MAULVI ANWARUL HAQ, J.---This judgment shall decide the several writ petitions particularized in the Schedule to this judgment as common questions are involved.
2. Vide section 2(5) of Finance Act (X11) of 1991, the First Schedule to the Central Excise and Salt Act, 1944 (hereinafter to be referred as Act (I of 1944) was amended. The amendment relevant to these cases is the one whereby a new Item 14.14 was added in the First Schedule as follows:--- 14.14. Services provided or rendered by banking companies, financial institutions, financing societies, other lending banks or institutions and other persons dealing in advancing of loans, in respect of advances made to any person.1/12th of 1% of the amount of each advance outstanding on the last working day of each calendar month.
3. Vide 'section 4(8) of the Finance Act, 1992 (VII of 1992), the entries in column No,3 of said Item 14.14 of the First Schedule were amended so as to substitute the figure "2% for the figure "1%".
4. It will be also relevant to refer here to some notifications issued by the Federal Government under section 12-A of the said Act I of 1944 granting exemption, inter alia, qua the said Item 14.14.
Vide S.R.O. 562(1)/1991, dated 30-5-1991 advances not exceeding Rs,50,000 and bad debt and investment loans were completely exempted from the payment of the said duty. This exercise was undertaken by amending S.R.O. 555(1)/97, dated 28-6-1979. Vide Notification No, S.R.O. 558(1)/91.
Dated 13-6-1991 the said S.R.O. Of 1979 was further amended by adding an explanation against Item No, 14.14 in the following terms:--- "Explanation.---Investment loans" means---
(i) advance made for the purchase of plant and machinery or for construction of factory buildings: ii. Loans for construction of residential houses, where the title of the house belongs to an individual; iii. Advances taken by the Government or by a Banking Company; iv. Export finance credit; v. Loans made for agricultural purposes; or vi. Qarz-e-Hasana."
Vide S.R.O. 1065(1)/91, dated 6-10-1991 a further amendment was made in the said notification of 1979 in the following terms:
1. The Explanation shall be numbered as "Explanation-I"
2. In Explanation-I, numbered as aforesaid, in clause (ii) after the word 'Banking Companythe commas and words a financial institution, an insurance company, a cooperative financing society any other lending bank or institution; and
3. After Explanation-I, the following new explanation shall be added; namely : - Explanation-II 'Bad debtsmeans loan classified as bad and doubtful under Prudential Regulations for Loan Classification issued by the State Bank of Pakistan."
Vide S.R.O. 356(1)/92, dated 14-5-1992 the total exemption granted against (a) & (b) of Item 14.14 in the said notification of 1979 was withdrawn and duty was imposed @ 1/12 of 1% of the amount of each advance outstanding on the last working day of each calendar month. Vide S.R.O. 519(1)/92 the following was substituted for entries relating to column Nos. 2 and 3 Item 14.14 in the Notification of 1979:--
(a) Advances not exceeding Rs.50,000 1/12th of 1% of the amount of each advance outstanding on the last working day of each calendar month.
(b)Advances made for the purpose of plant and machinery or for constitution of factory Buildings.1/12th of 1% of the amount of each advance outstanding on the last working day of each calendar month.
(c) Loans for constructions of residential house, where the title of the house belongs to an individual.1/12th of 1% of the amount of each advance outstanding on the last working day of each calendar month.
(d)Export finance credit. 1/12th of 1% of the amount of each advance outstanding on the last working day of each calendar month.
(e) Loans made for agricultural purposes. 1/12th of 1% of the amount of each advance outstanding on the last working day of each calendar month.
(f) Qarz-e-hasana 1/12th of 1% of the amount of each advance outstanding on the last working day of each calendar month.
(g)Advances taken by the Government or by a Banking Company, a financial institution a institution, an insurance company, a cooperative financing society and other lending bank orNil (h)Bad debts. Nil Explanation.-`Bad debtsmeans loans classified as bad and doubtful under Prudential Regulations for Loan Classification issued by the State Bank of Pakistan."
5. Barring a few petitions filed by same Finance institutions and Federal Government Departments, these writ petitions question the levy and collection of the Excise Duty vide the said Item 14.14.
6. Vide Finance Act, 1994, the entire First Schedule was substituted and in the new Schedule effective from 9-6-1994, the said heading was changed to Item No,9813.3000. Vide Finance Act 1996 following two headings were added:- 9813.3000 Services provided or rendered in respect of leasing.10 per cent of the amount of each lease outstanding on the last working day of each calendar month.
9813.4000 Services provided in respect of Musharka financing.10 per cent of the amount of each Musharka financing outstanding on the, last working day of each calendar month.
9813.9000 Others 50 per cent of the charges.
7. Corresponding with the said amendment exemption was granted in excess of 1% vide S.R.O.
455(1)96, dated 13-6-1996 in the said rate of duty.
8. Mr. Imtiaz Rashid Siddiqui, Advocate, dealing with the matter of imposition of said duty with reference to .Advances made by the banks argues that section 3 of the said Act, 1944 provides for levy and collection of duties of Excise on all excisable services provided or rendered in Pakistan, while section 3-C(b) of the said Act quantifies the said charge with reference to the date on which the services are provided or rendered. According to the learned counsel the said section 3-C(b) provides that the value of the services as also rate of duty applicable thereto shall be one in force on the said date i,e, on which the services are provided or rendered. Learned counsel further elaborated that Item No,14.14 (now 9813.3000) of the Schedule is not in harmony with the said provisions of sections 3 and 3-C (b) of the said Act. Goes on to state that there was no nexus between said item of the First Schedule on the one hand and the said charging and computing provisions on the other. Learned counsel further contends that the services which have been made chargeable to the said duty have not been specified in the said Schedule and as such the rule applicable for the interpretation of the said term would be its clear Dictionary meaning. Relies on the case of Ghulam Mustafa Jatoi. v. Additional District and Sessions Judge/ Returning Officer N.A.
158 Naushero Feroze and others (1994 SCM R 1299) to state that the definitions of term loans in other Statutes are not to be imported into the said Act of 1944. Argues particularly transaction based on mark-up would not be falling within the meaning of term loan.
9. Syed Mansoor Ali Shah, Advocate, with reference to Item 9813.3000 inserted by Finance Act. 1996 in the said First Schedule after adopting the arguments forwarded by Mr. Imtiaz Rashid Siddiqui, proceeds to contend that services sought to be charged have not been defined. According to the learned counsel the said Item provides for levy of the duty in respect of services provided or rendered in respect of leasing and these have no relation to the amount of lease. Refers to some agreements entered into between Leasing Company and lesseeto urge that only fee charged by the said company is front end fee 1% of amount of lease and this fee isalso charged at the time when facility is sanctioned. Precise contention is that only charge for service rendered or provided by leasing company being the said one time fee, there cannot be imposition of continuous charge as provided in column 3 of the said Item. According to the learned counsel the levy is violative of the Entry No,44 of the Federal Legislative List inasmuch as Government has proceeded to tax loan or lease itself and not the services rendered by the Bank or the Leasing Company. Further argues that in view of the provisions of section 3 and section 3-C (b) of the Act, 1944 the duty could not have been levied with retrospective effect inasmuch as services already rendered before the imposition of the duty are sought to be charged.
10. Mr. Faisal Islam, Advocate representing the Leasing Companies argues that levy could not have been imposed on the total balance outstanding but it could only have been imposed on the charge levied by the Company. Learned counsel explains that in case the lease is terminated, there would be discontinuance of service but the outstanding balance would still be there because of the lessee's default and thus notwithstanding the fact that no services are being rendered or provided, going by the terminology of the said Item 813.3000 the company would still be liable to pay the duty. Further particularizes that the levy is to be restricted to rental payable in each month and not on the whole amount as well as profit thereon outstanding at the end of each month, With reference to the said rule 96-ZZI, states that a transaction between the 'company and lessee in any given case involves documentation insurance and sale of goods. According to the learned counsel process fee is not always charged but is dependent upon the market trends. Further contends that in an ongoing lease, at the end of the month it is rental which is outstanding and not the entire amount leased out or for that matter its balance. Goes on to state that out of due rental each month it is only profit component that can possibly be subject to the levy of Excise Duty.
11. Mr. Tariq Qazi, Advocate, argues that in the matter of Mushraka there is a sale arrangement and no concept of loan or advance. Also insists that Banking Loans are not to be referred to in the matter of ascertaining the meaning of the terms loan and advance and ordinary dictionary meaning would be applicable. According to the learned counsel debt includes a loan but opposite is not true.
12. Mr. Hamid Ali Shah, Advocate, while adopting the arguments advanced by his learned friend, as noted above urges that levy is to be on the person providing services and the borrower/customers/leassees are not to be burdened.
13. Mian Ashiq Hussain, Advocate, has filed a note of arguments on the same lines urging that the impugned levy is not duty of excise within the meaning of said Act, 1944 and there is nothing in the said Act of 1944 enabling the Federal Government to enlarge the scope of levy envisaged by the said Act.
14. Mr. All Zafar, Advocate, argues that the term advance has not been defined and whereas the loan may be subject to the said duty, the Modaraba facility cannot be so charged. Further argues that the said Act of 1944 provides for levy of duty on services rendered or provided one time and there is no concept of recurring imposition and there is no co-relation inter se the services and manner in which the duty has been imposed. In the matter of Writ Petition No,1069 of 1995 urges that the amount in the said case was disbursed at Belgium and that no services were rendered in Pakistan and as such there is no question of levy or payment of-any duty qua the said transaction.
15. Ch. Muhammad Saleem, Advocate, appearing for WAPDA argues that it is a Department of Federal Government since 1977 and vide S.R.O. 519(1)192 since advance to Federal Government are exempted and as such WAPDA is not liable to pay the said duty being Department of the said Government.
16. Mr. M. Iqbal Hashmi, Advocate, appearing for Punjab Small Industries Corporation incorporated under Punjab Act. XV of 1973 also complains that the said Corporation being Finance institution is exempted from payment of the duty but the banks are charging the same on advance made to the said Corporation.
17. Mr. Shahzeb Masood, Advocate, representing the respondent-department argues that the duty has in fact been imposed on the services rendered by the bank and leasing company. As to the mode and quantum of charge states that the same cannot be challenged. According to the learned counsel maintenance of accounts or book keeping by the said companies are continuous services being provided and as such there is no violation of section 3C of the said Act, With reference to section 4(3) of the said Act argues that it does not prohibit imposition of duty on the basis other than charges for the services.
18. Mr. A. Karim Malik, Advocate, also representing respondent-Department argues that Schedule is part of the Act and in case of inconsistency it is the Schedule which is to prevail. Further contends that duty is payable by the banks and companies and that banks and companies have passed on the burden to the customers, borrower and lessees under the agreements between the said parties. The precise contention is that said customers, borrowers and lessees have no locus standi to file the petitions to challenge the said levy.
19. We may also state here that all learned counsel appearing for the writ petitioners in these cases have implicitly relied upon the judgment of Sindh High Court at Karachi in the case of Messrs Janana De Malucha Textile Mills Ltd. Habibabad Kohat v. Federal Government of Pakistan and others (C.P. No,D-690 of 1993) in support of their pleas (hereinafter to be referred as said judgment).
20. Initially the provisions were made by levy and collection of Duties of Excise on excisable goods produced or manufactured in Pakistan or ,imported into Pakistan or as are specified by the Federal Government by notification being manufactured and produced in non-tariff area and brought to the tariff area. It was vide Finance Ordinance, 1969 that the said Act of 1944 was amended so as to provide for levy and collection of the said duty on all excisable services provided or rendered in Pakistan as, and, to set forth in the First Schedule. Section 3 of the Act was accordingly amended while subsection (3) was added to section 4 of the said Act. The term "Excisable" service has been defined as follows:- In section 2(20) of the said Act:--- "(20) Excisable services, means service, facilities and utilities specified in the First Schedule and with Chapter 98 thereof, including the services, facilities and utilities originating from Pakistan or its tariff area of terminating in Pakistan or its tariff area."
The constitutionality and legality of the said amendment were upheld by Division Bench of the High Court Sindh at Karachi in the case of Modi's Refreshment Room and Bar Karachi, v. Islamic Republic of Pakistan etc. (PTCL 1983 88). Several appeals filed against the said judgment of High Court of Sindh were dismissed and the same was upheld by the Supreme Court of Pakistan in the case of Hirjina & Co. v. Islamic Republic of Pakistan and another (1993 SCM R 1342).
21. A plain reading of the said Item .14.14 (Presently 8193.4000) 'leaves one in no manner of doubt as per column No,2 of the said item it is not advances, loans, lease or Musharka finance which has been subject to the levy of the duty of excise rather it is services provided or rendered in respect thereof which have been subject to the said duty. This is also the finding recorded in the said judgment. Even otherwise in the cases before us there is no dispute regarding said meaning attributed by us to the said column 2 of the said item. The actual grievance being made out and dispute which needs to be resolved is the manner in which the duty is to be charged per column No,3 of the said Item and whether the same is valid or not.
22. This brings us to the question as to whether services being provided by the said Companies are excisable services within the meaning of the said Act or not. In the said judgment, reliance was pleaded on the case of South Bihar Sugar Mills Ltd. And another v. Union of India and another (AIR 1968 SC 922) to hold that notwithstanding the definition" contained in said section 2(20) services liable to said duty would be services as ordinarily defined in Dictionary. We are, afraid, observations lose sight of said case of Hirjina & Company, upholding the said judgment in the case of Modi's Restaurant. Under section 3 what has been made subject to levy of duty of excise are not goods or services but excisable goods and services. The said Statute defined excisable services to mean services, facilities and utilities in First Schedule read with Chapter 98 thereof including services, facilities and utilities originated from Pakistan or its tariff area or terminating in Pakistan or at its tariff area. The levy has been upheld in the said cases with reference to the said definition. This being so we would rather go by the said judgment of our Supreme Court in the said case of Hirjina & Co. We may also note here that in the said judgment reliance has been placed upon the judgment in the case of Abdul Rahim and others v. Messrs United Bank Ltd. Of Pakistan (PLD 1997 Kar. 62). We have gone through the said judgment in the case of Abdul Rahim and do find that as held in the very judgment itself and as is the contentions of the learned counsel for the petitioners themselves before us the definition provided in Banking Laws is not to be imported into the said Act, 1944. The said case was decided with reference to the provisions of Banking Tribunals Ordinance, 1984 and as such would to be relevant at all in the matter of present cases.
23. We deem it apt to refer here to some excerpts from the leading opinion of Mr. Justice Ajmal Mian (as his lordship then was) in the case of A & B Food Industries Limited. v. Commissioner of Income Tax/Sales, Karachi (1992 SCM R 663). In the said case the taxpayers sought refund of Sales Tax on the ground that the payment of Sales Tax has been exempted on the goods in question but they were made to pay the same on the basis that Legislature had merged the Sales Tax into enhanced rate of Excise Duty payable on the same. The precise plea was that the real character of the said levy of Excise Duty at the enhanced rate be determined and veil be lifted so as to expose the components of the said rate. Reliance was placed on the following passages, from the Corpus Juries Secundum, Vol 84 page 246.
Determination of character of tax.---In determining whether or not a particular statute impose an excise or privilege tax, the Courts look to the real nature of the tax, which is determined by its operation rather than by any particular descriptive language which may have been applied to it, so that the mere fact that the statute characterizes the tax as an excise or privilege tax does not constitute it such a tax. Although the legislative declaration that a tax thereby imposed is an excise tax is not conclusive, such designation is entitled to considerable weight in ascertaining the nature the tax, and will be accepted unless the declaration is incompatible with the effect of the statute."
His lordship while agreeing that no doubt the Court is competent to determine the real nature of particular revenue with reference to the 3 relevant statute, observed, that the above said rule does not empower a Court to read something into a clear provision of a taxing statute. Following observations of Mr. Justice Cornelius in the case of The Commissioner of Agricultural Income Tax East- Bengal v. B.W.M. Abdur Rehman, Manager, Taki Bara Taraf Wards Estate (1973 SCM R 445) were quoted with approval:--- "But indeed in determining whether or not a particular matter comes within a taxing statute, it is only the letter of the law which must be looked to. There is ample authority for the proposition that in a fiscal case, form is of primal, importance, the principle . Being that if the person sought to be taxed comes within the letter of law, he must be taxed, however, great a hardship may be thereby be involved but on the other hand if the Crown cannot bring the subject within the letter of law he is free, however, apparent it may be that this case is within what might be called the spirit of the Law.
As was said by Rowlatt,...J, in Cap Brandy Syndicate v. Inland Revenue Commissioner (1921) 1 K.B.
64).
In a Taxing Act one has to look merely at what is clearly said. There is no room for any intendment.
Nothing is to be read in, nothing " is to be implied. One can only look fairly - at the language used."
Following observations of Lord Halsbury in the case of Tenant v. Smith (1892 AC 150), also met the approval of his lordship.
"In a Taxing Act it is impossible, I believe to assume any intention, any governing purpose in the Act, to do more than take such tax as the statute imposes...Cases, therefore, under the Taxing Acts always resolve themselves into the question whether or not the words of the act have reached the alleged subject of Taxation."
24. Applying the said test to the present cases we find that levy has been imposed on services being or to be provided by the said financial institutions in respect of the loans, advances, leases and Musharka financing and not on the loans, advances, lease and Musharka itself as noted by us above. We also find upon a reading of the said rule 96-ZZI that it is Banking Company, financial institution, insurance company, cooperative financing society and lending bank, institution or any other company or Association of persons dealing in advancing of loans or providing the services of leasing or Musharka financing who are to pay said Excise Duty. As to the mechanism of arranging the payment the matter is between the said companies and their clients borrowers, customers, lessees. The impression we have got from the statements of the learned counsel in these cases is that it is matter of agreement between the two.
25. As noted by us above, the real grievance is the matter of quantification of the levy. The argument is that the charge is not defined and words of the said column No,3 clearly give impression that the very loans, advances or the leases or the Musharka have been taxed. The methodology adopted in the Schedule has been questioned with reference to provisions of the Act particularly section 3 and section 3-C(b) of the said Act. The precise contention is that in the entire Chapter 98 barring the said items, the duty has been levied with reference to the charges, under the said item the duty has been levied with reference to quantum of loans and advances as outstanding on the last working day of each calendar month. According to the learned counsel for the petitioners the said item in the First Schedule is inconsistent with the provisions of the Act and in case of inconsistency the Schedule has to give way to the provision of the Act. Mr. A. Karim Malik, Advocate, for the department has argued that the provisions of the Act and Schedule stand at par and it is former that has to give way to the latter in case of inconsistency. So far as the proposition is concerned, we find that contention of the learned counsel for the petitioners finds support from the case of Excise and Taxation Officer, Karachi and another v. Burmah Shell Storage and Distribution Company of Pakistan and five others (1993 SCM R 338). However, what has to be seen is as to whether there is inconsistency between the Schedule with reference to the said Item and charging section of the said Act, 1944." According to the learned counsel for the petitioner, section 3-C (h) of the said Act, 1944 lays down that the value and rate of duty applicable to Excisable services will be value and the rate of duty enforced on the date on which services are provided or rendered. In the same corollary it has been argued that Clauses (a) and (b) of subsection (3) of section 4 of the said Act, 1944 provides for the levy and collection of the duty on the amount which is to be charged for such services, facilities or utilities. According to the learned counsel the services if at all would be deemed to have been rendered on the date loans and finances were advanced (with reference to section 3-C) and the value of the services will have to be determined with reference to the said date. The arguments with reference to section 4(3) of the said Act is based on the assumption that the Excise Duty is dependent on the charges for the services, facilities and utilities. So far as the latter argument is concerned, it loses sight of the very provisions of section 4(3) itself inasmuch the said subsection (3) opens as follows:-- "Where under this Act any services, facilities and utilities are subject to duty at a rate dependent on the charges therefor."
To our mind there is nothing in the said provision to make subjecting to duty of any service, facilities and utilities at a rate dependent on the charges therefor alone and the possibility or probability of services, facilities or utilities being not dependent on the charges therefor stands catered for in the said Act.
As to the said first mentioned argument with reference to section 3-C(b) of the Act, we have already held that it is not loans, advances, leases or other finance facilities which have been subjected to the levy but services provided or rendered in respect thereof. Now section 3 of the said Act, 1944 provides for levy and collection of the duty of excise on all excisable services provided or rendered in Pakistan, as, and at the rate set forth in the First Schedule.
26. Now we find that in the present cases the services in question are subject to duty @ (sic) not dependent on the charge therefor. The question arises as to whether in such case no Excise Duty can be levied. The answer, to our mind, is in the negative. It will be noted that the Act initially provided for levy of Excise Duty on excisable goods with reference to their production, manufacture or import into Pakistan. It was at later stage that levy and collection of the said duty on excisable services provided or rendered in Pakistan was added. Now the Government obviously has nothing to do with the, fixation of price of goods or charges for the services. These are to be fixed obviously by the manufacturer, producer or importer of the goods and the person who provide or render services. Under the said Act only rate of duty is to be fixed which is to be collected in respect of said services. We, therefore, find that the reading of sections 3 and 3-C(b). Section 4(3) and the said Item of the Schedule together, there is no absence of harmony.. As to whether the said rate of duty is reasonable or not, we are afraid the said question cannot be gone into by this Court. In the case of Aloud Power Generation Limited v. Federation of Pakistan and others (PLD 2001 SC 340), their Lordships took note of the following comment of N.S. Bindra in his Book "Interpretation of Statutes"
(7th Edition) at page (771):-- "In construing a taxing measure for determining its Constitutional validity, the question of reasonableness cannot enter a judicial mind. The only consideration, which is germane is whether the legislation challenged is permitted by the Constitution. The reasonableness or otherwise of such a state is a matter of legislative policy and it is not for the Courts of adjudicate upon."
Their lordships also observed, with reference to the case of P.K. Kutty, Haji and others v. Union of India and others (1989) 176 ITR 481, "that the judicial approach throughout has been to allow the Legislature filexibility at the joints, particularly when a taxing statute is under attack." The said observations of the Indian Supreme Court met with approval in the case of Messrs Elahi Cotton Mills Ltd. And others v. Federation of Pakistan through Secretary Finance and 6 others (PLD 1997 SC 582), where a Bench of Supreme Court comprising five Hon'ble Judges headed by Mr. Justice Ajmal Mian (as his lordship then was) made the following observations with reference to the interpretation of a taxing statute at page 675 of the report:--- i. That in view of wide variety of diverse economic criteria, which are to be considered for the formulation of a fiscal policy, Legislature enjoys a wide latitude in the matter of selection of persons, subject-matter, events, etc. For taxation. But with all this latitude certain irreducible desiderata of equality shall govern classification for differential treatment in taxation law as well. Ii.
That Court while interpreting laws relating to economic activities view the same with greater latitude than the laws relating to civil rights such as freedom of speech, religion etc., keeping in view the complexity of economic problems which do not admit of solution through any doctrinaire or strait jacket formula as pointed out by Holmes, J. In one of his judgments. Iii. That Frankfurter, J., in Morey v. Doud (1957) U.S. 457 has remarked that in the utilities, tax and economic regulation cases, there are good reasons for judicial self-restraint if not judicial deference to the legislative judgment.
27. We, therefore, dismiss all the writ petitions mentioned in Part-I of the Schedule. The petitions enumerated in Part-II thereof do not have nexus with the questions heard and decided in these cases and same shall be re-heard by a learned Single Bench of this Court. Office to take orders from the Hon'ble Chief Justice in this regard.