2003 P T D 2140

[Quetta High Court]

Before Amanullah Khan Yasinzai and Ahmed Khan Lashari, JJ

MURREE BREWERY COMPANY LTD. through Secretary

Versus

PROVINCE OF BALOCHISTAN through Secretary, Excise and Taxation, Quetta

and 2 others

Constitutional Petition No.471 of 2000, decided on 07/04/2003.

Balochistan Excise Regulation, 1915---

----S. 62(d)---Notification No. RO(EXT) 234-Tax/99/769-78 dated 20-8-1999--Government of Balochistan Memorandum dated 23-8-1999--Constitution of Pakistan (1973), Arts.151 & 199---Constitutonal petition--Inter-provincial trade---Interpretation and application of Art.151 of the Constitution ---Vires of Notification and Memorandum issued by the Provincial Government whereby tax had been imposed on the import of Pak-made foreign liquor and the action for collection of said tax-- Notification or executive order, which invaded the authority of Art.151 of the Constitution, prohibiting the export of goods of any, class, from one Province to another, and was deterrent to free trade, commerce and intercourse throughout the, country could not be saved---Said Notification and subsequent memorandum were declared to be without lawful authority and of no legal effect by the High Court with the observation that the petitioner would be entitled to the recovery of tax, collected from him on the basis of said notification and memorandum.

Indian Cement and others v. State of Andhra Pradesh and others AIR 1988 SC 567 and Atiabari Tea Co. v. The State of Assam AIR 1961 SC 232 ref.

H. Shakil Ahmed for Petitioner

Ghulam Mustafa Mengal, Addl. A.-G. for Respondent No.1.

Muhammad Ishaq Notezai for Respondents Nos.2 and 3.

Date of hearing: 18th March, 2003.

JUDGMENT

AMANULLAH KHAN YASINZAI, J.---Through this petition the petitioner Murree Brewery Company Limited, has called !n-question, the validity of Notification dated 20-8-1999, issued by the Government of Balochistan and subsequent Memorandum dated 23-8-1999, whereby tax has been imposed, on the import of Pakistan Made Foreign Liquor (PMFL); and the action for collection of such tax, has been sought to be declared, as without lawful authority.

It is the case of the petitioner, that they are engaged in the manufacture and sale of PMFL, having its Factory at Rawalpindi. It exports its products throughout the Country, including Province of Balochistan, to the licensees under the provisions of Prohibition (Enforcement of Hadd) Order, 1979 and the Rules framed thereunder. It is further the case of the petitioner that, on 23-8-1999, the respondent No.1, imposed an Import Licence fee at the rate of Rs.100 per gallon on PMFL and Rs.2 per litre on Beer. On imposition of such tax, petitioner made several requests in the form of seeking illumination; as to under what provision of law, the said duty has been charged but in vain. Thus, petitioner was constrained to file a Constitutional petition, being C.P. No.318/00 and therein the respondents alongwith their parawise comments filed Notification dated 20-R-1999 and Memorandum dated 23-8-99, authorizing the respondents to impose the said tax. Petitioner contends that, said tax offends Article 151 of the Constitution of Islamic Republic of Pakistan, and thus the Notification may be declared, as ultra vires the Constitution.

We have heard Mr. Shakeel Ahmad, learned counsel for the petitioner, Mr. Ghulam Mustafa Mengal, Addl: A.-G. for respondent No.1 and Mr. Ishaque Notezai, Advocate for respondents 2 and 3.

Learned Counsel for petitioner contended; that imposition of import licence fee on PMFL and Beer, is in violation of Article 151 of the Constitution, as the Provincial Government, under the said Article had no authority to impose tax, besides it is an impediment in the way of trade 'and commerce, between different Provinces and hampers the movements of goods from one Province to another. Additionally', the said tax is discriminatory, as similar goods produced by Quetta Distillery, have not been subjected to such tax.

Learned Addl. A.-G. argued; that the tax has been validly imposed by the Government of Balochistan, as section 62(d) of the Balochistan Excise Regulation, 1915, (hereinafter referred as Regulation) authorized the Provincial Government to impose such tax.

Learned counsel for respondents 2 and 3 also opposed the petition and stated that, tax has been imposed lawfully under the Regulation and the purpose is to generate income.

We have given our anxious thought to the contentions put forth by the learned counsel for the parties, in the light of relevant provisions of law, have also carefully examined the available record.

It may be observed that the Notification dated 20-8-1999, has a bearing on the issues, falling for determination of the case, thus, it would be appropriate to reproduce the same hereinbelow:-

"GOVERNMENT OF BALOCHISTAN EXCISE

AND TAXATION DEPARTMENT.

Dated Quetta, the 20th August. 1999.

NOTIFICATION.

No.RO(E&T)234-Tax/99/769-78. In exercise of the powers conferred by section 62 of the Balochistan Excise Regulation, 1915 (I of 1915), the Government of Balochistan is pleased to make the following amendments in the British Balochistan Foreign Liquor and Country Spirit Rules, 147, namely:--

For sub-rule (4) of rule 4 the following shall be substituted namely:--

"(4) The permit fee on the import of Pak Made Foreign Liquor and Pak Made Beer shall be at the rates specified below:

(a) Pak Made Foreign LiquorRs.100 per gallons.

(b) Pak Made Beer Rs.2 per litre

This Notification shall come into force with immediate effect.

BY ORDER

GOVERNOR BALOCHISTAN

SYED ABBAS HUSSAIN

SECRETARY TO GOVERNMENT

OF BALOCHISTAN, EXCISE AND

DEPARTMENT. "

On the basis of said Notification, Memorandum dated 23-8-1999, was issued, which reads as under:--

"From: The Excise and Taxation Officer-III, Quetta.

To1. M/s Souse's Wine & General Store, Quetta.

2. M/s Tajik Wine Store, Quetta.

3. M/s Standard Store, (Pvt) Quetta.

4. M/s Ramesh Wine & General Store, Quetta.

5. M/s United Wine & General Store, Quetta.

6. M/s Quetta Sarena Hotel, Quetta.

7. M/s The Quetta Distillery, (Pvt) Quetta.

8. M/s Murree Brewery & Co. Ltd, Rawalpindi.

Memorandum No. 283/Vends.

Dated Quetta the 23rd August, 1999.

Subject: ENHANCEMENT OF TAXES/DUTY/LICENCE FEE UNDER PROVINCIAL EXCISE.

The Government of Balochistan has enhanced existing .of Taxes under the Provincial Excise with immediate effect:-

1. Liquor permit fee:--Rupees:--125-Per Unit for Non-

Muslim Citizens (effective. w.e.

from 20-8-1999).

2. Assessment fee:-Rupees:-- 420 per imperial gallon

1. PMFL.

2. Pak Made BeerRupees:-- 20 per liter.

(effective w.e.f. 2-8-1999)

3. Licence fee L-I & L-II:--Rupees.1,00,000 each per annum

(effective w.e.f. 1-7-1999)

4. Still Head duty:-Rupees:

1. PMFL200 per L.P. Gallon

2. Pak Made Beer15 per Liter

(effective w.e.f. 20-8-1999)

5. Permit fee on import of

PMFL/Beer.

1. PMFLRupees 100 per gallon.

2. Pak Made BeerRupees: 2 per litre

(effective w.e.f. 20-8-1999)

6. Distillery Licence fee:Rupees:- 20,00,000 per annum

(w. e. f. 20-8-1999 )

7. Non-Muslim permit fee:--Rupees:-- 123 per Unit

(w.e. f. 20-8-1999)

8. Licence fee in Form Ex-19

(Denatured Spirit)Rupees:-- 10,000 per annum

(with immediate effect)

9. Fee in Form PR-1.Rupees:-- 100 per permit.

(Asghar Ali)

Excise and Taxation Officer-III,

QUETTA. "

A bar perusal of the Notification of 20-8-1999, would show, that the said tax has been imposed in exercise of powers conferred by section 62 of the Regulation. The questions germane to the case in hand are; whether the imposition of the tax, offends Article 151 of the Constitution? and whether the Notification ultra vires the provisions of Constitution?

Mr. Shakeel Ahmad, learned counsel, contended with vehemence, that the Government has already imposed duty of ? % on the basic manufacture of goods. The break-up whereof is as follows :-

"Ex-Distillery Price= Rs. 33.83

Still-Head Duty = Rs. 31.25=82% of Ex-Dist. Price

Sales Tax @ 12.5% = Rs.8.67 = 23% of Ex-Dist. Price.

Goods Exit Tax @ =Rs, 1.75 = 5% of Ex-Dist. Price.

Rs. 125 per quintial

Vend Fees = Rs. 170.00 = 344% of Ex-Dist. price.

Central Excise duty = Rs.31.25 = 82% of Ex-Dist Price.

@ 12.5%

Provincial .Tax @ 5 % = Rs.14.08 = 37 % of Ex-Dist. price

__________

Rs.290.83"

__________

That total taxes calculated on the goods comes to about 570% which means that, petitioner's goods are already most highly taxed products in the Country and the Government revenue is adequately safeguarded.

Learned Counsel further contended that, provisions of section 62 of 1915 Regulation, cannot override the provisions of Constitution, and thus a favourable finding be given, by holding that, import licence fee, imposed on the goods of petitioner cannot be levied or enforced, being in contravention of Article 151 of the Constitution.

For convenience, provisions of Article 151 of the Constitution are reproduced hereinbelow: -

"Article 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 which, in the case of goods manufactured 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,

(c)an Act of a Provincial Assembly which imposes any reasonable restriction in the interest of the public health, public order 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."

On examination the said Article would reveal, that the aim and object is, to promote free and un-fettered inter-Provincial trade commerce, subject to such limited restrictions in public interest which the Parliament may by law impose. The freedom of trade and commerce between the Provinces has been ensured and guaranteed, except the limitations as provided by Article 151 (2) in public interest. Sub Article (3) of Article 151 of the Constitution, further prohibits the Provincial Assembly or the Provincial Government, from making any law or take any executive action which may hamper, obstruct or restrict the free flow of inter-Provincial trade and-commerce. Article 151 (3)(b) prohibits, from imposing any tax, which may discriminate between the goods manufactured in the Province and not so manufactured and is thus favourable to the goods manufactured anti produced in the Province, nor can any tax be imposed by Provincial Assembly, for import or export of such goods, which may be discriminatory in nature. Article 151 (4) however, permits the Provincial Assembly to make law imposing reasonable restrictions in public interest, as specified therein, with the consent of the President.

Learned counsel further contended that free trade and commerce is guaranteed under Article 151 of the Constitution. In this behalf, he referred to Articles 301, 302, 303, 304 and 305 of the Indian 'Constitution which embody the rule contained in Article 151 of our Constitution. The said Articles were considered by the Indian Supreme Court in the case of Indian Cement and others v. State of Andhra Pradesh and others AIR 1988 SC 567 and Atiabari Tea Co. v. The State of Asam AIR 1961 SC 232 Gajendragadkar, J. 1n the Indian Cement and others v. State of Andhra Pradesh and others AIR 1988 SC 567, following observations were made:---

"The true purpose of the provisions contained in Part XIII of the Constitution, as elucidated in the different decisions of the Constitution Benches, is that the restriction provided for in Art.301 can within the ambit be limited by law made by the Parliament and the State Legislature. No power is vested in the executive authority to act in any manner which affects or hinders the very essence and thesis contained in the scheme of Part XIII of the Constitution. It is equally clear that the declaration contained in Part XIII of the Constitution is against creation of economic barriers' and/or pockets which would stand against the free flow of trade, commerce and intercourse.

There can be no dispute that taxation is a deterrent against free flow. As a result of favourable or unfavourable, treatment by way of taxation, the course of flow of trade gets regulated either adversely or favourably. If the scheme which Part XIII guarantees has to be preserved in national interest, it is necessary that the provisions in the Article must be strictly complied with."

And in case of Atiabari Tea Co. v. the State of Asam AIR 1961 SC 232 Gajendragadkar, J. made the following observations:---

"In drafting the relevant Articles of Part XIII, the makers of the Constitution were fully conscious that economic unity was absolutely essential for the stability and progress of the federal polity which had been adopted` by the Constitution for the governance of the country. Political freedom, which had been won, and political unity which had been. accomplished by the Constitution, had to be' sustained and strengthened by the bond of economic unity. It was realized that in course of time, different political parties believing the different economic theories or ideologies may come in power in the several constituent units of the Union, and that may conceivably give rise to local and regional pulls and pressures in economic matters. Local or regional fears or apprehensions raised by local or regional problems may pursuable the State legislatures to adopt remedial measures intended solely for the protection of the regional interests without due regard to their effect on the economy of the nation as a whole. The object of Part XIII was to avoid such a possibility. Free movement and exchange of goods throughout the territory of India is essential for the economy of the nation and for sustaining and improving living standards of the country. The provision contained in Art. 301 guaranteeing the freedom of trade, commerce and intercourse is not a declaration of a mere platitude, or the expression of a pious hope of declatory character; it is not also a mere statement of a Directive Principle of State Policy; it embodies and enshrines a principle of paramount importance that the economic unity of the country will provide the main sustaining force for the stability and progress of the political and cultural unity of the country. "

Learned Counsel, regarding the provisions of Article 151 of the Constitution, referred to the case of Arshad Akram and Co. and 8 others, v. Divisional Superintendent, Pakistan Railways, Rawalpindi and 5 others (PLD 1982 Lahore 109) relevant para whereof reads as under:--

"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. The notification dated 3-10-1979 cannot confer such powers on the Provincial Government which are beyond the field allocated to it under the Provisions of the Constitution, forming part of the Provisional Constitution Order, 1981."

In view of the above discussion and the case-law referred to hereinabove, it can be safely concluded that, any Notification or executive order, which invades the authority of Article 151, in prohibiting the export of goods of any class, from one province to another, and is deterrent to free trade, commerce and intercourse throughout the country, cannot be-saved.

As a result of above discussion, the petition is allowed and we have no hesitation in declaring the Notification dated 20-8-1999 and subsequent Memorandum dated 23-8-1999, as without lawful authority, thus of no legal effect, the petitioner shall be entitled to the recovery of tax, collected from trim on the basis of said Notification.

Parties are left to bear their own costs.

M.B.A./175/QPetition allowed.