government Ordinance (XII of 1979) read with People's District Councils Export Tax Rules, 1976 and Sindh Local Councils (Validation of Taxes) Ordinance (VIII of 1982).
Contention(s).--As per the facts of this case petitioners carry on the business of manufacture of goods of various kinds. They are aggrieved by the levy, assessment and collection of export tax or Rawangi Mehsool' by the District Council, Dadu. It was contended that export tax, in any form it takes, cannot be levied, assessed or collected by any authority in Pakistan, except the Federal Government. Reliance is placed in this behalf on Article 70 and the Fourth Schedule of the Constitution, incorporating, inter alia, the Federal Legislative List and, in particular, on Entries Nos. 43 and 49 in Part-I of such List, pertaining respectively, to the 'Duties of Customs, including export duties' and 'Tax on the sales and purchases of goods imported, exported, produced, manufactured or consumed' ."
Conclusion.--It was held that while Export Tax or 'Rawangi Mahsool' on the inter-provincial movement of goods as also on goods exported from Pakistan is found to be unconstitutional, bad and without lawful authority. Export Tax or 'Rawangi Mehsool' on intra-Provincial movement of goods is found to be valid.
6. Star Flour Mills v. Province of Punjab and others (PLD 1996 Lahore 687)
Name of Provision of Law examined in view of Article 151 of the Constitution.--Section 3 of West Pakistan Foodstuffs (Control) Act (XX of 1958) read with Notification, dated 12th June, 1996.
Contention(s).--In this case Notification dated 12th June, 1996, issued by the Government of Punjab was challenged, whereby it was directed that no person shall carry or transport Wheat/Atta, Suji, Maida from any place in the Punjab to a place outside the Punjab Province. Therefore, with reference to proposition under consideration, it was argued that the notification on being ultra vires the Article 151 of the Constitution, 1973 is equally valid (invalid).
Conclusion.--The Provincial Government in no circumstances has any authority to issue any order or notification which impede the flow of trade and commerce between the different Provinces or create hurdles in the movement of the goods of any sort from one Province to another, therefore, the. Notification is plainly contrary to the Constitutional provision." A perusal of above judgments indicates that except in the case of Arshad Akram & Co. (ibid) and Star Flour Mills (ibid) no complete restriction was imposed on the movement of goods from one Province to other.
14. It is important to note that the Indian Constitution under Article 301 had also guaranteed trade, commerce and intercourse free throughout the territory of India, however subject to other provisions. But despite of such provision some of the States out of union of states had promulgated the laws imposing tax on inter-Provincial trade, commerce and intercourse, resultantly, identical question with which we are faced in instant cases had engaged Indian Supreme Court, to resolve the controversy from time to time. It is also to be noted that the word "free" used in Article 301 as it has been used in Article 151 of our Constitution, is not accepted in unqualified terms and according to interpretation of word "free" by the Indian Supreme Court, it must have some. Qualifications because the provision of Constitution carrying in its fold, the word "free" has to be applied in the working of an ordinarily society. In this behalf reference to the following judgments, relied upon by Syed Ali Zafar, learned Advocate Supreme Court for the appellants, deems necessary:--
1. Atiabari Tea Co. Ltd. And others v. State of Assam (AIR 1961 SC 232)
(The Bench comprising of 5 Judges)
Name of Law examined in view of Article 301 of the Indian Constitution.--Assam Taxation (on Goods carried by Roads or Inland Waterways) Act (13 of 1954) Contention(s).--Appellants contended that they are growers of tea in West Bengal or in Assam and carry their tea to the market in Calcutta from where the tea is sold for consumption in the country or is exported for sale out of the country. The sale of tea inside Assam bears a very small proportion to the tea produced and manufactured by the appellants. Thus, the bulk of tea produced and manufactured is carried out of Assam either for internal consumption in India or for export abroad. Besides the tea carried by rail, a large quantity of tea is carried by road or by inland waterways from Assam to Bengal and in some of these cases, from one part of West Bengal to another part of the same State through inland waterways, only a few miles of which pass through the territory of the State of Assam. The Assam Legislature passed the Act which received the assent of the Governor of Assam on April 9, 1951 and came into force on and from June 1, 1954. The purpose of the Act is to levy taxes on certain goods carried by road or inland waterways in the State of Assam. On June 30, 1954, the Commissioner of Taxes, Assam in exercise of the powers conferred upon him by subsection (3) of section 7 of the Act, published a Notification in the Assam Government Gazette bearing, dated June 21, 1954, by which he notified for general information that the restraint under the aforesaid Act and the rules made, thereunder for the period commencing June 1, 1954 to September 30, 1954 should be furnished by October 30, 1954. The said notification demanded the furnishing of quarterly returns before January 30, 1955, respectively. The appellants in some of the cases in pursuance of demand notices, submitted returns to the Commissioner and also paid the tax demanded under protest. Appellant, thereafter, filed a Constitutional petition before High Court challenging said Act and praying for the, issuance of a writ of mandamus directing the respondents to forbear from giving effect to the provisions of the Act and the notification issued under the Act and/or a writ of prohibition or any other appropriate writ restraining them from taking steps under the provisions of the Act. It was further contended that the Act, rules and the notifications under the Act were ultra vires the Constitution, because the Act was repugnant to the provisions of Article 301 of the Constitution as the tax on carriage of tea through the State of Assam had the effect of interfering with the freedom of trade, commerce and intercourse and the tea being a controlled industry under the Provision of the Tea Act, XXIX of 1953, the Union Government alone had the power to regulate the manufacture, production, distribution or transport of tea and the jurisdiction of the Assam Legislature was thus, completely ousted. It was also contended that the tax under the Act was nothing but a duty of excise, in substance, though not in form and was thus an encroachment on the Central Legislative field within the meaning. Of Entry 84 of the Union List. The Act was also challenged on the ground that it was discriminatory, and thus void under Article 14 of the Constitution. The competence of the Assam Legislature to legislate on the subject was also questioned. The official respondents opposed the petitions, denying that the Act or the Rules made thereunder or the notifications issued thereunder were ultra vires the Constitution or that the Act contravened the provisions of Article 301 of the Constitution or that it was an encroachment on the sphere of the Union Legislature or was in any way in conflict with the provisions of the Tea Act XXIX of 1953. It was plea/contention of the official respondents that the Act was in pith and substance, a legislation to levy tax on certain classes and types of goods carried by roads or inland waterways, strictly within Entry No,56 of the State List. It was also asserted that the Act was within the Legislative competence of the Assam Legislature and was not within the terms of the prohibition contained in Article 301 of the Constitution.
Conclusion (of the High Court).--Petitions were dismissed by two separate judgments on 6th June, 1955. In one judgment, authored by Chief Justice, it was ,.Held that the Act contemplated imposition of a tax on transport or carriage of goods within the meaning of Entry 56 of List II and did not amount to interference with the freedom of trade and commerce within the meaning of Article 301 of the Constitution; that the pith and substance of the impugned Act was that it was a taxing legislation which was not directly concerned with trade and commerce, though it might indirectly entrench on the field of trade and commerce and that Article 301 was not directly concerned with taxing laws. (Emphasis provided). Whereas one of the member of the Bench disagreeing with the conclusion drawn by the Chief Justice, wrote his separate judgment examining the provision of impugned Act in great detail and he came to the conclusion that the element of carriage was expressly made a condition of liability to tax under the impugned Act and it was, therefore, distinguishable from a duty of excise and came directly under Entry 56 of List II. In respect of interpretation of Article 301 his conclusion was that taxation per se has not the effect of abridging or curtailing the freedom contemplated by this Article. (Emphasis provided). Conclusion (of the supreme Court).--Against the judgment of the High Court, matter was taken before the Supreme Court where Chief Justice in his minority judgment observed as follows:-- "18. Article 301, with which Part XIII commences, contains the crucial words 'shall be free' and provides the key to the solution of the problems posed by the whole Part. The freedom declared by this Article is not an absolute freedom from all legislation. As already indicated, the several entries in the three Lists would suggest that both Parliament and State Legislatures have been given the power to legislate in respect of trade, commerce and intercourse, but it is equally clear that legislation should not have the effect of putting impediments in the way of free flow of trade and commerce. In my opinion, it is equally clear that the freedom envisaged by the Article is not an absolute freedom from the incidence of taxation in respect of trade, commerce and intercourse, as shown by Entries 89 and 92-A in List I, Entries 52, 54 and 56 in 60 in List II and Entry 35 in List III. All these entries in terms speak of taxation in relation to different aspects of trade, commerce and intercourse. The Union and State Legislature, therefore, has the power to legislate by way of taxation in_ respect of trade, commerce and intercourse so as not to erect trade barriers, tariff walls or imposts, which have a deleterious effect on the free flow of trade, commerce and intercourse. That freedom has further been circumscribed by the power vested in Parliament or in the Legislature of a State to impose restrictions in the public interest. Parliament has further been authorised to legislate in the way of giving preference or legislate in the way of giving performance or making discrimination in certain strictly limited circumstances indicated in clause (2) of Art.
303. Thus, on a fair construction of the provisions of Part XIII, the following propositions emerge; (1) trade, commerce and intercourse throughout the territory of India are not absolutely free but are subject to certain powers of legislation by Parliament or the Legislature of a Sate; (2) the freedom declared by Article 301 does not mean freedom from taxation simpliciter, but does mean freedom from taxation which has the effect of directly impeding the free flow of trade, commerce and intercourse; (3) the freedom envisaged in Article 301 is subject to non-discriminatory restrictions imposed by Parliament in public interest (Article 302); (4) even discriminatory or preferential legislation may be made by Parliament for the purpose of dealing with an emergency like a scarcity of goods in any part of India (Article 303(2)); (5) reasonable restrictions may be imposed by the Legislature of a State in the public interest (Article 304(b)); (6) non-discriminatory taxes may be imposed by the Legislature of a State on goods imported from another State or other States, if similar taxes are imposed on goods produced or manufactured in that State (Article 304(a)); and lastly (7) restrictions imposed by existing laws have been continued, except in so far as the President may by order otherwise direct (Article 305)." The other learned Members of the Bench did not agree with the above view-point of learned Chief Justice and by delivering separate judgment written on behalf of the Court by one of learned Member it was held that the Assam Taxation (on Goods carried by Road and Inland Waterways)
Act, 1954 must be regarded as infringing the guarantee of freedom of trade and commerce under Article 301 because the bill moved in the Assembly had not received the assent of the President as required by Article 304 (b) proviso, and the Act has not been validated by the assent of the President under Article 255(c). In view of the majority judgment, the writ petitions were allowed." A learned Single Bench of Lahore High Court, Lahore had also taken the above view in the case of Mehmood Majeed, Director, Asia Flour Mills, Bahawalpur (Pvt.) Ltd., Bahawalpur v. The State and 3 others (PLD 1998 Lahore 296). Learned counsel Syed Ali Zafar also relied upon few other judgments from the Indian jurisdiction but those are not being discussed here because after having gone through them, we are of the opinion that principle laid down therein are not relevant to clench the issue which is presently under consideration before us. However, we would refer to another judgment which was not relied by petitioners' counsel and discuss it hereinunder:-- "Automobile Transport (Rajasthan) Ltd. and others v. State of Rajasthan and others (AIR 1962 SC 1406)
(delivered by 7 learned Judges of Supreme Court of India)
Name of Law examined in view of Article 301 of the Indian Constitution.--Rajasthan Motor Vehicles Taxation Act, 1951 Contention(s).--Appellants contended that they are running the business of plying stage carriages on different route of State of Ajmer and while going to destination within the State they have to cross from a portion of road, situated in the State of Rajasthan. While crossing through the said route, its Regional Transport Officer who is ex-officio Motor Vehicle Taxation Officer, Jaipur demanded tax from appellants on their Motor Vehicle under the Rajasthan Motor Vehicles Taxation Act, 1951. In this behalf, appellants were called upon to pay different amounts. As such, that order was challenged by them before the Transport Commissioner, Jaipur under section 18 of the Act but their appeals were dismissed. Subsequent thereto, they filed writ petitions in the Rajasthan High Court, wherein they inter alia contended that the relevant provisions of the Act imposing a tax on their motor vehicles is unConstitutional and void as they contravened the freedom of trade, commerce and intercourse throughout the territory of India, declared by Article 301 of the Constitution, and therefore the demand and attempted collection of such tax were illegal and should be prohibited.
Conclusion (of the High Court).--A learned Division Bench seized with the writ petitions filed by the appellants examined the different provisions of Rajasthan Motor Vehicle Taxation Act, 1951 but they were of the view that the cases involve substantial question of law as to the interpretation of Article 301 of the Constitution and other connected Articles, these appeals should be heard by a larger Bench. A Full Bench held that under the heading of freedom of intercourse from the stand point of the individual citizen and came to the conclusion that the restrictions which the Act imposed on the individual citizen were reasonable restrictions having regard to the necessity of raising funds for the maintenance of roads and the making of new roads in the State of Rajasthan (Emphasis provided). As far the question of validity of the relevant provision of the Act from the spin point of freedom of trade and commerce, it came to the conclusion that the regulation of trade, commerce and intercourse and intra-course was not incompatible with its freedom and in the matter of such regulation of trade, commerce and intercourse a distinction must be drawn between restrictions which are direct and immediate and restrictions which are indirect and consequential." (Emphasis provided). Ultimately, after the decision of these two questions, writ petitions filed by the appellants were heard and dismissed by the Division Bench. As such the appellants' invoked the jurisdiction of the Supreme Court of India.
Conclusion (of the Supreme Court).--Learned Supreme Court adopted the minority view of the Chief Justice on the interpretation of Article 301 of the Constitution in the case of Atiabari Tea Co.
Ltd. (ibid) and thereby endorsed the findings of Full Bench of the High Court. Even textually, we must ascertain the true meaning of the word "free" occurring in Article 301. From what burdens or restriction is the freedom assured? This is a question of vital importance even in the matter of construction. In section 92 of the Australian Constitution the expression used was absolutely free and repeatedly the question was posed as to what this freedom meant. We do not propose to recite the somewhat chequered history of the Australian decision in respect of which Lord Porter, after a review of the earlier cases, said in Commonwealth of Australia v. Bank of New South Wales, 1950 AC 235 that in "Labyrinth of cases decided under section 92 there was no golden thread". What is more important for our purpose is that the expressed view that two general propositions stood out from the decisions: (i) that regulation of trade, commerce and intercourse among the States is compatible with its absolute freedom, and (ii) that section 92 of the Australian Constitution is violated only when a legislative or executive act operates to restrict such trade, commerce and intercourse directly in immediately as distinct from creating some indirect or inconsequential impediment which may fairly be regarded as remote. Lord Porter admitted 'that in the application of these general propositions, in determining whether an enactment is regulatory of something more, or whether a restriction is direct or only remote or incidental, there cannot fail (sic) to be differences of opinion'. It seems clear, however, that since merce and intercourse in a community regulated by law presupposes some degree of restriction upon the individual that freedom must necessarily be delimited by considerations of social orderliness. In one of the earlier Australian decisions (Duncan v. State of Queensland, (1916 22 CLR 556) Griffith, C.J. Said: But the word 'free' does not mean extra legem, any more than freedom means anarchy. We boast of being an absolutely free people, but that does not mean that we are not subject to law.' (p.573) As the language employed in Article 301 runs unqualified the Court, bearing in mind the fact that provision has to be applied in the working of an orderly society, has necessarily to add certain qualifications subject to which alone that freedom may be exercised. This point has been very lucidly discussed in the dissenting opinion which Fullagar, J. Wrote in McCarter v. Brodie, (1950) 80 CLR 432 an opinion which was substantially approved by the Privy Council in Hughes and Vale Proprietary Ltd. v. State of New South Wales, 1955 AC 241. The learned Judge gave several examples to show the distinction between what was merely permitted regulation and what was true interference with freedom of trade and commerce. He pointed out that in the matter of motor vehicles most countries have legislation which requires the motor vehicle to be registered and a fee to be paid on registration. Every motor vehicle must carry lamps of a specified kind in front and at the rear and in the hours of darkness these lamps must be alight if the vehicle is being driven on the road. Every motor vehicle must carry a warning device, such as a horn; it must not be driven at a speed or in a manner, which is dangerous to the public. In certain localities a motor vehicle must not be driven at more than a certain speed. The weight of the load which may be carried on a motor vehicle on a public highway is limited. Such examples may be multiplied indefinitely. Nobody doubts that the application of rules like the above does not really affect the freedom of trade and commerce; on the contrary they facilitate the free flow of trade and commerce. The reason is that these rules cannot fairly be said to impose a burden on a trader or deter him from trading; it would be absurd, for example, to suggest that freedom of trade is impaired or hindered by laws which require a motor vehicle to keep to the left of the road and not drive in a manner dangerous to the public. If the word 'free' in Article 301 means freedom to do whatever one wants to do then chaos may be the result; for example, one owner of a motor vehicle may wish to drive on the left of the road while another may wish to drive on the right of the road. It they come from opposite directions, there will be an inevitable clash. Another class of examples relates to making a charge for the use of trading facilities, such as roads, bridges, aerodromes etc. The collection of a tool or a tax for the use of a road or for the use of a bridge or for the use of an aerodrome is no barrier or burden or deterrent to traders who in their absence, may have to take a longer or less convenient or more expensive route. Such compensatory taxes are no hindrance to anybody's freedom so long as they remain reasonable; but they could of course be converted into a hindrance to the freedom of trade. If the authorities concerned really wanted to hamper anybody's trade, they could easily raise the amount of tax or toll to an amount which would be prohibitive or deterrent or create other impediments which instead of facilitating trade and commerce would hamper them. It is here that the contrast, between freedom (Article 301) and restriction (Articles 302 and 304) clearly appears; that which in reality facilitates trade and commerce is not a restriction and that which in reality hampers or burdens trade and commerce is a restriction. (Emphasis provided). It is the reality or substance of the matter that has to be determined. It is not possible a priori to draw a dividing line between that which would really be a charge for a facility provided and that which would really be a deterrent to a trade but the distinction, if it has to be drawn, is real and clear. For the tax to become a prohibited tax it has to be a direct tax the effect of which is to hinder the movement part of trade. So long as a tax remains compensatory or regulatory it cannot operate as a hindrance.
(Emphasis provided)."
16. It may be noted that phraseology of Article 151, sub-Article (1) of the Constitution and Article 301 of Indian Constitution. Para materia and in both the provisions to generate commercial union among federating unities policy and free trade, commerce and intercourse throughout the country has been canvassed, however, subject to the other provisions embodied in both the Articles, respectively. Therefore, while understanding the meaning of free trade, commerce and intercourse the interpretation of the Indian Supreme Court in the case of Automobile Transport (Rajasthan) Ltd.
(ibid) is adopted being logical and convincing.
17. The above discussion persuades us to hold that liberal and dynamic interpretation of the word 'free' does not mean an unqualified freedom at all in the trade, commerce and intercourse between the provinces because unchecked freedom in the trade, commerce and intercourse without any reasonable prohibition and restriction would not be beneficial for an orderly society inasmuch as even there would be lack of discipline and the Provincial administration would not be in a position to control trade and commerce prohibited/contraband articles, therefore, a qualified restriction if imposed up to the trade which has not financially burdened the traders and had also not impeded the flow of trade and commerce, would not be violative of the provisions of Article 151(1)(3), clause (a) of the Constitution. It may also be observed that as far as simpliciter levy of cess by the Provincial Government (N.-W.F.P.) on the movement of tobacco outside the Province that would not tantamount to placing any prohibition or restriction on the trade, commerce and intercourse between the Provinces. However, if the entry of the goods into the Province or export of goods to the other Provinces is completely banned then of course it would amount to placing a complete prohibition, limitation and restriction as it happened in the cases of Arshad Akram & Co.
(ibid) and Star Flour Mills (ibid). As far as the imposition of development taxes like "Tobacco Development Cess" is concerned, such levy would fall within the definition of compensatory or incidental tax which would not cause hindrance in trade, commerce and intercourse rather such reasonable/nominal, tax would facilitate the Provincial Government for the purpose of generating revenue for development etc.
18. It is important to note that clause (b), sub-Article (3) of Article 151 of the Constitution, itself authorises the Provincial Government to impose a tax subject to the conditions namely that no tax will be imposed as between goods manufactured and produced in the Province and similar goods not so manufactured or produced to discriminate in favour of the former goods, meaning thereby that if similar goods is brought in the Province, then tax is imposed on it, whereas no local tax has been imposed on the goods which is manufactured in the Province because if such nature of tax is allowed then the similar goods which is imported in the Province would not be in a position to compete with the goods which is manufactured in the Province and in this manner there would be discrimination in the latter kind of goods. This sub-Article further says that no tax shall be imposed on the goods produced outside the Province which discriminates between the goods manufactured or produced in any area in Pakistan and similar goods manufactured or produced in any other area in Pakistan meaning thereby that if any goods is imported (brought in the Province) from a particular Province and tax imposed upon it, whereas similar goods which is manufactured or produced in the Province other than the goods which was imported from the particular Province and then if the tax is not imposed on the goods which is manufactured and produced in other area in Pakistan, it would cause discrimination. Although learned Division Bench of High Court had attended to these aspects of the case but in our opinion it requires no detailed discussion for the reason that admittedly the "Tobacco Development Cess" is recovered on the movement of the Tobacco outside the Province of N.-W.F.P. It is admitted that even if the factories which are manufacturing tobacco products not in the Province of N.-W.F.P. They consumed localy produced tobacco instead of bringing tobacco from outside the Province. However, learned counsel appearing for the parties have also not dilated upon this aspect of the case, therefore, we are of the opinion that levy of cess is not causing hindrance in freedom of trade, commerce and intercourse, therefore, the provision of section 11 of the Act is not violative of Article 151 (1)(3) of the Constitution.
19. Mr. Rashid-ul-Haq Qazi learned Advocate-General, Punjab contended that Government of N.- W.F.P. Has filed Civil Appeals Nos.1249 and 1250 of 1998 to challenge the impugned judgment to the extent of its observation whereby the power conferred under section 11 of the Act upon the executive Government to fix the rate of the tax has been declared illegal, following the doctrine of excessive delegation. He stated that Legislature had lawful authority to delegate its powers to the Government for the purpose of fixation of the rate of tax and the rules framed in exercise of such power shall be deemed to be consistence to the provision of section 11 of the Act. Reliance in this behalf was placed on 1992 SCMR 372.
20. Syed Ali Zafar, learned counsel appearing for appellant, however, vehemently opposed the contention of the learned Advocate-General and pointed out that section 11 of the Act does not provide guidelines for the executive Government to determine the quantum of "Tobacco Development Cess" which is to be recovered during the movement of Tobacco outside the Province and lack of such guidelines may give rise arbitrary and unreasonable fixation of the cess, therefore, learned Division Bench of the Peshawar High Court had rightly struck down such powers of the Government because any action taken by the executive authority in exercise of such powers is liable to be declared so being contrary to natural principle of justice.
21. In above paras. Of the judgment, while dealing with the interpretation of Article 151 of the Constitution, we have held that imposing of "Tobacco Development Cess" by the Provincial Legislature is permissible being not contrary to the provisions of Article 151 (3)(a) of the Constitution and imposition of such tax on the trade and commerce can be considered to be compensatory tax for the purpose of development in the Province. It has also been held that imposition of the cess/tax will not cause prohibition or restriction in the movement of tobacco outside the Province.
Simultaneously, it has also been observed that the Provincial Assembly is competent to levy a reasonable cess on the movement of tobacco. In view of these observations it is imperative to note that initially when in the year of 1996, cess was levied and the Provincial Legislature itself fixed its rate at Re.1 per kg. But in the N.-W.F.P. Finance Act of 1997, section 11 was re-enacted in pursuance whereof powers to levy the development cess was delegated to the Government, which the latter was required to fix from time to time by Notification in the Official Gazette. A perusal of section 11 of the Act clearly demonstrates that no guidelines were provided enabling the Provincial Government to fix the rate from time to time by means of Notification. We are informed that vide a Notification, dated 9th July, 1997 being No,AO-II/LCB/6-23/97 the Provincial Government through Finance Department had issued the revised Notification spelling out the rate of the cess. It seems that a Notification was issued wherein the rates of different items of tobacco were fixed including Rs,1.25 on tobacco leafs. At this stage it would not be out of context to note that as per section 11 of the Act of 1996 flat rate of development cess on tobacco was levied at the rate of Re.1 per kg. As far as remaining items namely Choora, Naswar, etc., are concerned, no rate was fixed by the Provincial Legislature. In view of said position, we fail to understand that on the basis of which criteria cess was increased from Re.1 per kg. To Rs,1.25 per kg and as how for the first time cess is being charged on the items other than the tobacco leafs namely Choora, Naswar, etc. Because substantive provision of law i,e, section 11 of the Act does not authorize recovery of cess on any other item except tobacco. There is possibility that the other items on which cess is being charged might be inferior type of tobacco or its derivatives. But according to provision of section 11, no authority was conferred upon the executive Government to recover cess on these items. Considering the case in hand from these angles, H it is important to trace out the principles, governing the delegation of powers by the legislature to executives. There is consensus of the judicial opinion that delegation of powers should not be uncontrolled and unbridled and to check the arbitrary attitude of the executive in exercise of powers, the Legislature must provide some guidelines basing on the policy of the Government to exercise such powers. Reference in this behalf may be made to the case of P.N. Kaushal and others v. Union of India and others (AIR 1978 SC 1457). Relevant para. Wherefrom is read as under thus:-- "This is why the principle of excessive delegation, that is to say, the making over by the Legislature of the essential principles of legislation to another body becomes relevant in the present debate.
Under our Constitutional scheme the Legislature must retain its own hands the essential legislative functions. Exactly what constitutes the essential legislative functions is difficult to define; The Legislature must retain in its own hands the essential legislative function. Exactly what constituted 'essential legislative function', was difficult to define in general terms, but this much was clear that the essential legislative function must at least consist of the determination of the legislative policy and its formulation as a binding rule of conduct. Thus, where the law passed by the Legislature declares the legislative policy and lays down the standard which is enacted into a rule of law it can leave the task of subordinate legislation which by its very nature is ancillary to the status to subordinate bodies, i,e,, the making of rules, regulations of bye-laws. The subordinate authority must do so within the framework of the law, subordinate legislation has to be consistent with the law under which it is made and cannot go beyond the limits of the policy and standard laid down in the law provided the legislative policy is enunciated with sufficient clearness or a standard is laid down the Courts should not interfere with the discretion that undoubtedly rests with the Legislature itself in determining the extent of delegation necessary in a particular case. In Vasanthlal Manganbhai Sajanwal v. The State of Bombay, 1961 SCR 341: (AIR 1961 SC 4) the above proposition was summarized in following words:-- A statute challenged on the ground of excessive delegation must therefore, be subject to two tests,
(1) whether it delegates essential legislative function or power, and (2) whether the Legislature has enunciated its policy and principle for the guidance of the delegate." Likewise a learned Division Bench of Lahore High Court, Lahore in the case of Muhammad Aslam and others v. Punjab Government and others (1996 MLD 685) following the judgments from our own jurisdiction in the cases reported in PLD 1958 SC 41, PLD 1965 Dacca 156, PLD 1966 SC 854, PLD 1988 SC 416 has held that naked, unbridled and unguided powers cannot be conferred upon the outside agency like executive.
22. It is to be further seen that Article 142 of the Constitution has demarcated, subject-matters, for the purpose of legislation by Majlis-eShoora and Provincial Assembly. The -Majlis-e-Shoora have been promulgating laws on the basis of which executive Government is authorized to levy the tax but for doing so, guidelines are provided by the Legislature itself to the executive with a view to canalize such powers and also to avoid exercise of such power arbitrarily or without reasonability.
Reference in this context can be made to section 18-A of the Customs Act. A perusal whereof would indicate that a complete guideline has been made available to the executive for the purpose of the recovery of regulatory duty. There is doubt that the levy of "Tobacco Development Cess" falls within the prerogative of Provincial Assembly and the same can be levied and collected for development purpose in the Province. Such identical laws viz. West Pakistan Sugarcane Control Act, 1963 are applicable in other Provinces and this Court in the case of Shahtaj Sugar Mills Ltd. And 3 others v. Province of Punjab and others 1998 SCMR 2492 has held that levy of such development cess are not restricted to territorial limits or zone. Therefore, we are of the opinion that if the Provincial Assembly or the Government of N.-W.F.P. Intended to levy "Tobacco Development Cess", it should have either fixed the rate of the cess itself as it was done by means of section 11 of the N.- W.F.P. Finance Act, 1996 or some guidelines should have been provided in the parent section, channelizing the power to the executive Government to fix the rate because in our considered opinion levy of such development cess must be reasonable being a type of compensatory tax which is charged on the movement of tobacco being taken outside the Province.
23. However, despite the fact that on account of excessive delegation of the powers, the executive Government has often misused the authority conferred upon it by the Provincial Legislature but striking down of such law by the High Court was not warranted because simultaneously it was the obligatory duty of the Court to save the law instead of destroying it. Thus, in our opinion section 11 of Act even now can be saved by making directions to the Provincial Government to issue fresh notification for purposes of fixing the rate of cess/tax strictly following the procedure laid down under section 22 of the N.-W.F.P. General Clause Act, 1956 and till then the Notification dated 9th July, 1997 shall remain suspended and the executive Government shall recover "Tobacco Development Cess" at the rate of Re.1 per kg.
24. It is hoped that above exercise shall be completed by the Provincial Government of N.-W.F.P. If it is so intended within the period of three months, after the pronouncement of this judgment, failing which the observation of learned High Court of Peshawar to the extent of the subject under discussion shall hold the field. As consequence of foregoing reasons it is held that section 11 of the Act, 1997 is not ultra vires the Article 151 (1)(3)(a) of the Constitution. Resultantly Civil Appeals Nos.1242, 1243, 1244, 1245, 1246 and 1248 of 1997 are hereby dismissed with costs. Whereas Civil Appeals Nos.1249 and 1250 stand disposed of in view of the observation made hereinabove.