'SABIHUDDIN AHMED, J.---The petitioners appear to be aggrieved by the increase in conservancy tax effected by the respondent No,2 vide notification of the respondent No,2 published on 29-11- 1,990 in the purported exercise of powers udder section 62(2) of the Sindh Local Government Ordinance, 1979 pursuant to the directions of the respondent No, I allegedly contained in the Government Sindh Local Government Public Health Engineering and Rural Development Department ,Notification No,SO(V106- 45/90/KWSB dated 17th July, 1990 delinkiirg conservancy rates from net annual rental (NARY) of properties and linking it with water charges.
2. The admitted facts appear to be that the petitioners in Civil Petitions Nos. 730 of 1991 and 2407 of 1992 are owners of different textile mills operating in Karachi whereas the petitioner in Civil Petition No,2679 of 1992 owned certain commercial properties in different buildings in the city. Prior to June, 1990 the petitioners were paying conservancy charges at the rate of 5% of the annual rental value of the property. However, through the impugned notification the respondent 'No,2 under section 62(2) of the Sindh Local Gdvernment Ordinance, 1979, in the purported compliance of directives of the respondent No,1 under section 62(1), the conservancy charges were de-linked from NARV and such charges' were made payable at the rate of 50% of water charges. This according to the petitioners led to a 10 to 20 times increase in the quantum of conservancy charges payable by the owner/occupant of a building. It is contended that such exorbitant increase in conservancy charges is both unlawful and unconstitutional.
3. Since common questions of law were involved in all the three petitions it was decided to be heard together. Mr. Muhammad Ali Sayeed, learned counsel for the petitioner in Civil Petition No,730 of 1991, 2407 of 1992, as well as Mr. Khalil-ur-Rehman representing the petitioners in Civil Petition No,2679 of 1992 raised the following contentions to question the impugned levy:--
(i) That the power to levy a tax, rate, toll or fee available to a local council was liable to be exercised only in accordance with the Sindh Local Councils (Imposition of Taxes) Rules, 1980. The aforesaid Rules required that a tax (which has been comprehensively defined to include a fee, tool, cess or rate for the purposes of Ordinance) could be imposed after publication of a taxation proposal and inviting public objections thereon. No such procedure was admittedly adopted while imposing the impugned levy.
(ii) That section 62 of the Sindh Local Government Ordinance, 1979 (hereinafter mentioned as the Ordinance) could not be so construed as to authorize levy of a tax merely upon direction of the executive , Government. An executive power to levy tax or specify its rates would render the statutory provisions Consti-tutionally invalid as being repugnant to Article 77 read with Article 127 of the Constitution. 'iii) That in any event conferment of unbridled executive power to levy a tax under the Ordinance would amount to excessive delegation of legislative power and would have to be struck down on that ground alone.
(iv) That the levy in question having been described as conservancy rate the same could not be treated as .a general purposes tax but merely a fee levied by the respondents Nos.2 and 3.
' It was therefore, required to have a reasonable nexus with the costs of the services rendered and the mere fact that it resulted in burdens ranging from 10 to 20 times of those borne by the petitioner earlier itself established that no such reasonable basis existed.
(v) That in any event the purported directions of the respondent No,1 (Province of Sindh) allegedly contained in the notification dated 17-7-2000 simply did not exist: Neither the notification was made available to the petitioners despite repeated requests nor was it placed before the Court by the respondent despite specific allegations as to its non-existence contained in the petition.
4. The case for the petitioners was mainly argued, by Mr. Muhammad Ali Sayeed and Mr. Khalilur Rehman mostly adopted his arguments. We heard Mr. Abrar Hassan assisted by Mr. Abdul Karim Khan on behalf of the K.W. & S.B. And Mr. Sulleman Habibullah, Additional A.-G. For the Provincial Government in response to the contentions raised by the learned counsel for the petitioners. Since questions pertaining to interpretation of Constitutional law had also been raised, we also issued notice to the learned Attorney-General of Pakistan and had the benefit of his able assistance. All learned counsel' substantiated their contention with a wealth of case-law and some material purporting to justify the impugned levy on the basis of economic necessity was also placed before us on behalf of the respondents. After having gone through the same, we would proceed to record our findings in the following terms.
5. With profound respects, we find no force in the contention that the methodology prescribed in the Imposition of Taxes Rules, 1980 is also to be implied when taxes levied under section 62 of the Ordinance. A plain reading of sections 60 and 62 show that under the former provision a tax or fee can be levied by a council in the prescribed manner i.e, after following the requirements of statutory rules. On .The other hand under section 62(1) it is levied by the council under directions` the Government. The position becomes clearer by the overriding the provisions of section 62(2) which mandates the Chief Executive of the Council to issue a notification in terms of such directions notwithstanding anything contained in the Ordinance.
6. With respect to the second contention Mr. Sayeed in the first place argued that the power to levy tax could only be exercised by a representative Legislature in all democratic societies and was also recognized by our legal system. He then referred to Article 77 of the Constitution, which requires that no tax shall be levied for the purposes of the Federation except by or under the authority of an Act of Parliament and Article 127 makes the same provision applicable to a Provincial Assembly.
Indeed learned counsel is theoretically correct to the extent that the power to levy a tax is essentially legislative. Nevertheless the contention overlooks two important aspects of the matter.
In the first instance apart from the short durations, wherein the representative legislative institutions have become non-functionary, there have been long durations during which the exercise of legislative powers by unelected persons controlling the affairs of the State have been recognized. It cannot be seriously argued that such powers or function did not include the power to levy taxes. Secondly the scheme of a Local Government system in any society presupposes that a local body (by whatever name call) would have the power to levy such taxes and subject to such condition as may be laid down by the Legislature. If the argument of learned counsel is taken to its logical conclusion, no tax imposed by any Local Council, even if imposed strictly according to the rules and within the limitations laid down by the Legislature would be able withstand the test of Constitutional validity.
7. Apart from the above, the language of Article 77 itself is explicitly clear. It speaks of taxes to be levied by or under the authority of an Act of Parliament. The words "under the authority" clearly show that the Legislature can always authorize another institution such as a Local Council to levy a tax. Moreover when the levy is in the nature of fee for services rendered, the rates must necessarily be left to be determined by the agency responsible for performing such services. We, therefore, do not find any force with respect, to the challenge on this ground.
8. With respect to the question of excessive delegation of legislative power, Mr. Muhammad Ali Sayeed emphatically argued that the power to essentially legislative, while a Legislature could delegate some of its powers to an outside agency including the executive, but could not abdicate essentially legislative function in favour of such an agency. Indeed this principle was asserted by the Supreme Court of U.S.A. In U.S. v. Grinaud 220 US 506 and has been acknowledged by the Courts in India and Pakistan. Mr. Saeed relying upon some precedents from the Supreme Court of India argued that section 62 of the Ordinance is liable to be struck down on the ground that the Ordinance seems to empower the Provincial Government to direct a council to levy any tax that it feels like or to determine the rates of any tax without even laying down any standards for imposition of such taxes or determining the rates thereof.
9. In the context learned counsel referred to the observations of the Supreme Court of India in Corporation of Calcutta v. Liberty Cinema AIR 1965 SC 1107 to the following effect:-- "The Legislature cannot delegate its essential legislative function in any case it must lay down the legislative policy and principle and must offer guidance for carrying out the legislative policy."
10. Mr. Sayeed also placed reliance on Devidas v. State of Punjab AIR 1967 SC 1895 where some provisions of the Punjab General Sales Tax Act were struck down on the ground of impermissible delegation of legislative power and that the Provincial Government was authorized to levy tax without any guidelines provided in the Statute. Indeed the Supreme Court of India has at times declared statutory provisions delegating powers to supporting agencies invalid when no guidelines were provided in the Statute itself. The pattern of decisions, however, if one may say so with profound respects is not uniformed and does not lay down the law to fully support Mr. Sayeed, contention. For instance in the Liberty Cinema case itself AIR 1965 SC 1107 relied upon by learned counsel, the majority upheld the 15 times increase in licence fee from Rs,400 to Rs,6,000 per year. It also took the view that determination of the rate of tax was not an essentially legislative function and a Municipal Corporation, which was an autonomous body ought to be given sufficient latitude for raising 'revenues to meet its obligations.
11. On the other hand Mr. Makhdoom Ali Khan learned Attorney-General of Pakistan argued with reference to several reported pronouncements of the Honourable Supreme Court of Pakistan including East and West Steamship Company v. Pakistan PLD 1958 SC (Pak.) 41; District Magistrate, Lahore v. Raza Kazim PLD 1961 SC 178; Mohammad Ismail & Company v. Chief Cotton Inspector PLD 1966 SC 388; Province of East Pakistan v. Sirajul Huq Patwari PLD 1966 SC 854 and finally the elaborate announcement in Zaibtun Textile Mills v. Central Board of Revenue PLD 1983 SC 358. Since all the earlier precedents were taken into consideration and some Indian precedents cited by Mr. Saeed have, also been referred to it might be sufficient to refer to the facts and legal principles laid down therein. Through an amendment in the Central Excise and Salt Act a provision was added to enable the Central Board of Revenue to levy and collect, instead of duty on excisable goods on the basis of actual production, a duty on the production capacity of plants or machineries, it was stipulated that such notification of the C.B.R. Would specify inter alia the guiding principles for determination of production capacity. The duty or the rate of duty on such capacity and the manner of collection of such duty.
12. This provision was challenged on the ground of amounting to excessive or impermissible delegation of the legislative power because neither the guiding principles for determination of capacity nor the rate of duty was spelt out by the Legislature itself and both these functions were delegated to an outside agency i.e, the Central Board of Revenue. In his usual lucid style (Zafar Hussain Mirza, J.) noticed the developing trend or delegation of a multitude of powers in the area of taxation being delegated by Legislatures to outside agencies and arrived at the conclusion that the rule against excessive delegation would be attracted only when the Legislature had effaced itself and abdicated its power in favour of an outside agency, thereby creating a parallel Legislature. It was held that as long as the Legislature retained the power to amend the newly- added provision, the mere fact that a discretion was conferred upon the C.B.R. Either to charge duty on the basis of actual production under section 3(1) or on the basis of production capacity under section 3(4) did not render the legislation invalid on grounds of excessive delegation. The Court also declined to follow the rule laid down in some Indian precedents to the effect that the guidelines must be provided by the Legislature itself.
13. The above pronouncement being the latest declaration of law on the subject by the Honourable Supreme Court we must express our inability to subscribe to the proposition canvassed by Mr. Muhammad All Saeed. Learned Attorney-General argued that in any event since the levy in question could only be imposed for the purposes of the Sindh Local Government Ordinance, which were clearly specified in the statute sufficient guidelines did exist so as to forestall any challenge on the ground of excessive delegation we may add that since the levy is only in the nature of fee for municipal services rendered clear guidelines exist to indicate that the rates should have a reasonable nexus with the value of services rendered. We therefore, entirely agree with the learned Attorney-General on this aspects of the matter.
14. The next contention advanced on behalf of the petitioner was that conservancy tax was essentially in the nature of a fee for services rendered and the extent of the levy must bear a reasonable nexus with the cost of the service. It was argued that a sudden revision of rates having an impact of 10 to 20 times from what was payable earlier ex facie established that such revision was arbitrary and liable to be struck down on this ground alone. It may be explained at the outset that though the Sindh Local Government Ordinance used the generic expression "tax" to cover any tax, fee or cess the basic distinction between a tax and 'a fee is recognized by several pronouncements of the Honourable Supreme Court i.e, Muhammad Ismail v. Chief Cotton Inspector PLD 1966 SC 388; Government of N.-W.F.P. v. Rahimullah 1992 SCM R 750 and Collector of Customs v.
Shaikh Spinning Mills 1999 SCM R 1402 'need to be kept in view. The consistent view of the Honourable Supreme Court appears to be that while both tax and fee are compulsory exactions the essential difference lies in the fact that while a tax is levied for the purposes of the general revenues of the State a fee is imposed for the purposes of rendering specific services and its burden falls upon persons to whom such services are provided. It has therefore, been held that while it may not be possible to charge fee only on the basis of the actual value of such services collected with mathematical precession some co-relations between the value of services and the quantum of fee, must exist.
15. With respect to the impugned levy it may be observed that the respondent No,2 was charged With the responsibility of providing conservancy services for rendition of which it 'collects the levy in question. No doubt Item 3 of Part I of the Vth Schedule to the Sindh Local Government Ordinance 1979 enabled a Metropolitan Corporation to levy "conservancy tax" but such description could not conclusively establish that the levy was only a tax and not fee. Evidently under section 2(70) the expression "tax" was meant to include any toll, fee or other impost leviable under the Ordinance and therefore, the use of the expression "tax" in the Ordinance would include a fee. Such description for the . Limited purpose of the Ordinance would not make the fee to be treated as tax for all purposes. At the same time it needs to be noted that the above power became available to a Metropolitan Corporation only through the Sindh Local Government (Amendment) Act, 1996 and prior thereto the function of solid vast management was to be performed by Zonal Municipal Corporation which were authorized to. Levy "conservancy rates" in terms of Item 13 of Part II to the Vth Schedule. Obviously the transfer of function from one local body to another followed by transfer of collecting an amount of power to levy a charge fr services rendered could not convert a fee into a tax for all purposes. Mr. Saeed therefore, appears to be right in contending that for all intents and purposes the conservancy tax is merely a fee and therefore, some reasonable nexus between the value of the services and the amount demanded must be shown. He also seems to be right in contending that prima facie the impact of enhancing to the extent of 10 to 20 times appear to be arbitrary and unreasonable. Learned Attorney-General attempted to argue that in taxing statutes a levy could only be struck down if it was found to be confiscatory in nature. We agree with him to the extent that this principle would apply when an impost in the nature of the tax is questioned.
Nevertheless, we find ourselves unable to subscribe to the proposition even in respect of fee where the well-settled rule must be shown that some co-relations between the quantum of the levy and the value of services rendered exists.
16. Nevertheless, the detailed counter-affidavits alongwith the data placed on record by the respondent No,3 appears to show that conservancy services were being provided at a very heavy subsidy and the old rates hardly 10 % of the total cost was recovered under the old rates charged.
Even after the introduction of the impugned system of assessment only about 50% of the costs could be recovered while the remainder had to be subsidised. No affidavit in rejoinder to rebut these contentions was filed. We, therefore, find force in the alternate contention of the learned.
Attorney-General that it could not be stated on the basis of material available before the Court that no reasonable nexus between the amount of tax and the value of services existed. The contention of the learned counsel for the petitioner on this ground as well must be repelled.
17. However, the last contention of Mr. Muhammad Ali Sayeed that no direction of the Government to levy the impost in question existed appears to be crucial. It was expressly alleged, in paras.5 to 7 of the memo. Of petition in Civil Petition No,730 of 1991 that the petitioners repeatedly asked for a copy of the Sindh Government Notification No,S0(IV)6- 15/90/KWSB, dated 17-7-1990, alleged to contain the direction of the Government to levy conservancy tax at the rate of 15% of water charges but the same was never made available to them. It was further stated that the petitioners themselves made efforts to obtain it but to no avail. Accordingly it was categorically asserted in ground (e) "That, the alleged. Government Notification relied upon by the Municipal Commissioner for the purpose of giving effect to a so-called decision of the Government is, in fact, a non-existent instrument". Copies of letters of the Secretary of the petitioner addressed to the Secretary to the Government Department purportedly issuing the Notification and the Managing Director of respondent No,3 requesting for a copy have been placed on record as Annexures D and E to the petition. In response to the same, in the counter-affidavit filed on behalf of the respondents Nos.2 and 3 by a Deputy Director (Taxes) of the respondent No,3 a rather a ridiculous plea was taken in para. 10 to the effect that "the letter of the Government was a secret/privileged document and could not be made public.
18. The matter however, does not end here. The order sheet shows that when this petition was taken up for hearing on 16-9-1991 after pre-admission notice to the respondents, the Court expressly directed the learned A.A.-G. To place on record the decision of the Government to increase conservancy tax and hearing was adjourned to 26-9-1991 to enable him to do so. On the adjourned date of hearing he was unable to do so and another adjournment was granted. Even at the third opportunity on 1-10-1991 no such decision could be produced and thereupon the petition was admitted to regular hearing and the ad interim order passed earlier was confirmed.
19. Nevertheless, stretching the presumption of regularity to official acts to the maximum extent after the final hearing we once again requested the learned Additional Advocate-General and learned counsel for respondent No,3, to place a copy of the alleged decision dated 17-7-1990 on record. Mr. Abdul Karim Khan, learned counsel for the respondent No,3' placed on record a Notification dated 5-8-1992 (whose effect will be considered hereinafter) but filed a statement that despite diligent.,efforts he could not obtain the desired Notification. Mr. Suleman Habibullah learned Additional Advocate-General could only lay his hands on the impugned Notification issued by the Municipal Commissioner. On 8-5-2003 both learned counsel stated at the bar that they were unable to obtain copies of the alleged directions of the Provincial Government datcd 17-7- 1990.
20. Mr. Makhdoom Ali Khan, learned Attorney-General of Pakistan, with his usual candour, straightaway acknowledged that the plea of privilege was entirely untenable in view of the pronouncement of the Honourable Supreme Court in Benazir Bhutto v. The President of Pakistan PLD 1992 SC 492. In any event even prior to the above landmark decision of the apex Court the well- settled rule was, as held in Abdul Baqi Baloch v. State PLD 1968 SC 313 that whenever privilege is claimed in respect of any document, the same should be placed before the Court which would decide whether the claim is genuine or otherwise. In the instant case it is evident from the record that after filing a counter-affidavit wherein privilege was claimed, the Court expressly directed the respondents to place the document on record and despite three directions, the order was not complied with. From the above we have no option but to reach the irresistible conclusion that the plea of privilege was raised only to suppress facts and no direction of the Provincial Government under section 62(1) of the Sindh Local Government Ordinance appeared to exist. The only other permissible mode was to levy the tax under section 60 by the respondent No,2 itself but in that case the requirement of Imposition of Taxes Rules were to be followed which was not done.
Therefore, we are constrained to hold that the Notification dated 29-11-1990 issued by the Municipal Commissioner under the purported exercise of powers under section 62(2) of the Ordinance was without lawful authority.
21. Mr. Abdul Karim Khan however, brought to our notice a subsequent direction from the Provincial Government dated 4th August, 1992 which reads as under:-- Government of Sindh Local Government ' Public Health Engineering & Rural . Development Department.
Ref. No,SOI(LG)KWSB-5(19)/92, Dated 4th August 1992.
Notification ' The Municipal Commissioner, Karachi Metropolitan Corporation, Karachi.
' SUBJECT: ISSUANCE OF NOTIFICATION REGARD-ING NEW WATER TARIFF SCHEDULE WITH 50% AVERAGE INCREASE AND CONSEQUENTIAL CON-SERVANCY (SEWERAGE) RAIF SCHEDULE BEING LINKED TO WATER RATES.
' In exercise of the powers vested under subsection (1) of section 62 of Sindh Local Government Ordinance 1979, the Government of Sindh are pleased to direct the Municipal Commissioner Karachi Metropolitan Corporation to notify new water tariff with 50% average increase on differential slap basis and consequential conservancy (sewerage) rate schedule being linked to water rates to be effective from the date of notification, as per enclosed draft schedule.
(Sd.)
(Ahmed Maqsood Hameedi), Additional Chief Secretary (LG), Government of Sindh."
22. It seems that through this Notification the Government directed the respondent No,2 to notify new water tariff and conservancy rate being linked to such tariff to be effected from the date of the Notification. It seems that pursuant to the aforesaid directions a Notification dated 6th August, 1992 was issued by the Municipal Commissioner of respondent No,2 containing a revised schedule of water rates and conservancy charges for industrial consumers at the rate of 50% of the water rates. In our humble opinion such levy is unexceptionable. For the foregoing reasons we would allow these petitions to the extent that the conservancy rates claimed by the respondents w.e.f, 1st July, 1990 up to 5th August, 1992 are declared to be unlawful but the rates effected from 6th August, 1992 at the rate of 50% of water charges are held to be valid. The respondents would be entitled to collect conservancy tax accordingly from the amount deposited in Court and the remainder alongwith profits earned would be refunded to the petitioners.