FEDERATION OF PAKISTAN through Secretary, Ministry of Finance VS Haji MUHAMMAD SADIQ and others
2007 P T D 67
[Supreme Court of Pakistan]
Present: Iftikhar Muhammad Chaudhry, C. J., Faqir Muhammad Khokhar and Mian Shakirullah Jan, JJ
Civil Appeals Nos. 2296 to 2412 of 2001
FEDERATION OF PAKISTAN through Secretary, Ministry of Finance and others
Versus
Haji MUHAMMAD SADIQ and others
(On appeal from the judgment and order of High Court of Sindh, Karachi dated 22-12-2000 passed in C.Ps. Nos. 1216, 1452, 2287, 1454, 1471, 1969, 1795, 774, 1064, 693, 1517, 463, 1521/1993, 1545/92, 1092, 1514, 1841, 204, 3430, 932, 762, 3163, 1038, 3146, 775, 1541, 1290, 3186, 1160, 1735, 1468, 140, 2616, 1470, 805, 2818, 1456, 2136, 3514, 3147, 1063, 748, 1036, 506, 3167, 1518/93, 3164/92, 1513, 694, 2872, 224, 691/93, 225/94, 1379, 2471, 704, 1031/93, 186, 1342, 1371, 2873, 692, 1736, 3389, 1453, 1472, 2874, 1159/93, 3185/92, 804-D/93, 3165/92, 275-D/93, 2617/93, 3166-D/92, 1457/93, 1794-D/93, 690/93, 1116-D/93, 1281/93, 1694, 1333/93, D-226/93, D-1098/94, D-1405/98, D-1372/94, D-1449/93, D-1494/93, D-1519/93, D-1532/94, D-1951/93, D-1971/93, D-1796/93, D-3137/92, D-151/93, D-255/93, D-734/93, D-735/93, D-769/93, 934/93, 1099/94, 1143/93, 1189/95, 1217/93, 1372/94, 1386/93, 1794/93, 1970/93, 2193/93, 2194/93, 3098/93 and 3146/92).
Civil Appeals Nos.2707-2717 of 2001
INDUSTRIAL DEVELOPMENT BANK OF PAKISTAN
Versus
FEDERATION OF PAKISTAN through Secretary, Ministry of Finance and others
(On appeal from the judgment and order of High Court of Sindh, Karachi dated 22-12-2000 passed in C.Ps. Nos.D-148, 152, 727, 729, 736, 775, 1064, 1099, 1468, 1521 and 1541/1993).
Civil Appeal No.516 of 2002
INDUSTRIAL DEVELOPMENT BANK OF PAKISTAN
Versus
FEDERATION OF PAKISTAN through Secretary, Ministry of Finance and others
(On appeal from the judgment and order of High Court of Sindh at Karachi dated 30-10-2001 in C.P. No.D-2342/93).
Civil Appeal No.934 of 2002
ICC TEXTILE MILLS, LTD.
Versus
FEDERATION OF PAKISTAN through Secretary, Ministry of Finance and others
(On appeal from the judgment and order of Lahore High Court Lahore dated 4-4-2002 passed in W.P. No. 9705).
Civil Appeals Nos.1087-1091 of 2004
Messrs PAK ELECTRON LTD. and others
Versus
FEDERATION OF PAKISTAN through Secretary, Ministry of Finance and others
(On appeal from the judgment and order of the Lahore High Court, Lahore dated 4-4-2002 passed in W.Ps. Nos. 23072/96, 316-317/97 and dated 27-5-2004 in W.Ps. Nos. 21760 and 20642/1996).
Civil Appeals Nos.2254-2403 of 2005
Messrs FAISAL ASAD TEXTILE MILLS LTD. and others
Versus
FEDERATION OF PAKISTAN through Secretary, Ministry of Finance and others
(On appeal from the judgment and order of Lahore High Court, Lahore dated 4-4-2002 in W.Ps. Nos. 151/94, 1082/93, 3895/92, 12059/97, 743/93, 744/93, 795/93, 742/93, 918/96, 2512/97, 10691/95, 5686/96, 4915/95, 4919/95, 4917/95, 4918/95, 776/93, 4916/95, 121010/92, 12011/92, 685/93, 22007/92, 12139/92, 101/93, 11060/92, 102/93, 12091/92, 12014/92, 12092/92, 11059/92, 12013/92, 11061/92, 12008/92, 12012-92, 3730/96, 2063/96, 12143/92, 12141/02, 12142/02, 4599/94, 16565/96, 2293/97, 16567/96, 7601/97, 704/97, 703/97, 1851/93, 12445/92, 12450/92, 1770/98, 1357/93, 1580/93, 16520/95, 216522/95, 2918/93, 1046/93, 12665/96, 12768196, 11238/97, 1267/96, 1263/96, 12674/96, 12676/96, 12695/96, 12696/96, 19120/01, 20059/96, 20060/96, 2901/93, 3309/93, 3513/97, 4073/97, 7039 to 7041/93, 2454/93, 2523/93, 2526-2530/93, 3995/93, 14284/93, 14285/93, 243/93, 436/93, 492/93, 2525/93, 2531/93, 5317/93, 11294/95, 1407/92, 13775/96, 3543/93, 509/93, 1083/93, 2524/93, 322/94, 989/93, 3000/94, 3001/94, 3004-3005/94, 13894/94, 8113/95, 8115/95, 8116/95, 8117/95, 987/93, 17214/96, 17215/96, 17218/96, 10057/97, 10045/97, 10061/97, 10063/97, 13179/96, 613/96, 12333/92, 10054/97, 2593/96, 611/96, 2594/96, 2592/96, 609/96, 2595/96, 606/96, 610/96, 605/96, 607/96, 4099/93, 10055/97, 12334/92, 10056/97, 612/97, 608/96, dated 20-8-2002 in W.P. No.3896/1992, dated 4-4-2002 in W. P. No. 2596/96, 1408/93, 5412/93, dated 24-9-2002 in W.P. No. 18702/2001, dated 4-4-2002 in W.Ps. Nos.1884/96, 20753/96, dated 18-6-2002 in W.P. No.319/93 and dated 4-4-2002 in W.P.No.7078/1993).
Civil Appeals Nos.2410-2423 of 2005
FEDERATION OF PAKISTAN and others
Versus
GUL AHMAD TEXTILE MILLS LTD. and others
(On appeal from the judgment and order of High Court of Sindh, Karachi passed in C.Ps. Nos. 462, 780, 2289/93, 2136/94, 841/93, 3139/92, 147/03, D-54/94, D-2190/93, D-254/93, D-2202/93, D-933/93, D-1331/93 and 1606-D/1993).
Civil Appeals Nos.2433-2436 of 2005
THE PAK PUNJAB MANUFACTURING COMPANY (PVT.) LTD. and others
Versus
FEDERATION OF PAKISTAN and others
(On appeal from the judgment and order of Lahore High Court, Lahore dated 4-4-2002 in W.Ps. Nos.17307, 17309, 17310 and 17314 of 1993).
Civil Appeals Nos. 2296 to 2412, 2707-2717 of 2001, 516, 934 of 2002, 1087-1091 of 2004, 2254-2403, 2410-2423, 2433--2436 of 2005, decided on 22nd February, 2006.
(a) Central Excise Act (I of 1944)--- ----Ss. 2(20), 3 & First Sched. Part-II, Item 14.14---Excisable Services---History stated.?
(b) Central Excise Act (I of 1944)---
---Ss. 2(20), 3, 3-C(1)(b), 4(3), 7(1) & First Sched. Part-II, Item 14.14 [as inserted by S.5 of Finance Act (XII of 1991) and then replaced with Item No.9813.0000 by Finance Act (XII of 1994)]---Constitution of Pakistan (1973), Arts, 144, 163 & Fourth Sched.---Levy of excise duty on services provided or rendered to its customers by Institutions named in Item 14.14 of Part-II of First Sched. of Central Excise Act, 1944---Validity---Legislature was competent to levy excise duty on excisable services by inserting Item 14.14 in First Sched. of Central Excise Act, 1944---Such Item was part of the Central Excise Act, 1944 for purposes of charging duty on services in respect of advances made to any person---First Sched. was appended with Central Excise Act, 1944 to cater requirement of S.3 thereof being a charging section---Constitutionality of such Item, thus, could not be testified on touchstone of S.3 of Central Excise Act, 1944 for being constitutional---In case of irreconcilable inconsistency between such Item and S.3 of Central Excise Act, 1944, such Item would yield to section 3 thereof---Legal nexus between such Item and S.3 of the Act, existed for both being part of a statute---Word "services" used in plural sense in Column II of such Item would cover all services provided to its customers by Institutions named therein---Criteria or measure to calculate duty provided in Column II of such Item was neither vague nor ambiguous---Excise duty would be calculated on the volume of loan/advance at the rate specified in Column III of such Item---Such Institutions would have a recurring cause of action for purpose of effecting recovery of excise duty on services being provided on monthly basis on volume of advance/loan, which would be calculated on last working day of each calendar month---Expressions/ words used in S. 2(20) of Central Excise Act, 1944 and such item would be interpreted keeping in view their popular meanings---Words "facilities", "loans", "utilities" and "advances" would be considered in popular sense---Such Item did not speak in respect of Modaraba or Musharka etc., but after its replacement with Item No.9813.0000 by Finance Act, 1994, excise duty became chargeable on services provided or rendered by Banking Companies, Insurance Companies, Cooperative Financing Society, Modaraba, Musharka, Licensing Companies, Non-Banking Companies and other person dealing in such services---Levy of excise duty would depend upon services being provided in respect of advances to a person, but no sooner when there was no advance outstanding, Bank would not be deemed to be providing or rendering any service as transaction between Bank and customer came to an end---Financing Company would enjoy recurring cause of action till adjustment of loan---Day on which excisable service was rendered/provided would be the date for determination of excise duty---Rate of excise duty mentioned in Item 14.4 of First Schedule, Part II of the Central Excise Act, 1944 was just, proper and not arbitrary---Levy of excise duty at such rate being an indirect tax would not burden such Institutions, but would be passed on to its customers---Principles.?
South Behar Sugar Mills Ltd. v. Union of India AIR 1968 SC 922; Hirjina & Co. v. Islamic Republic of Pakistan 1993 SCMR 1342; Elahi Cotton Mills Ltd. v. Federation of Pakistan PLD 1997 SC 582; Pakistan Industrial Development Corporation v. Pakistan 1992 SCMR 891; United Provinces v. Atiqa Begum AIR 1941 FC 16; Navinchaandra Mafatlal v. Commissioner of Income Tax [1954] (XVI) ITR 758; Bisvil Spinners v. Superintendent Central Excise PLD 1988 SC 370; Ghulam Hyder Shah v. Chief Land Commissioner 1983 CLC 1585; Sabir Shah v. Shad Muhammad Khan PLD 1995 SC 66; A&B Food Industries Ltd. v. Commissioner of Income/Sales Tax Karachi 1992 SCMR 663; Commissioner of Agricultural Income Tax East Bengal v. B.W.M. Abdul Rehman PLD 1973 SC 445; Excise and Taxation Officer Karachi v. Burma Shell Storage and Distribution Company of Pakistan 1993 SCMR 338; Mondi's Refreshment Room & Bar, Karachi v. Islamic Republic of Pakistan PLD 1983 Kar. 214; Sohail Jute Mills Ltd. and others v. Federation of Pakistan PLD 1991 SC 329; ICC Textiles Ltd. v. Federation of Pakistan 2003 PTD 1017; P. Kunhammad Kutty Haji v. Union of India [1989] 176 ITR 481; Ocean Industries Ltd. v. Industrial Development Bank PLD 1966 SC 738; Jamat-i-Islami Pakistan v. Federation of Pakistan PLD 2000 SC 111; Buxa Dooars Tea Company Ltd. v. State of West Bengal AIR 1989 SC 2015; Govind Saran Ganga Saran v. Commissioner of the Sales Tax (1985) 155 ITR 144; Commissioner of Sales Tax v. Hunza Central Asian Textile and Woolen Mills Ltd. 1999 PTD 1135; Reference No.2 of 2005 PLD 2005 SC 873; 2002 CLC 1714; Messrs Central Insurance Co. v. The Central Board of Revenue 1993 SCMR 1232; Al-Jehad Trust v. Federation of Pakistan PLD 1996 SC 324; Pakistan v. Public at large PLD 1987 SC 304 and Mrs. Zehra Begum v. Pakistan Burmah-shell Ltd. PLD 1984 SC 38 ref.
Abdul Rahim v. UBL PLD 1997 Kar. 62; Excise and Taxation Officer Karachi v. Burma Shell Storage and Distribution Company of Pakistan 1993 SCMR 338; Messrs Army Welfare Sugar Mills Ltd. v. Federation of Pakistan 1992 SCMR 1652; Chambers Concise Dictionary (pg. 53); Habib Bank Limited v. Messrs Farooq Compost Fertilizer Corporation Ltd. 1993 MLD 1571; Habib Bank Limited v. Messrs Qayyum Spinning Ltd. 2001 MLD 1351; Muhammad Shafi v. Wealth Tax Officer 1992 PTD 726 and Messrs ICC Textile Ltd. and others v. Federation of Pakistan and others 2001 SCMR 1208 rel.
(c) Islamic Banking---
----Islamic modes of financing, adoption of---Expressions "loan", "interest" etc., would be alien to Islamic Banking system.?
(d) Words and phrases---
----"Service"---Meaning.?
Advanced Law Lexicon 3rd Edition Volume 4 (2005) ref.
(e) Interpretation of statutes---
----Fiscal statute---Language used in fiscal statute would be interpreted in its literal and ordinary meanings in favour of taxpayer.
?
Government of Pakistan v. Messrs Haswani Hotel Ltd. PLD 1990 SC 68; Messrs Army Welfare Sugar Mills Ltd. v. Federation of Pakistan 1992 SCMR 1652; Messrs Bisvil Spinners Ltd. v. Superintendent Central Excise and Land Customs PLD 1988 SC 370 and Abdul Rahim v. United Bank Ltd. PLD 1997 Kar. 62 fol.
(f) Interpretation of statutes---
----Not safe to compare language in one statute with that employed in another, even though subject covered by the two may involve similarities.?
Abdul Rahim v. UBL PLD 1997 Kar. 62 ref.
(g) Words and phrases---
----"Advances"---Meaning.?
Words and Phrases Vo. 2-A (pg. 117) and Corpus Juris Secundum Vol. 2 page 496-97 ref.
(h) Interpretation of statutes---
----Law should be interpreted in such a manner, that same should be saved rather than destroyed.?
Elahi Cotton Mills PLD 1997 SC 582 and Corpus Juris Secundum Vol. 2 pg. 496-97 rel.
(i) Interpretation of statutes---
----Schedule appended with statute---Legal status---Schedule placed/appended with an enactment is an extension of the section for the purpose of which same has been inserted.?
(j) Interpretation of statutes---
----Act and Schedule, conflict between---Schedule being an enjoinder equal status of an enacment; in case of such conflict, Act would prevail and Schedule would yield to the Act---Principles.?
Excise and Taxation Officer Karachi v. Burma Shell Storage and Distribution Company of Pakistan 1993 SCMR 338; Craies on Statute Law Seventh Edition 1971 p. 225; N.S. Bindra's The Interpretation of Statutes Seventh Edition at pg. 92 and Understanding Statutes S.M. Zafar rel.
?
(k) Interpretation of statutes---
----Fiscal statute, constitutional validity of---Determination---Principles stated.
The Court is bound while examining whether particular matter falls within a fiscal statute is required to examine the letter of the law, and if it comes to the conclusion that all the expressions used by the legislature are to be taken into consideration its popular meaning, then there should not be hesitation in maintaining the constitutionality of particular law.?
Corpus Juris Secundum Vol. 84 page 246; Commissioner of Agricultural Income Tax East Bengal v. B.W.M. Abdul Rehman 1973 SCMR 445; Tenant v. Smith 1892 AC 150; Interpretation of Statutes Fourth Edition at page 977; Sohail Jute Mills Ltd. v. Federation of Pakistan PLD 1991 SC 329 and Mian Ejaz Shafi v. Federation of Pakistan and others PLD 1997 Kar. 604 ref.
(l) Interpretation of statutes---
----Laws relating to economical activities, interpretation of---Principles stated.
The Court while interpreting laws relating to economical activities view the same with greater latitude than the law 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.?
Elahi Cotton Mills PLD 1997 SC 582 fol.
(m) Interpretation of statutes---
----Fiscal statute---Taxing measure---Ultra vires to the Constitution---Determination---Reasonableness or otherwise of such measure would be a matter of legislative policy and not for the Courts for adjudication.?
Anoud Power Generation Ltd. v. Federation of Pakistan PLD 2001 SC 340 rel.
(n) Constitution of Pakistan (1973)----
----Arts. 25, 184, 185(3) & 199---Pakistan Citizenship Act (II of 1951), S.2---Constitutional petition by a Company challenging constitutionality of a statute on touchstone of Art. 25 of the Constitution---Not maintainable without joining its shareholder/director---Principles.
Undoubtedly, the companies have got fundamental rights to carry on business through its representatives, who are the citizens of Pakistan, but for the purpose of challenging the constitutionality of a statute, it would be a condition precedent to satisfy that challenge is by a citizen at the touchstone of Article 25 of the Constitution, which provides that all citizens are equal before the law and are entitled to protection of law. Expression "citizen" means a citizen of Pakistan as defined by law under Article 260 of the Constitution.
A company incorporated under the Companies Act, 1913 or the Companies Ordinance, 1984, does not fall within the definition of a citizen. However, the constitutionality of a legislation, which has impaired the rights of a company, can be challenged through a shareholder.
An incorporated company does not fall within the definition of citizen. However, constitutionality of a statute can be examined for violation of Article 25 of the Constitution, if the vires of the statute have been questioned by a shareholder, director along with the company itself and the company independently cannot question the constitutionality of legislation at the touchstone of Article 25 of the Constitution. The Courts are not debarred to examine the case of the company on the point other than the alleged violation of Article 25 of the Constitution.
The incorporated bodies/companies do not fall within the definition of a citizen for the purpose of Article 25 of the Constitution; therefore, without joining the share/account holders, the impugned legislation cannot be examined within the parameters of Article 25 of the Constitution.
It would be incorrect to contend that while examining the availability of the question of discrimination under Article 25 to an incorporated body, but so far as the petition under Article 199 of the Constitution is concerned, it would be maintainable on behalf of the companies/banking institutions, if they fall within the definition of a person as it has been used in Article 199 of the Constitution. It would not be out of context to lay down a distinction between the expression of a person and a citizen. As far as the expression "person" is concerned, it also includes a juristic person i.e. incorporated bodies, and so far as expression "citizen" is concerned as it has been employed in Article 25 of the Constitution, which means as defined under the law. Essentially the law on the subject is Pakistan Citizenship Act, 1951, which by its implication excludes a juristic person from the definition of citizen.
Divisional Forest Officer v. Bishwanath Tea Co. Ltd. AIR 1981 SC 1368; Excell Wear v. Union of India AIR 1979 SC 25; U.P.S.E. Board v. Hari Shanker AIR 1979 SC 65; I.A. Sherwani v. Government of Pakistan 1991 SCMR 1041 and Inaam ur Rehman v. Federation of Pakistan 1992 SCMR 563 ref.
The Progress of Pakistan Co. Ltd. v. Registrar Joint Stock Companies Karachi PLD 1958 Lah. 887; Shelat v. Bhargava, G.K. Mitter AIR 1970 SC 564; Godhra Electric Company v. State of Gujarat AIR 1975 SC 32 and DC & GM Company v. Union of India AIR 1983 SC 937 rel.
(o) Administration of justice---
----Power of Court to maintain judgment other than on the grounds on which same was founded---Scope stated.
Courts can maintain the judgments other than on the grounds on which the same were founded. But if the plea is not available under the law to defend the judgment, then argument raised by him would not help him at all.?
(p) Central Excise Act (1 of 1944)---
----S. 2(20), 3 & First Sched. Part-II, Item, 14.14 [as inserted by S. 5 of Finance Act (XII of 1991) and then replaced with Item No.9813.0000 by Finance Act (XII of 1994)]---Excise duty on excisable services---Status---Such tax being an indirect tax recoverable from a person to whom excisable services were provided or rendered---Duty of Financial Institution, Insurance Company, Cooperative Financial Society, other Lending Bank or Institution and other person dealing in advancing of loans to realize excise duty at prescribed rate from amount of advances outstanding against each borrower.?
Messrs Central Insurance Co. v. The Central Board of Revenue 1993 SCMR 1232 ref.
(q) Interpretation of statutes---
---Retrospective effect---Scope---In absence of clear intention of legislature to apply provision of a statute with retrospective effect, same would be deemed applicable prospectively.?
(r) Taxation---
---Rate of tax, fixation of---Acceptable consensus of taxpayers ordinarily preferred by Lawmakers--Principles.
The Lawgivers before imposing the tax ordinarily undertake an exercise during the process whereof the taxpayers are also examined and keeping in view their acceptable consensus the rate of tax is fixed. Besides at the same time, it becomes very difficult to quantify the excise tax, therefore, a reasonable/moderate rate of tax is fixed keeping in view the suggestion of the taxpayers and other persons who matter in this behalf.?
Elahi Cotton Mills PLD 1997 SC 582 rel.
(s) Central Excise Act (I of 1944)---
----Ss. 2(20), 3, 3-C(1)(b), 4(3), 7(1) & First Sched. Part-II Item 14.14 [as inserted by S. 5 of Finance Act (XII of 1991)]---Excise duty on excisable services, imposition of---Estoppel against legislature---Scope---Legislature could not be estopped from promulgating a law to impose tax with a view to generate revenue---Principles.
Neither Banking Companies nor C.B.R. has imposed excise levy on excisable services, as it is evident from the contents of Finance Act, 1991. Similarly the Federation of Pakistan, who had legislated Item 14.14 of First Schedule Part-II is not a party to the agreement between the persons dealing in advances of loans and the Bank. Therefore, the legislature cannot be estopped from promulgating a law for the purpose of imposing of the tax with a view to generate revenue keeping in view its growing requirement to generate funds to address burning problems of the day and the complex issues facing the people, which the legislature in its wisdom through legislation seeks to solve, therefore, there is no estoppel against the Federation to levy excise on the excisable services notwithstanding the contents of the agreement. The powers of the legislature to promulgate the law imposing excise duty or other duties cannot be curtailed.?
Molasses Trading and Export (Pvt.) Ltd. v. Federation of Pakistan 1993 SCMR 1905 and Government of Pakistan v. Muhammad Ashraf PLD 1993 SC 176 rel.
Waseem Sajjad, Senior Advocate Supreme Court, and Mumtaz Sheikh, Member (Legal) C.B.R. for Appellants (in Civil Appeals Nos.2296 to 2412 of 2001).
Khalid Anwar, Senior Advocate Supreme Court with M.A. Zaidi and M.S. Khattak, Advocates-on-Record for Respondents (in C. As. Nos.2312, 2317, 2321, 2355, 2356, 2359, 2373, 2375, 2376, 2383, 2402 and 2406 of 2001).
Syed Ali Zafar, Advocate Supreme Court for Respondents (in C.A. No.2318 of 2001).
Fazal-e-Ghani, Advocate Supreme Court and Ejaz Muhammad Khan, Advocate-on-Record for Respondents (in C.As. Nos. 2325, 2331, 2376, 2402 and 2410 of 2001).
Muhammad Afzal Sandhu, Advocate Supreme Court for Respondents (in C.As. Nos. 2330 and 2366 of 2001).
Raja Haq Nawaz, Advocate Supreme Court with Ch. Akhtar Ali, Advocate-on-Record for Respondents (in C.As. Nos. 2345, 2357, 2363, 2386 and 2405 of 2001).
Muhammad Farid, Advocate Supreme Court for Respondents (in C.A. No.2401 of 2001).
A.I. Chundrigarh, Advocate Supreme Court with A.S.K. Ghori, Advocate Supreme Court for Appellant (in C.As. Nos. 2707-2717 of 2001).
Waseem Sajjad, Senior Advocate Supreme Court with Raja Abdul Ghafoor, Advocate-on-Record (in Civil Appeals Nos. 2707 to 2717 of 2001) and Farogh Naseem, Advocate Supreme Court with M.A. Zaidi, Advocate-on-Record for Respondents (in C.A.2717 of 2001).
A.I. Chundrigarh, Advocate Supreme Court with A.S.K. Ghori, Advocate-on-Record for Appellant (in C.A. No. 516 of 2002).
Nemo for Respondents (in C.As. Nos. 516 of 2002).
Imtiaz Rasheed Siddiqui, Advocate Supreme Court with Sh. Salahuddin, Advocate-on-Record for Appellant (in C.A. No.934 of 2002).
A. Karim Malik, Senior Advocate Supreme Corut and Ahmer Bilal Sufi, Advocate Supreme Court for Respondents (in C.A. No.934 of 2002).
Nemo for Appellant (in C.As. Nos. 1087-1091 of 2004)
Raja Muhammad Irshad, D.A.-G. with Raja Abdul Ghafoor, Advocate-on-Record for Respondents (in C.As. Nos. 1087 to 1091 of 2004).
Izhar-ul-Haq Advocate-Supreme-Court (in C. A No. 1091 of 2004).
Imtiaz Rasheed Siddiqui, Advocate Supreme Court with Sh. Salahuddin, Advocate-on-Record for Appellants (in C.As. Nos.2254-2256, 2260-2261, 2262, 227, 2287, 2290-2292,2297-2300, 2301, 2303, 2318-2322, 2327-2329, 2349, 2350 and 2395 of 2005).
Syed Ali Zafar, Advocate Supreme Court with Ch. Arshad Ali, Advocate-on-Record for Appellants (in C.As. Nos. 2257, 2288, 2289 and 2304-2308 of 2005).
Syed Najmul Hassan Kazmi, Advocate Supreme Court for Appellants (in C.As. Nos. 2258 and 2259 of 2005).
Ashtar Ausaf Ali, Advocate Supreme Court with Sh. Salahuddin, Advocate-on-Record for Appellants (in C.As. Nos. 2262, 2290-2292 and 2327-2329 of 2005).
Shahid Hamid, Senior Advocate Supreme Court for Appellants (in C.As. Nos. 2263-2265 of 2005).
Khawaja Muhammad Akram, Advocate Supreme Court for Appellants (in C.As. Nos. 2293-2296 and 2323 of 2005).
Muhammad Akram Sheikh, Senior Advocate Supreme Court for Appellants (in C.As. Nos.2310-2317 and 2325-2326 of 2005).
Raja Muhammad Akram, Senior Advocate Supreme Court for Appellants (in C.As.Nos.2259, 2311, 2330-2338, 2340-2347, 2349, 2352, 2353, 2365, 2367-2369, 2375, 2376 and 2385-2388 of 2005).
Sh. Shahid Waheed, Advocate Supreme Court for Appellants (in C.As. Nos.2337-2339 of 2005).
Mian Abdul Rauf, Advocate Supreme Court for Appellants (in C.As. Nos. 2344 and 2352 of 2005).
Ch. Muhammad Anwar, Advocate Supreme Court for Appellants (in C.As. Nos. 2348, 2354 and 2364 of 2005).
Tariq Mehmood Khokhar, Advocate Supreme Court with Ejaz Muhammad Khan, Advocate-on-Record for Respondents (in C.A. No.2332 of 2005).
Waseem Sajjad, Senior Advocate Supreme Court and Mumtaz Sheikh, Member (Legal) C.B.R. for Appellants (C.As. Nos.2410-2423 of 2005).
Khalid Anwar, Senior Advocate Supreme Court with M.S. Khattak, Advocate-on-Record for Respondents (in C.As. Nos.2410 and 2412 of 2005).
Muhammad Azeem Malik, Advocate Supreme Court for Appellants (in C.As. Nos.2433 and 2434 of 2005).
Ch. Muhammad Anwar Khan, Advocate-on-Record for Appellants (in C.As. Nos. 2435-2436 of 2005).
M.S. Khattak, Advocate-on-Record for Respondents (in C.A. No.2433 of 2005).
Dates of hearing: 20th, 21st and 22nd February, 2006.
JUDGMENT
IFTIKHAR MUHAMMAD CHAUDHRY, C.J.---These appeals are by the leave of the Court against judgments passed by High Court of Sindh dated 22-12-2000 and 23-10-2001 and Lahore High Court dated 4th April, 2002 and 27th May, 2004 respectively whereby divergent opinions were expressed respectively about the constitutionality of the item 14.14 incorporated in the 1st Schedule of the Central Excise and Salt Act, 1944 (herein after referred to as `the Act 1944'). Concluding paras from both the judgment are reproduced thus:--
Impugned judgment of the High Court of Sindh at Karachi.---"The learned counsel for the parties relied on the following case laws in support of their contentions, Pakistan through Secretary, Ministry of Commerce and 2 others v. Salahuddin and 3 others (PLD 1991 SC 546), Ram Nawaz Guppy and others v. State of Haryana through Secretary Local Self Government (sic), Federation of Pakistan and others v. Ch. Muhammad Aslam and others 1986 SCMR 916, Al-Samreze Enterprises v. Federation of Pakistan (1986 SCMR 1917, 1918), Government of Pakistan and another v. Messrs Mardan Industries Ltd. (1988 SCMR 410), Colony Sarhad Textile Mills Ltd., Nowshera v. Superintendent Central Excise and Land Customs (sic), Muhammad Younas v. Central Board of Revenue Government of Pakistan and others (PLD 1964 SC 113), Government of Pakistan and others v. Muhammad Ashraf and others (PLD 1993 SC 176), Government of Pakistan and others v. Messrs Hashwani Hotel Ltd. (PLD 1990 SC 68), Mondi's Refreshment Room and Bar Karachi v. Islamic Republic of Pakistan and others (PLD 1986 Karachi 214), Messrs Abdul Wahid, Abdul Majeed v. Government of Pakistan and others (1993 SCMR 18), Central Insurance Co. Ltd. v. C.B.R. (1993 SCMR 1232), CIT v. Noor Hussain (PLD 1964 SC 657), State of Madras v. Garrission (1958 SC 560), Zaman Textile Mills Ltd. v. C.B.R. (PLD 1993 SC 305), Madrass Trading v. Federation of Pakistan (1993 SCMR 1905), CIT v. Olympia (1987 PTD 739), South Bihar Sugar Mills Ltd. v. Union of India (AIR 1968 SC 922), Abdul Rahim v. UBL (PLD 1997 Karachi 62), Shamres Khan v. Muhammad Amin (PLD 1978 SC 89), Hirjina v. Islamic Republic of Pakistan (1993 SCMR 1342), PIDC v. Federation of Pakistan (1992 SCMR 891), CIT v. SK & F (PTCL 1993 CL 89), Tola Ram V. State of Bombay (AIR 1954 SC 496), State of Madras v. Chittuni (AIR 1957 AP 675), Berger v. Industry (1900) 2QB 348, Brett v. Rajers (1897) IQB 525, Lord Ghanely v. Winghtman (1933) AC 618.
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In a result the petitions are allowed, however, there shall be no order as to costs."
Impugned judgment of Lahore High Court.---We, therefore, dismissed 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 and decided in these cases and same shall be re-heard by the learned Single Bench of this Court. Office to take orders from the Hon'ble Justice in this regard."
2. Learned Lahore High Court, Lahore vide impugned judgments, dated 4-4-2002 and 27-5-2004 declared Item No.14.14 intra vires to the Constitution of the Islamic Republic of Pakistan whereas the learned High Court of Sindh, vide impugned judgments, dated 22-12-2000 and 23-10-2001, held to be ultra vires to the Constitution.
3. As both the judgments passed by learned High Courts, are under challenge therefore, we intended to dispose them of by instant judgment.
4. The legislative history of the impugned Item 14.14 is like this levy was on, `Excisable Goods' but in 1970, levy on excisable services' was made chargeable by virtue of following amendment of the Act, 1944:
"S. 2(20) `excisable services' means services, facilities and utilities specified in the First Schedule read with Chapter 98 thereof, including the services, facilities and utilities originating from Pakistan or its tariff area or terminating in Pakistan or its tariff area."
In view of the above amendment original section 3-C was renumbered as subsection (1) of section 3-C by the Act, 1991. For convenience same is reproduced herein below:
S.3-C Determination of tariff value and rate of duty.---
(1) The value, retail price, tariff value of and the rate of duty applicable to, excisable goods or services shall be the value, retail prices, tariff value and the rate of duty in force:--
(a) In the case of goods, on the date on which the goods are cleared for export or for kind of consumption:
(b) in the case of services, on the date on which the services are provided or rendered; and
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??????????? (c) -----------
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??????????? (d) -----------
In Part-II of the First Schedule of the Act, 1944 following Item was added by the Finance Act, 1991:--
| "14.14 | Services provided or rendered by | 1/12th of 1% of the |
| | banking companies, financial | amount each advance |
| | institutions, insurance companies, | outstanding on the last |
| | other lending banks or institutions | working day of each |
| | and other persons dealing in | calendar month." |
| | advancing of loans, in respect of advances made to any person. | |
The Federal Government through S.R.O. No. 706(I)/91, dated 4th August, 91 added Rule 96 `ZZI' to the Rules of 1944. Sub Rule-1 which being relevant is reproduced herein below:-
"96 ZZI(I) "All banking companies, financial institutions, insurance companies, cooperative financing societies, other lending banks or institutions and other persons dealing in advancing of loans hereinafter called company, shall pay the central excise duty leviable on the advances made by the company to any person."
5. Learned High Court of Sindh in the impugned judgment formulated following issues for consideration:--
"(13) In our considered opinion the key questions which revolve round these petitions are the following two connected issues:--
(a) while imposing central excise duty on goods or services under 1944 Act, can the legislature bring within the tax net any transaction or event which otherwise on a plain, ordinary and grammatical meaning of the terms may by no stretch of imagination be construed as `goods' or `services';
(b) only if the answer to the first issue is in the negative, whether in fact the grant of advances or loans, especially their quantum in its ordinary signification be construed as services'.
6. Learned High Court to find out meanings of `excisable service' relied upon judgment in the case of South Behar Sugar Mills Ltd. v. Union of India (AIR 1968 SC 922) wherein it was held that as the Act does not define the term `goods', the Legislature must be taken to have used that word in its ordinary dictionary meaning and concluded that as this expression (services) has also not been defined, therefore, "the Court will have to look at the pith and substance of the subject-matter of tax, to ascertain whether in ordinary signification the same can be construed as `service'. It was further held that Entry 44 of the Fourth Schedule of the Constitution of Pakistan, 1973 empowers the Federal Legislature to impose duty of excise. Originally in Pakistan, Central Excise duty was levied only on manufacturing of goods and not on services. However, through the Finance Ordinance, 1970 services were brought within the tax net. This amendment was challenged and this Court in the case of Hirjina and Co. v. Islamic Republic of Pakistan (1993 SCMR 1342) held that the levy i.e. excise duty on services had been saved by Article 278 of the Constitution. If this is so then the term `services'. has to be read as part of Entry 44 of the Fourth Schedule of the Constitution which prescribes the levy of central excise duty, as has already stated above. Once the term `services' is read into Entry 44, it is the fundamental principle of interpretation of Constitutional entries that Courts have to look whether in pith and substance the subject-matter of the levy in question comes within the ambit of Constitutional Entry. No doubt the Courts have to give a very liberal and stretch connotation to Constitutional entries, however, at the end of the day in pith and substance, the ordinary grammatical and literal meanings' of the terms will have to be seen. To support the arguments help was sought from Elahi Cotton Mills Ltd. v. Federation of Pakistan (PLD 1997 SC 582), Pakistan Industrial Development Corporation v. Pakistan (1992 SCMR 891), United Provinces v. Atiqa Begum (AIR 1941 FC 16) and Navinchaandra Mafatlal v. Commissioner of Income Tax ([1954] (XVI) ITR 758) as a result whereof Issue (a) was decided in negative.
As far as Issue (b) is concerned, it was decided that in the case of Abdul Rahim v. UBL (PLD 1997 Karachi 62) mere advancement of loans or finances by the Bank to customers would not amount to rendering of services. This would be moreso when the advancement of loans was structured on the Islamic mode of financing. It may be noted that the High Court also interpreted the expression "in respect of" in item No.14.14 and held that it is relatable to which on a plain reading implies that what has been taxed is not mere advancement of loan but rather services which may have been rendered in relation to give all such loans. The observation in Abdul Rahim's case (ibid) do not apply because it is altogether in different fields/areas of law. The observations therein were made in the context of banking laws and in these petitions the fact that the grant of loans/advancement constitutes services can only be answered by recourse to banking concepts and laws. The definition of "banking" as appearing in section 5 read with section 7 of Banking Companies Ordinance, 1962 confirms that banking is business and not `services'. The fact that Item 14.14, Column II imposes the charge on "services" in respect of loans and not on loans/advances per se is obvious from a plain reading of the statute. In fiscal statue the Court cannot supply any omission or extra words or cannot change the expression used in the statute on grounds that the Legislature would have used a different word had it thought about it i.e. there is no scope for any intendment. Reliance in this behalf was placed on Bisvil Spinners v. Superintendent Central Excise (PLD 1988 SC .370). As a result of this discussion the Court held as follows:
(a) mere advancement of loans or financial facilities, or quantum thereof, does not constitute rendering of services and hence the same cannot be subjected to central excise duty;
(b) on a plain and grammatical reading of Item 14.14 Column II, the charge or levy is not on the mere advances or loans but any services which may be rendered with regard thereto, in relation thereto or in respect thereof.
It is further held that Column III of item 14.14 has provided a fatal blow to the validity of the levy. According to it a yardstick of measure the levy is the outstanding balance of the loan/advance at the end of every month, whereas the charge is on services "in respect of loans or advances". The two had no correlation. The amount may be greater and services rendered very meagre, or vice versa. Both in Pakistan and India now it is an established principle of taxing law that the yardstick to measure the tax, must have nexus with the nature and the character of the subject-matter of the tax. In this case this nexus is missing and the levy also fails.
'It was also held that even if the levy had been sustained as lawful it could not have been given any retrospective operation to affect contracts of loans already concluded between the parties before introduction of the levy. This is so since no retrospectivity has been found to be expressed or implicit. Also if the impugned levy was found to be retrospective, it could not have affected transaction past and closed as held by a Division Bench of this Court in Ghulam Hyder Shah v. Chief Land Commissioner (1983 CLC 1585) that even where law is given a retrospective expression it cannot affect transactions past and closed'. Also it appears relevant to mention that in Item 14.14 the law has intended a one-time levy by use of expression "provided" and "rendered", in other words the calculation of the levy on a continuing basis i.e. according to the balance of outstanding loans every month, as mentioned in the third column of Item 14.14. conflicts the charge mentioned in the second column of Item No.14.14. In Elahi Cotton Mills (PLD 1997 SC 582) the Supreme Court found the levies to be intra vires on the ground that in pith and substances taxes on sales and purchases were covered by the Constitutional entries listed out in the Fourth Schedule of the Constitution. A true interpretation of Elahi Cotton would be that since Entry 49 of the 4th Schedule of the Constitution had prescribed `taxes on sales and purchases', to challenge that the taxes introduced through sections 80-C, 80-CC and 80-D fell outside the scope of Entry 47 was rather immaterial, since the same could fall under Entry No.49.
It was further observed that the Court should lean in favour of finding possible explanations to uphold rather than destroy legislation but that is only the first principle. The second principle as held in Sabir Shah v. Shad Muhammad Khan (PLD 1995 SC 66) is that where on a plain reading of statute and the Constitution; the legislation is so ultra vires that it cannot be saved despite a very liberal connotation, it is the duty of the Court to strike the same down since the principle regarding presumption of Constitutionality of laws is only rebuttable presumption.
In Elahi Cotton Mills case it has also been held that question as to whether laws are intra vires or ultra vires do not depend upon the consideration of the jurisprudence or policy but depend simply on examining the language of Constitution and of comparing the legislative authority conferred on the Parliament with the provisions of the sub-Constitutional law by which the Parliament purports to exercise that authority.
Elahi Cotton Mills case says that a very liberal interpretation is to be given to fiscal legislation.
7. Learned Lahore High Court, Lahore examined following questions:--
(1) Section 3 of the Act, 1944 provides for levy and collection of duty of excise on all excisable services provided or rendered in Pakistan while section 3-C(1)(b) of the said Act classifies the said charge with reference to the date on which services are provided or rendered.
(2) Section 3-C(l)(b) provides that value of the services as also rate of duty applicable to them shall be one enforced on the said date i.e. on which the services are provided or rendered.
(3) Item No.14.14 (now 9813.0000) of the schedule is not in harmony with the said provision of sections 3 and 3-C(1)(b) of the said Act. There is no nexus between the said item of the first schedule on the one hand and the said charging and computing provisions on the other.
(4) 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 itself clear dictionary meaning i.e. definition of terms loans in other statutes are not to be imported into the said Act, 1944.
(5) The transaction based on mark up would not be falling within the meaning of term 'loan'.
(6) That services sought to be charges have no been defined. Item 14.14 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.
(7) That only charge for services rendered or provided by Leasing Company being the said one-time services, there cannot be imposition of continuous charge as provided in column No.3 of the said item. The levy is violative of the Item 14.14 of the Federal Legislative list inasmuch as Government has proceeded to tax loans or lease itself and not the services rendered by the bank or the leasing company. In view of provision of sections 3 and section 3-C(1)(b) of the Act, 1944 the duty could not have been levied with retrospective effect inasmuch as services already rendered before imposition of the duty are sought to be charged.
(8) In the matter of Musharka there is a sale. arrangement and not concept of loan or advance, also insist that banking loans are not to be referred to in the matter of ascertaining the meanings of terms `loans and advances' and ordinary dictionary meaning would be applicable.
(9) Levy is to be on the person providing services and borrower/ customers/lessees are not to be burdened. The term `advance' has not been defined and whereas loan may be subject to the said duty Modarba cannot be also charged.
(10) Act of 1944 provides for levy of duty on services rendered or provided on services one time and there is no concept of recurring imposition and there is no co-relation inter se the services and manners in which the duty has been imposed. The duty has in fact been imposed on the services rendered by the bank and leasing company. The mode and quantum of charge, same cannot be challenged. Maintenance of accounts and book-keeping by the said companies are continues services being provided and as such there is no violation of section 3-C of the said Act. Section 4(3) of the Act, 1944 does not prohibit imposition of duty on the basis other than charges for the services.
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(11) Schedule is part of the Act and in case of inconsistency it is the schedule which is to prevail.
(12) Duty is payable by the banks and companies who passed on the burden to the customers and borrowers under the agreements between the said parties. Thus said customers, borrowers and lessees have no locus standi to file the petitions to challenge the said levy.
The conclusion drawn by the High Court in respect of above questions is as under:-
(1) A plain reading of Item 14.14 (presently 9831) leaves one in no manner of doubt as per column II 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.
(2) Under section 3 what has been made subject to levy of the duty of excise are not goods or services but excisable goods and services. The said Statute defines excisable services to mean services, faculties and utilities in First Schedule read with chapter 98 thereof including services, facilities and utilities originated. As per the judgment in Hirjina and Co. (1993 SCMR 1342) section 3 has been declared constitutionally valid. The judgment relied upon by the Sindh High Court reported in AIR 1968 SC 922 and PLD 1997 Karachi 62 are distinguishable. The latter judgment has been delivered with reference to banking laws which cannot be merged into the cases of Act, 1944.
(3) In the case of A&B Food Industries Ltd. v. Commissioner of Income/Sales Tax, Karachi (1992 SCMR 663) the tax payer 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 at the enhanced rate be determined and veil be lifted so as to expose the component of the said rate. The Supreme Court observed that no doubt the Court is competent to determine the real nature of particular revenue with reference to the relevant statute but observed that the above rule does not empower a Court to read something into a clear provision of a taxing statute. Similar observations were made by Mr. Justice Cornelius in the case of Commissioner of Agricultural Income Tax East Bengal v. B.W.M. Abdul Rehman (PLD 1973 SC 445) (para. has been reproduced at page 30). Similar reference from the judgment of Lord Halsburry in the case of Tanant v. Smith (1892 AC 150) was made, "reproduction" is at page 30). On the basis of these two judgments the High Court concluded that levy has been imposed on services being provided by the said financial institution instead of loans, advances, lease and Musharka finances and not on the loan, advances, lease and Musharka itself.
(4) It is the banking company, financial institution, insurance company, cooperative financing society and lending bank or any other company or association of persons dealing in advancing of loans or providing services of leasing or Musharka finances who are to pay said exercise duty. As to the mechanism of arranging the payment the matter is between the said companies and their clients, borrowers, customers, lessees.
(5) In view of the judgment in the case of Excise and Taxation Officer Karachi v. Burma Shell Storage and Distribution Company of Pakistan (1993 SCMR 338) if there is inconsistency between the schedule and section 3-C(1)(b) of the Act, 1944 the substantive portion of the Act will prevail. However, on having examined the provisions of section 3-C(1)(b) and section 4(3) of the Act there is no consistency between them.
(6) As far as reasonability of the rate of duty is concerned, in view of the commentary reproduced in PLD 2001 SC 340 from NS Bindra's "interpretation of statutes" (7th Edition at Pg. 771) and PK Kutty Haji (1989) 176 ITR 481 that "Judicial approach throughout has been to allow the legislature flexibility at the joint, particularly when a taxing statute is under attack". This principle has also been re-iterated in the case of Messrs Elahi Cotton Mills v. Federation of Pakistan (PLD 1997 SC 582) therefore, rate of the tax cannot be questioned.
8. Mr. Waseem Sajjad, learned senior Advocate Supreme Court contended that as per the definition of excisable services under section 2(20) of the Act, 1944, the Federal Government has been empowered under Part II Schedule 1 of the Act, 1944 to recover duty for providing service of banking which includes processing of application for loan, maintaining ledger/account and undertaking of other acts necessary to keep the borrower updated. He further explained that the word loan, facility, utility and advance has been used in its popular meanings in Item 14.14.
9. Mr. Abdul Karim Malik, Sr. Advocate Supreme Court and Mr. Ahmer Bilal Sufi, Advocate Supreme Court, supported his contention and to elaborate their arguments preferred to dictionary meaning of the term `services and advances'.
10. Mr. Khalid Anwar, learned Sr. Advocate Supreme Court who has advanced leading arguments contended that duty of excisable services on loan facilities, utilities and advances under section 3 read with section 3-C(1)(b) of the Act, 1944 and Item No.14.14 of Part-II of the First Schedule, cannot be recovered as with effect from 1st July, 1984, the banking system in Pakistan has shifted over to Islamic modes of financing and according to the spirit of this system instead of loaning the amount, the banks enter into a trade agreement with the borrower with latest commitment to pay extra amount other than the amount which has been obtained by a purchaser for running the business or trade. Learned counsel placed on record BCD-13 which find mentioned in respect of elimination of RIBA from the banking system. Reliance in this behalf has been placed by him on the case of Abdul Rahim (ibid). He further stressed with vehemence that a banking or financial institution does not render any extra service to the customer/borrower as it is their duty to provide them service for completion and maintaining of the bank accounts for which at the end of each transaction, charges for the service are separately recovered, therefore, extra burden cannot be placed upon the borrower by compelling them to pay duty on the services provided/ rendered by the bankers.
11. We have heard learned counsel for both the sides and have gone through the relevant documents placed on record. It would be appropriate to note briefly legislative history of section 3 of the Act, 1944 for purpose of understanding the concept of excisable services on which for the first time excise duty was imposed. Prior to 29th June, 1970, there was no concept of charging duty on excisable services and for the first time by means of Finance Ordinance, 1970 (Ordinance XI of 1970) its definition was provided by which in clause (dd) was incorporated in section 2 of the Act, 1944, which defines the "excisable services". According to which "excisable services" means services, facilities and utilities specified in part II of the first Schedule as being subject to a duty of excise. By means of same Ordinance, subsection (1) of the original subsection (3) was substituted which provides "there shall be levied and collected in such a manner as may be prescribed duties of excise on `excisable goods' produced or manufactured and on all `excisable services' provided or rendered in Pakistan, as and at the rates set forth in the firs schedule". Later on definition clause (dd) of section 2 of the Act, 1944 was substituted with section 2(20) by means of Finance Act, 1995, which has already been reproduced hereinabove. It is equally important to note that subsequent thereto, section 3-C was also inserted by the Finance Ordinance, 1983. Relevant provision therefrom i.e. 3-C(1)(b) dealing with the case of services has already beenlB reproduced above.
The constitutionality of section 2(dd) and section 3 of the Act, 1944 came for consideration in the case of Mondi's Refreshment Room and Bar, Karachi v. Islamic Republic of Pakistan (PLD 1983 Karachi 214) wherein it has been held that if the legislature is competent to levy a tax or duty it could do so by providing for the same either in existing Act or by passing independent Act. The judgment in Mondi's Refreshment Room (ibid) came upto for consideration before this Court in the case of Hirjina and Co. (ibid). After examining the constitutionality of section 3(1) this Court declared it to be valid law for all intents and purposes taking into consideration the provisions of the constitutional documents applicable at that time. Thus question of validity of charging duties on excisable services is not open for further discussion.
12. Now turning towards the arguments of Mr. Waseem Sajjad, learned counsel for the appellants who filed appeals on behalf of the Federation against the impugned judgments passed by High Court of Sindh. It is to be observed that the duty is being charged as per Item 14.14 on the services provided or rendered not only by banking companies, financial institutions, insurance companies, other lending banks or institutions and also persons dealing in advancing of loans in respect of advances made to any person. He emphasized that facilitating the processing, completion and handling all the accounts of borrowers/ customers to whom loan has been provided, tantamounts rendering `excisable services' and in lieu of the same the legislature is empowered under section 3 of the Act, 1944 to recover duties as per the rate set forth in the First Schedule. To support his arguments he quoted following part from the case of Hirjina (ibid):--
"(14) The appellants in Civil Appeals Nos. 101-K to 107-K were selling alcoholic liquor for consumption on their premises. It was urged on their behalf that they did not provide any services to the consumers and as such they did not render any excisable services and for that reason the demand of excise duty from them was illegal. There is no merit in this contention. The appellants did provide services to their clients by affording them the facility of consumption of liquor in their premises and as such they cannot avoid the liability to pay excise duty."
In this behalf it would be appropriate to attend to the contention raised by learned counsel for respondents, Mr. Khalid Anwar, learned Sr. Advocate Supreme Court whose arguments have been adopted by majority of the counsel appearing for different respondents. It is true that from 1st July, 1984, the banks had adopted Islamic modes of financing and the expression `loans', `interest' etc. is alien to such system as learned counsel has explained in his arguments, referred to above. The proposition can be attended from two different angles, keeping in view the definition of excisable services under section 2(20) wherein for the purpose of defining excisable services expression facilities and utilities has been used. According to the dictionary, facility means `in banking this is referred as an arrangement between bankers and customers for the use of a banking service' e.g. deposit, collection, documentary credits etc. Alternatively it is an understanding that over draft and the loans are available if required upto a given amount, [Klein, judicial dictionary, 13th Edition, pg 393.] At this juncture definition of the word service as per dictionary meaning may not be out of context. As per advanced Law Lexicon 3rd Edition volume 4 (2005), it means service of any description which is made available to potentional users and includes the provisions of facilities in connection with banking financing, insurance, medical assistance, legal assistance or something provide usually for a fee, that may not be classified as a manufacturing or production in any form as such legal advise, procrage, agency services and financial advice (international account; business; insurance).
13. It is the case of the respondents that in terms of sections 5 and 7 of the Banking Companies Ordinance, 1962 it is the duty of the bank to facilitate its customers for the purposes of handling their accounts which include depositing, processing of the applications, encashing of cheques etc., therefore, the bank is not providing an extra service entitling it to charge duties.
14. Learned counsel for the respondents contended that Hirjina's case (ibid) is distinguishable on this point, because it pertains to supply of eatable etc. in the hotel for which a service is provided, whereas bank does not provide any service. The argument so raised by him has no force in view of the definition of the word `facility of the service' noted hereinabove. We are inclined to agree that the bank is bound to handle the cases of their customers/borrowers as it has been prescribed under the Banking Companies Ordinance, 1962 but we have to keep in mind that a duty of excisable service is not charged only by the banking companies but by other financial institutions, insurance companies and other persons dealing in advancing of loans as per the language of Item 14.14 as well. He stated that language implied in fiscal statute is required to be interpreted in its literal and ordinary meanings, in favour of tax payers, as it has been held in the case of Government of Pakistan v. Messrs Haswani Hotel Ltd. (PLD 1990 SC 68), Messrs Army Welfare Sugar Mills Ltd. v. Federation of Pakistan (1992 SCMR 1652), Messrs Bisvil Spinners Ltd. v. Superintendent Central Excise and Land Customs (PLD 1988 SC 370), Abdul Rahim v. United Bank Ltd. (PLD 1997 Karachi 62).
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15. As far as the question of interpreting fiscal statute is concerned, it has been discussed time and again by this Court in the judgments which have been relied upon on behalf of the respondents and in number of other cases. However, the proposition in the case in hand is some-what different. Here we have to ascertain as to whether excise duty can be recovered on the services in terms of section 2(dd) read, with 3 of the Act 1944, on the services provided or rendered by the bank, therefore, it is obligatory to examine the characteristics of the duty as discussed by this Court in the case of A & B Food Industries Ltd. v. Commissioner of Income/Sales Tax, Karachi (1992 SCMR 663), Sohail Jute Mills Ltd. and others v. Federation of Pakistan (PLD 1991 SC 329). However, a larger Bench comprising five learned Judges of this Court on having surveyed the judgments from our own jurisdiction and across the border finally laid down principles in the case of Messrs Elahi Cotton Mills Ltd. v. Federation of Pakistan (PLD 1997 SC 582) and ICC Textiles Ltd. v. Federation of Pakistan (2003 PTD 1017). Relevant extracts are reproduced from page 1031, paragraph 26 (i,ii,iii) as follows:--
(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 a 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 Holms, 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 defence to the legislative judgments."
Keeping in view the above principle as well as following the observations in the case of P. Kunhammed Kutty Haji v. Union of India ((1989) 176 ITR 481) i.e. Judicial approach throughout has to allow the legislature flexibility at the joints, particularly when a taxing statue is under attack, we have to interpret the words `services', `loan' and `advances'. It may be noted that the learned High Court of Sindh at Karachi had relied upon the principle discussed in the case of South Bihar Sugar Mills Ltd. v. Tata Chemicals Ltd. (AIR 1968 SC 922). The principle enunciated in this judgment has not been applied correctly. According to its ratio decidendi if a word like goods has not been defined by the law, therefore, it is to be construed that such a word has been used in its ordinary dictionary meaning. There is yet another aspect of the case namely that Indian Supreme Court was not interpreting the expression excisable services, therefore, instead of taking the support from this judgment the learned High Court of Sindh may have relied upon the case of Hirjina (ibid). Relevant para. therefrom has already been reproduced hereinabove. Particularly in view of the fact that this Court had declared section 3 of the Act, 1944 intra vires to the Constitution. Similarly the judgment in the case of Abdul Rahim (ibid) was distinguishable because in this case as well the word `loan' has been defined in view of the definition of the finance under the Banking Tribunals Ordinance, 1984. As per its meaning under section 2(e) it includes an accommodation or facility under a system which is not based on interest but provided on the basis of participation in providing a loan, markup/markdown in price, higher purchase, lease, licensing, common charge or fee of any count, purchase/sale including commodities, patent, business, trademarks and copy rights etc. Whereas in item 14.14 the word loans has been used in its popular meanings. In this context it is to be noted that in the case of Ocean Industries Ltd. v. Industrial Development Bank (PLD 1966 SC 738) proposition came into consideration whether under section, 39 of Industrial Development Bank of Pakistan Ordinance, 1961 the bank could only exercise its powers for enforcing claim of bank against industrial concerned where the bank had granted a loan, because a case of the appellant was that recourse of section 39 could not have been made as the bank had not granted any loan at all to the appellant company but had merely granted the payment of certain instalments payable to the Foreign Ship Builder. While examining this proposition it was observed that it is true that under subsection (1) of section 39 where an industrial concern fails to repay such loan by the due date or in compliance with the notice under section 38, an officer of the Bank, generally or specially authorized by the Board in this behalf may apply to the District Judge.
16. It is important to disclose that subsequently the Industrial Development Bank Ordinance, 1961 was amended on 3rd June, 1965 by Ordinance XIX of 1965 and terms, "loan" was defined as including a guarantee. The arguments so raised were not accepted because this Court without taking into consideration the amended definition of the loan held that after the bank had in fulfilment of its guarantee paid the first two instalments to the ship builder and insurance premium upon the failure of the appellant company it became entitled to recovery the same from the appellant company (the principal debtor) as money was paid on behalf of principal-debtor. To that extent the amount paid constituted an advance and the relationship of debtor and creditor arose between the surety and the principal-debtor. In this behalf the debt also assumed the characteristic of a loan for the amount so advanced. In this back-drop the Court proceeded to examine the term loan and held as under:
"The term "loan" has, of course, not been defined in the Ordinance of 1961 as it originally stood. What meaning is then to be given to it? Should it be read in a technical sense or in its ordinary or popular sense. Reading the provisions of the Ordinance as a whole it appears to us that the term has been used in its popular sense, for it is difficult to imagine that the framers of the Ordinance only wished the special procedure prescribed by section 39 to protect "loans" in the strict sense and to leave out other debts due to the respondent-Bank from industrial concerns. The obvious intention of these provisions appears to us to have been to give the respondent-Bank a special remedy to recover its claim and dues from defaulting industrial concerns assisted by it. We would, therefore, read the term "loan" in this section as meaning a contract by which a person receives upon his own credit advances of money from another on specified conditions of repayment."
17. It is an important fact that cash is paid to a borrower subject to entering Modaraba agreement etc.
Mr. Waseem Sajjad learned counsel for the appellants in this behalf placed reliance on a letter, dated 27th September, 1994, copy of which was issued by Faisal Islamic Bank of Bahrain. Relevant lines therefrom are reproduced below:--
"Further to our discussion, we hereby confirm to you that we agree to appoint you as our agent to acquire for our account and benefit goods under the following terms and conditions:--
(1) You will be provided by us upto a sum of Rs.40,000,000, to be credited in your account No.2006804-001 with us on a date to be agreed upon mutually under intimation to you.
??????????? (2) --------
??????????? (3) --------
(4) The authorization hereunder contingent upon your entering into a Modarbah agreement being in a form satisfactory to us."
In view of the above admitted document factual assistance can also be availed for the purposes interpreting a fiscal statute provided that no one amongst parties has reservation about its existence. Since this document has been relied upon by the respondents themselves, therefore, no objection from their side can be entertained. In addition to this the definition of finance in the Banking Tribunal Ordinance, 1984 cannot be imported in Act, 1944 in view of the principle that it is unsaved to compare the language in one statute with that employed in another, even though the subject covered by the two may involve similarities. Such comparison otherwise may also not be conclusive on the point agitated in the case of Abdul Rahim (ibid).
Thus it is held that judgment in the case of Abdul Rahim (ibid) for the purpose of defining the expression `services' is not applicable and the expressions/words used in section 2(20) of the Act, 1944 and Item 14.14 of the Second Schedule are to be interpreted independently keeping in view their popular meanings.
18. In Item 14.14 column II another important expression namely `advances' has been employed. This expression with reference to context is equally important as according to Words and Phrases Vol.2-A (Pg. 117) ordinarily its meanings also include a `loan' and an `action to recover it'. Reference at this juncture of section 7(1) may also be made which defines forms of business in which banking company may engage including borrowing, or taking up of money, lending or advancing of money either upon or without security.
19. Similarly in Corpus Juris Secundum Vol.2 pages 496-97 the word `advances' has been defined as under:--
"in legal parlance the word used to indicate advances of a pecuniary nature and includes money or chattels or both, although it may be employed as referring only to money."
Thus it is held that words facilities, utilities, loans and advances are to be used in popular sense for the purpose of interpreting the same in view' of the cardinal principle of interpretation of statutes that a law should be interpreted in such a manner that it should be saved rather than destroyed. Multiline Associates v. Ardeshir Cowasgee (PLD 1995 SC 423) and Elahi Cotton Mills (ibid). Relevant para. therefrom is reproduced herein below:--
(ix) That the law should be saved rather than be destroyed and the Court must lean in favour of upholding the constitutionality of a legislation keeping in view that the rule of Constitutional interpretation is that there is a presumption in favour of the constitutionality of the legislative enactments unless ex facie it is violative of a Constitutional provision."
Secondly in view of the above conclusion that the terms employed in the legislative provisions under discussion are to be considered in popular sense. It is to be noted that in Act, 1944 First Schedule was again amended and the duty on excisable services was made chargeable under heading 9813.000 wherein it was held applicable on services provided or rendered by Banking Companies, Insurance Companies, Cooperative Financing Societies, Modaraba, Musharka, Leasing Companies, non-banking Financial Institutions and other persons dealing in such services. So in view of the amendment, although this amendment was not specifically called in question either of the parties but a perusal of the amended schedule indicates that excise duty has also been made applicable on the transaction covered by Islamic modes of financing. In this context it is to be borne in mind that factually in these transactions as well cess is passed on to the borrower as it is evident from a letter of Faisal Islamic Bank of Bahrain, dated 27th September, 1994, contents whereof have been reproduced hereinabove.
20. Learned counsel for the respondents contended that item 14.14 of First Schedule has no nexus with the provisions of main Act i.e. section 3 of the Act, 1944, because it does not provide for any specific service namely that on which type of the services, excise duty is recoverable, therefore, being vague is liable to be struck down. Reliance has been placed on Jamat-e-Islami Pakistan v. Federation of Pakistan (PLD 2000 SC 111), Buxa Dooars Tea Company Ltd. v. State of West Bengal (AIR 1989 SC 2015), Govind Saran Ganga Saran v. Commissioner of the Sales Tax (1985) 155 ITR 144, Commissioner of Sales Tax v. Hunza Central Asian Textile and Woolen Mills Ltd. (1999 PTD 1135), Reference No.2 of 2005 (PLD 2005 SC 873). He has also referred to Hirjina's case (ibid) to explain that in this judgment an excise duty was imposed in respect of services rendered by hotels in providing room, liquor and other refreshment to their clients, whereas in respect of excisable services item 14.14 of the Schedule does not describe any service which will be provided or rendered, therefore, on account of it being an unspecific in nature cannot be made liable to the respondents to pay excise duty on the services.
21. On the other hand learned counsel for the appellants including Mr. A. Karim Malik and Mr. Ahmer Bilal Sufi, who appeared on behalf of Central Board of Revenue argued that item 14.14 of the Schedule has to be read along with the provision of sections 3(1), 3-C(1)(b) and section 4(3) of the Act, 1944 for the purpose of substantiating that there is nexus between item 14.14 of the Schedule as well as substantive provisions of law.
22. In the judgments relied by the learned counsel different provisions of law were declared void and invalid on account of their being vague. In Jamat-e-Islami's case (ibid) this Court tested provision of section 7-A of the Anti-Terrorism Act, 1997 at the touch stone of Articles 4, 9, 14, 16, 19 and 27 of the Constitution and held that due to vague definition of the word "internal disturbance", illegal strike, lockout and go-slow is unconstitutional and requires suitably amended. In the case of Pakistan Tobacco Company Ltd. (ibid) it was held that rate of levy of the excise duty should have nexus with the value of the goods which are produced or manufactured and that the same cannot be fixed arbitrarily. It was held in the case of Buxa Dooars (ibid) that if the levy was regarded as one in respect of tea estate and the measure of the liability was defined in terms of the weight of tea dispatched from the tea estate there must be a nexus between the levy on the tea estate and the criteria for determining the measure of liability. In the case of Govind Saran, Ganga Saran (ibid) the learned counsel discussed essential components for a concept of the tax namely: first is the character of the imposition known by its nature which prescribes the taxable event attracting the levy, second is a clear indication of the person on whom the levy is imposed and who is obliged to pay the tax, the third is the rate at which the tax is imposed and the fourth is the measure or value to which the rate will be applied for computing the tax liability. If those components are not clearly and definitely ascertainable, it is difficult to say that levy exists in point of law. Any uncertainty or vagueness in the legislative scheme defining any of those components of the levy will be fatal to its validity. In the case of Commissioner of Sales Tax and others v. Hunza Central Asian Textile and Woolen Mills Ltd. (1999 SCMR 526) it was held that "use or consumption of intermediary goods, in restricted sense could be treated as sales by legal fiction, so as to bring such goods under the levy of sales tax where final product was not subject to sales tax when sold and used or consumed by intermediary goods. In such circumstances have a rational nexus with sales tax. In the case of Mehram Ali v. Federation of Pakistan (PLD 1998 SC 1445) while taking into consideration the provisions of sections 6, 7 and 8 of the Anti-Terrorism Act, 1997 along with Schedule attached thereto it was held that offences mentioned in the schedule should have nexus with the object mentioned in sections 6, 7 and 8 of the Act, 1997. In the case of Excise Taxation Officer v. Burma Shell and distribution this Court held that one of the Rules of construction of statute is that in case of irreconcilable inconsistency between a charging section and the Schedule, the former is to prevail and the schedule is to yield to the Act. Some of the provisions in Reference No.2 of 2005 (Hisba Bill, 2005) were declared ultra vires to the Constitution being vague and overbroad.
23. First of all it would be appropriate to ascertain the status of item 14.14 of first Schedule Part-II. Reference in this behalf may be made that under First Schedule Part-II of the Excise Act, 1944, item 14.14 of the First Schedule part-II was inserted in pursuance of section 5 of the Finance Act, 1991, meaning thereby that the item has been made part of the Act, 1944 for the purposes of charging excise duty on services in respect of advances made to any person. The rate of the duty has been prescribed in Column No.3 which will be leviable on the amount of advances outstanding on the last day of each calendar month. According to the legal status a schedule placed/appended with an enactment is an extension of the section for the purpose of which it has been inserted. In the instant case section 3 is a charging section, therefore, to cater its requirement it has been appended. At this stage reference may be made to the following two principles discussed in Craies on Statute Law Seventh Edition, 1971 Pg. 225 and N.S. Bindra's The Interpretation of Statutes Seventh Edition at Pg. 92:--
Craies on Statute Law Seventh Edition, 1971 p.225.---"If the enacting part of the Statute cannot be made to correspond with the Schedule, the latter must yield to the former".
N.S. Bindra's The Interpretation of Statutes Seventh Edition at pg.92).---In case of conflict between the body of the Act and its Schedule, the former prevails.
Reference of book "Understanding Statutes" by S.M. Zafar is equally important wherein it has been observed that:--
(1) "The schedule is an extension of the section which induces it. Material is put into a schedule because it is too lengthy or detailed to conveniently accommodated in a section or because it forms a separate document (such as a treaty)
(2) With respect to calling it a schedule, a schedule is an Act of Parliament is a mere question of drafting; a mere question of words; a schedule is as much a part of the statute and is as much an equipment as any other part."
The above principles are sufficient to conclude that a schedule is an enjoinder equal status of an enactment There could be cases wherein a conflict between the Act and the schedule could be visible and in such a situation principle noted in the Craies on Statute Law (seventh Edition 1971 at pg. 225) and N.S. Bindra's The Interpretation of Statutes (Seventh Edition pg. 92) shall be pressed into service. Keeping in view the above principles, this Court in the case of Excise and Taxation Officer v. Burma Shell Storage (ibid) held that in case of irreconcilable inconsistency between the charging section and a schedule, former is to prevail and schedule is to yield to the Act.
24. It may be noted that as per sections 8 and 10 of the Act the Third Schedule were to provide scale as to the amount of the tax which was to be levied and recovered on the value of the goods imported or exported. The Third Schedule instead of providing scale in terms of the above sections purported to levy tax on the value of the licences. This Court held that the third Schedule is not in terms of section 3, therefore, cannot be enforced. To resolve the controversy it is to be observed that as per the dictum laid down in' the case of Hirjina's (ibid) constitutionality of section 3 has been upheld and now as per the grievance of the respondents item 14.14 of the First Schedule Part-II has no nexus with section 3. Before examining the proposition it is to be noted that item 14.14 as per its status is a part of the main enactment. Under the Constitution its constitutionality cannot be testified at the touchstone of section 3 unless it violates any of the provisions of the Constitution or inconsistency as it has been alleged irreconcilable therefore, instead of declaring it to be ultra vires of the Constitution, it would be yield to section 3 of the Act. Section 3 being a charging section deals in respect of duties specified in the First Schedule to be levied. Thus a legal nexus between item 14.14 of the Schedule Part-II and section 3 to exist as both of them are the parts of a statute. Section 3 being charging section provides that excisable service provided or rendered in Pakistan, as and at the rates set forth in the first Schedule shall be chargeable. Word `as' according to Chambers Concise Dictionary (pg. 53) means in what decree, proportioned manner, to what extent; in that decree; to that extent clearly demonstrates that duty can be recovered on excisable service at the rates set forth in the Schedule. It means that under the schedule a rate has to be specified for charging duty on the excisable service. The provision being a comprehensive in its nature has not placed restriction to fix the rates of the duty and the manner in which it will be recovered as per the contents of the Schedule. As such it is necessary to see whether the Schedule fulfils the requirements namely proportioned manner and extent to recover the excise duty or not. A perusal of Column-II of the schedule speaks about the services provided or rendered by banking companies etc. in respect of advances made to any person. It is to be kept in mind that above discussion as it has already been held that institutions named in Column-II of Item 14.14 provides service in respect of advances made to any, person. It is also to be observed that the word `services' used in this column, represents to more than one services. Thus the arguments put forwarded on behalf of the respondents' counsel that as in the case of Hirjina (ibid) services were specified, therefore, to that extent the item of the schedule discussed therein is valid and in the item under discussion this expression has not defined therefore, on account of vagueness the provision has no substance. The word `services' in plural sense is sufficient to conclude that it covers all the services provided by the institutions named in Column-II to its customers, therefore, the legislation instead of spelling out each kind of the service comparing to the item of the schedule 'which were discussed in Hirjina's case, a comprehensive expression `Services' has been employed. Thus it is held that no ambiguity or vagueness can be attached to the contents of Column-II of the Item 14.14 for the purpose of declaring the provision vague or unspecified. Since the legislature had demanded duty on excisable services in respect of the advances made to any person (customers), therefore, it would be seen that as to what manner has been adapted to calculate the duty and it has got nexus with the provision of section 3 of the Act, 1944. Reference in this context may be made to Column II of the Item 14.14 of First Schedule Part-II, according to which 1/12th of 1% of amount of each advance, outstanding on the last working day of each calendar month. Its plain reading indicates that excise duty is being charged on excisable services depending on the volume of the amount outstanding on the last working day of each calendar month. Thus the criteria or measure to calculate the duty has been provided in this column. Meaning thereby that if loan is higher the services are more and if the loan is less the services are less. The measure to calculate the excise duty, therefore, seems to be just and proper because, prima facie, by adapting such yardstick there would be no discrimination in the recovery of the excise duty. Thus it is held that in view of the manner prescribed in column III of item 14.14 first Schedule part-II the legislation had provided a device to calculate the duty at the rates in acceptable manner to fulfil requirements of section 3 of the Act, 1944. Now at this stage another important argument raised by the learned counsel is required to be attended namely in column III of the item 14.14 rate of excise duty has been levied on volume of loans and advances as outstanding on the last working day of each calendar month which is inconsistent to the provision of section 3-C(1)(b) and section 4(3) of the Act. It may be observed that this provision, excise duty (CED) is to be calculated on the amount which is to be charged for such services, facilities or utilities whereas according to the learned counsel the schedule as prescribed charging of the duty on the volume of the advances/loans. It is to be observed that as far as section 4(3) is concerned it was also added as back as in the year, 1970 by means of the Finance Ordinance, 1970 when the services were also subjected to excise duty. Section 4(3)(b) deals that the amount with reference to which the duty shall be levied, shall be the total amount charged for all services, facilities and utilities provided or rendered including charging for supply or merchandise therewith. So the argument is that on the volume of amount excise duty cannot be charged and if it is to be calculated it should be amount chargeable for providing/rendering facilities, services and utilities. The argument has no force because subsection (3) of section 4 has widened the scope of levying the excise duty by using the expression where under this Act any services, facilities or utilities are subject to duty at a rate dependent upon the charges thereof. The word `dependent' has created a distinction in respect of different kind of services on which excise duty is recoverable. In this behalf reference
?
may be made to the case of Hirjina (ibid) where calculation of the duty on each item provided to the customers where as in the financial institutions to quantify the excise duty item-wise is not possible in view of multifarious services rendered or provided by the banks, therefore, depending upon this particular aspect of the case for the purpose of quantifying the excise duty, it is to be calculated on the volume of loan. Therefore, we are persuaded to hold that there is no inconsistency between the Act of 1944 and item 14.14 first Schedule part-II and this item of the Schedule for all intends and purposes shall be deemed to be a part of section 3 of the Act, 1944. As such the judgment in the case of Excise and Taxation Officer Karachi (ibid) is not applicable and further it is not in conflict with section 3-C(1)(b) of the Act, 1944 which relates to the determination of tariff value and rate of duty on the date on which the services are provided or rendered. Admittedly so long a person continuously enjoys services provided or rendered by the banking companies etc. in respect of advances made of to it/him shall be obliged to pay excise duty at the rate mentioned in Column-III of item 14.14. In other words it would be a recurring cause of section to the banking institutions and others for the purpose of effecting the recovery of excise duty on the services being provided on monthly basis on the volume of advances which shall be calculated on the last working day of each calendar month as it has been held in Messrs Army Welfare Sugar Mills Ltd. v. Federation of Pakistan (ibid). Thus the arguments raised in this context by Mr. Imtiaz Rashid Siddiqui and Mr. Ali Zafar, learned Advocate Supreme Court namely services on advances is provided only once at the time of giving loan, and duty cannot be charged on monthly' basis, has no substance.
25. Mr. Khalid Anwar, learned counsel for respondents emphasized that this Court while examining the vires of item 14.14 of first Schedule part-II required to consider its pith and substance to ascertain whether it is violative of the Constitution of the Islamic Republic of Pakistan and also to determine whether it is in violation of the powers of the Federal or Provincial Government under Article 163 of the Constitution. Mr. Ali Zafar, learned Advocate Supreme Court has also adopted his arguments and to substantiate his plea he has referred to Article 141 of the Constitution and contended that charging of CED on excisable services is not permissible by the Federal Government. The argument put forward by both the sides have no force because it is nobody's case that Federal Legislature is not empowered to enact item 14.14 of the Schedule Part-II for the purpose of levying excise duty on the excisable services. In this behalf reference may be made to Entry 44 of the Fourth Schedule part-I of the Constitution.
26. Mr. Khalid Anwar, learned counsel for the respondents actually wanted to canvass that in view of banking system based on Islamic modes of financing excise duty cannot be recovered on the loans or advances as according to him there is no loan or advance but it is trading i.e. sale and purchase of goods, which regulates the financial liabilities of the parties upon each others. Reliance in this behalf has been placed on Habib Bank Limited v. Messrs Farooq Compost Fertilizer Corporation Ltd. (1993 MLD 1571) and Habib Bank Limited v. Messrs Qayyum Spinning Ltd. (2001 MLD 1351). Whereas the argument of learned counsel Mr. Ali Zafar is that the Constitution has not authorized to recover excise duty on advances and it does not fall within the pith and substance of the Article 141 of the Constitution of the Islamic Republic of Pakistan. As such Item 14.14 being unconstitutional deserves to be struck down.
27. Mr. Shahid Hamid one of the learned counsel for the respondents contended that without prejudice to his arguments namely Advances even if are treated Loan, it would not cover the transaction of Lease, Modaraba etc. therefore, the loan amount is the capital assets of the bank advanced to the customers on which no excise duty could be recovered as according to the pith and substance of item 14.14 actually it is duty on capital assets of the bank.
28. On having taken into consideration the arguments of the learned counsel with reference to Article 141 and Article 163 of the Constitution which deals with the jurisdiction of Majlis-e-Shoora (Parliament) and Provincial Assembly to make laws in respect of profession etc. As far as Entry 44 of the Fourth Schedule Part-I is concerned it confers powers upon the legislature to promulgate laws relating to duties of excise including duty on Salt but not including on alcoholic liquor, opium and other narcotics. It is nobody's case that the law givers are not empowered to promulgate the law within their sphere, however, the arguments of the learned counsel for respondents seem to be that as Modaraba, Musharka etc. are concerned, the excise duty cannot be recovered on such loans. It may be noted that they have taken exception to the definition of the word `advances' as it has been noted herein above but on having taken into consideration the different aspect of the case it has been held that word `advance' or `loan' has been used in its popular sense. It is equally important to note that as far as item No.14.14 of the First Schedule Part-II is concerned it does not speak in respect of the Modaraba or Musharka etc. It so happened that in the year of 1994 the First Schedule was once again substituted by means of Finance Act, 1994 and item 14.14 was replaced with item No.9813.0000, acceding to which excise duty was chargeable on services provided or rendered by Banking Companies, Insurance Companies, Cooperative Financing Society, Modaraba, Musharka, Licensing Companies, Non-Banking Companies and other persons dealing in such services.
Firstly it may be noted that as far as this amendment is concerned it was never challenged before the High Court nor in this behalf any argument was raised obviously for the reason that this amendment was brought in the year, 1994 when the petitions have already been filed by them.
Secondly if we have to consider the arguments in the light of this amended item even then keeping in view the material available on record particularly a letter, dated 27th September, 1994 issued by the Faisal Islamic Bank of Bahrain, reference of which has also been made hereinabove wherein instead of entering into the trade of sales and purchase, cash amount was given to the loanee. Relevant conditions have already been reproduced hereinabove. Besides, the Court is bound while examining whether particular matter becomes within a fiscal statute is required to examine the letter of the law and if comes to the conclusion that all the expressions used by the legislature are to be taken into consideration in its popular meaning then there should not be hesitation in maintaining the constitutionality of particular law. Reference in this behalf be made to the following passage from Corpus Juris Secundum Vol.84 page 246:--
"Determination of character of tax.---In determining whether or not a particular statute impose on 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 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."
Similarly the above principle has been approved in the case of the Commissioner of Agricultural Income Tax East Bengal v. B.W.M. Abdul Rehman (1973 SCMR 445).
It is equally important to note that Lord Halsbury in the case of Tenant v. Smith (1892 AC 150) observed as follows:--
"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 a question whether or not the words of the Act have reached the alleged subject of taxation."
Similarly in the case of Elahi Cotton Mills (ibid) it has been held that Court While interpreting laws relating to economical activities viewed 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.
Secondly, the arguments for declaring item 14.14 of the First Schedule part-II unconstitutional as by its pith and substance it is not covered under Article 163 of the Constitution is not acceptable in view of the fact that this Article in its original form covers item 14.14 of the Schedule and so far as the Islamic mode of financing, wherein the money is given to a second party by Banking Institutions by using the expression Modaraba etc. is concerned such transactions would also be taken into consideration in the popular sense.
Thirdly as far as Article 163 is concerned it deals in respect of the provision of tax etc. The excise duty on the excisable services is altogether different. If for the sake of arguments it is considered that excise duty on the excisable services is being charged in lieu of providing professional skills to maintain the action of the customers, still the Federal Legislation would not be debarred to legislate the tax on such profession because worse to worse the case of the respondents could be of a double taxation i.e. (i) it could be charged/claimed by the Provincial Government in terms of Article 163 and under Article 144 of the Constitution read with item 14.14 of the schedule and double taxation under the law promulgated by the Majlis-e-Shoora or Provincial Assembly is permissible as it has been held by this Court in number of cases. Reference may be made to Muhammad Shafi v. Wealth Tax Officer (1992 PTD 726). This judgment has been followed in the case of Messrs ICC Textile Ltd. and others v. Federation of Pakistan and others (2001 SCMR 1208).
Fourthly a test has been laid down to declare a law unconstitutional by N.S. Bindra in his book on Interpretation of Statutes fourth edition at page 977 as follows:--
"To determine the Constitutional validity of an Act, its pith and substance should be considered. In other words,' where a law is impugned as ultra vires, it is the true character of the legislation that has to be ascertained. That is, it must be ascertained whether the impugned legislation is directly in respect of the subject covered by any particular Article of the Constitution or touches the said Article only incidentally or directly. If it be found that the legislation is in substance one on a matter which has been assigned to the Legislature, there can be no question of its validity even though it might incidentally infringe on matters beyond its competence."
The above principle has also been relied upon by this Court in the case of Sohail Jute Mills Ltd. v. Federation of Pakistan (PLD 1991 SC 329) and in the case of Mian Ejaz Shafi v. Federation of Pakistan and others (PLD 1997 Karachi 604). Applying the above test which has been approved by this Court in the case of Sohail Jute Mills (ibid), we are persuaded to hold that legislature was competent to levy excise duty on excisable services by inserting item 14.14 in First Schedule Par-II, in view of the provisions of Fourth Schedule of the Constitution. Thus the judgment relied upon by the respondents counsel being of no help to them are kept out of consideration.
29. Next it was contended by them that levy of excise duty on excisable services is unreasonable because if there is no outstanding amount on the last working day of each calendar month but excise duty will be charged as services being provided by maintaining the accounts etc.
30. Learned counsel for the appellant Mr. Waseem Sajjad stated that excise duty is recoverable only when there is a service provided or rendered in respect of advance made to any person .but no sooner the outstanding amount of advances has reimbursed it shall be deemed that no services are being provided by the banking or financial or other institutions to the customers. He also contended that reasonableness of law is not to be examined by this Court for the purpose of declaring the same unconstitutional. In our considered opinion the levy of excise duty under item 14.14 is dependent upon the services which are being paid off in respect of the advances to a person but no sooner when there is no advance it would be deemed that bank is neither providing nor rendering any service because the transaction has come to an end between a bank and the customers. Therefore, it is in the interest of customers that he is being obliviated from further levy of the excise duty. In addition to it while construing a taxing measure for determining its constitutional validity at the touchstone of reasonableness cannot be entertained as per settled judicial norms. The only consideration is whether the legislation under challenge is permissible by the Constitution. The reasonableness or otherwise of such state is a matter of legislative policy and it is not for the Courts for adjudication. (Interpretation of Statute by N.S. Bindra Seventh Edition pg 771 relied upon by this Court in the case of Anoud Power Generation Ltd. v. Federation of Pakistan (PLD 2001 SC 340). Thus it is concluded that for both the reasons mentioned hereinbefore item 14.14 of the First Schedule part-II of the Act, 1944 cannot be declared ultravires of the Constitution.
31. Learned counsel contended that item 14.14 of First Schedule is unconstitutional being contrary to the provision of law as it has created unreasonable classification for the purpose of providing/rendering excisable services of identical nature to all of them.?
32. Mr. Akram Sheikh, learned counsel for some of the respondents also supported the view of Mr. Khalid Anwar in respect of violation of Article 25 of the Constitution by incorporating item 14.14 of the First Schedule part-II and stated that companies being incorporate bodies are entitled to question the constitutionality of the law if it is against the fundamental rights or any one of the provisions of the Constitution. Reference in this context has been made to Divisional Forest Officer v. Bishwanath Tea Co. Ltd., AIR 1981 SC 1368), Excell Wear v. Union of India (AIR 1979 SC 25), U.P.S.E. Board v. Hari Shanker (AIR 1979 SC 65).
33. Before adverting to the arguments advanced on behalf of the respondent/banking companies on the question whether incorporate bodies are entitled for the protection of Article 25 of the Constitution and the constitutionality of a Statute can be examined on their behalf. Learned counsel for the respondents were one on the point that as the companies are entitled to freedom of trade, business or to carry on a profession, therefore, if the legislation is discriminatory qua their rights, the companies can impugn such legislation before the Courts either under Article 199 or under Article 185(3) of the Constitution. We are not in agreement with the contentions raised by them. Undoubtedly the companies have not fundamental rights to carry on business through its representatives who are the citizens of Pakistan but for the purpose of challenging the constitutionality of a statute, it would be a condition precedent to satisfy that challenge is by a citizen at the touchstone of Article 25 of the Constitution, which provides that all citizens are equal before the law and are entitled to protection of law, Expression "citizen" means a citizen of Pakistan as defined by law under Article 260 of the Constitution. According to the case of The Progress of Pakistan Co. Ltd. v. Registrar Joint Stock Companies Karachi (PLD 1958 Lahore 887) relevant law to define the "citizen" is the Citizenship Act of 1951 as it has been explained in sections 6, 7 and 9 of that Act. Relevant paras are reproduced from the case of Shelat v. Bhargava, G.K. Mitter (AIR 1970 SC 564):--
"(14) By a petition praying for a writ against infringement of fundamental rights, except in a case where the petition is for a writ of habeas corpus and probably for infringement of the guarantees under Articles 17, 23 and 24, the petitioner may seek relief in respect of his own rights and not of others. The shareholder of a Company, it .is true, is not the owner of its assets; he has merely a right to participate in the profits the Company subject to the contract contained in the Articles of Association. But on that account the petitions will not fail. A measure executive or legislative may impair the rights of the Company alone, and not of its shareholders; it may impair the rights of the shareholder and not of the Company: it may impair the rights of the shareholders as well as of the Company. Jurisdiction of the Court to grant relief cannot be denied, when by State action the rights of the individual shareholder are impaired if any as well. The test in determining whether the shareholder's right is impaired is not formal; it is essentially qualitative, if the State action impairs the right of the shareholders as well as of the Company, the Court will not, concentrating merely upon the technical operation of the action, deny itself jurisdiction to grant relief.?????
(15) The petitioner claims that by the Act and by the Ordinance the rights guaranteed to him under Articles 14, 19 and 31 of the Constitution are impaired. He says that the Act and the Ordinance are without legislative competence in that they interfere with the guarantee of freedom of trade and are not made in the public interest; that the Parliament had no legislative competence to enact the Act and the President had no power to promulgate the Ordinance, because the subject-matter of the Act and the Ordinance is (partially at least) within the State List; and that the Act and Ordinance are invalid because they vest the undertaking of the named banks in the new corporations without a public purpose and without setting out principles and the basis for determination and payment of a just equivalent for the property expropriated. He says that in consequence of the hostile discrimination practised by the State the value of his investment in the shares in substantially reduced, his right to receive dividend from his investment has ceased, and he has suffered great financial, loss, he is deprived of the rights as a shareholder to carry on business through the agency of the Company, and that in respect of deposits the obligations of the corresponding new banks not of his choice are substituted without his consent."
34. Admittedly a company incorporated under the Companies Act, 1913 or The Companies Ordinance, 1984 does not fall within the definition of a citizen. However, constitutionality of legislation which has impaired the rights of a company can be challenged through a shareholder who fulfils the following test laid down in the case of Godhra Electric Company v. State of Gujarat (AIR 1975 SC 32):--
"(30) In R.C. Cooper v. Union of India (1970) 3 SCR 530 at p.556 = (AIR 1970 SC 564 at p.585) this Court said:--
"Jurisdiction of the Court to grant relief cannot be denied, when by State action the rights of the individual shareholder are impaired, if that action impairs the rights of the Company as well. The test in determining whether the shareholder's right is impaired is not formal; it is essentially qualitative: if the State action impairs the right of the shareholders as well as to the Company, the Court will not, concentrating merely upon the technical, operation of the action, deny itself jurisdiction to grant relief."
(32) In Bennett Coleman and Co. v. Union of India, (1973) 2 SCR 757 at p.773 = (AIR 1973 SC 106 at p.115) one of us, Ray, J. as he then was, speaking for the majority said:--
"As a result of the Bank Nationalization case (1970) 3 SCR 530 (AIR 1970 SC 564) (supra) it follows that the Court finds out whether the legislative measure directly touches the company of which the petitioner is a shareholder. A shareholder is entitled to protection of Art. 19. That individual right is not lost by reason of the fact that he is a shareholder of the company. The Bank Nationalization case (supra) has established the view that the fundamental rights of shareholders as citizens are not lost when they associate to form a company. When their fundamental rights as shareholders are impaired by State action their rights as shareholder are protected. The reason is that the shareholders' rights are equally and necessarily affected if the rights of the company are affected.
(33) We think the second appellant is entitled to challenge the validity of the subsection on the ground that it abridged his fundamental right under Arts. 19(1)(g) and 19(1)(f)."
The Indian Supreme Court in the case of DC & GM Company v. Union of India (AIR 1983 SC 937) examined maintainability of a writ petition by an incorporated company qua denial of freedom guaranteed under Article 90 and observed as follows:--
"(12) The Attorney General raised a preliminary objection to the maintainability of the writ petitions filed in this Court under Art.32 and those filed in the High Court under Art. 226 of the Constitution. The submission was founded on the ground that an incorporated company being not a citizen for the purposes of Art. 19 and therefore it cannot complain of the denial or deprivation of fundamental freedom guaranteed by Art. 19 (1)(g) of the Constitution and the situation is not improved by joining either a shareholder or a- Director as co-petitioner. It was said that the company has a juristic personality independent of the Director or a shareholder and the business or trade carried on by the company is not that of either the shareholder or the Director.
As the corollary, it was urged that even if the impugned Rule 3A imposes an unreasonable restriction on the fundamental freedom to carry on trade or business, this Court cannot entertain a petition under Art. 32 not the High Court can entertain one under Art. 226 of the Constitution. Frankly speaking, this is an of repeated contention whenever the petitioner is an incorporated company but the law in this behalf is in a nebulous state and therefore, it is not possible to throw out the petition at the threshold. More so because a petition under Art. 226 of the Constitution can be filed by the company for any other purpose and also the petitioners complain of violation of Art. 14 of the Constitution. The reasons for stating that the law is in a nebulous state may briefly be mentioned. In State Trading Corporation of India Ltd. v. Commercial Tax Officer, Visakhapatnam (1964) 4 SCR 99: (AIR 1963 SC 1811) and Tata Engineering and Locomotive Co. v. State of Bihar, (1964) 6 SCR 885: (AIR 1965 SC 40), this Court held that a Corporation was not a citizen within the comprehension of Art. 19 and therefore, could not complain of denial of fundamental freedom granted by Art. 19 to a citizen of this country. These two decisions are an authority for the proposition that an incorporated company being not a citizen could not complain of violation of fundamental freedom granted to citizen under Art.19. But a different note was struck in R.C. Cooper v. Union of India, (1970) 3 SCR 530: (AIR 1970 SC 564), when it was held that a measure executive or legislative may impair the rights of the company alone, and not of its shareholder; it may impair the rights of the shareholder as well as the company. It was further held that jurisdiction of the Court to grant relief cannot be denied, when by State action the rights of the individual shareholder are impaired, if that action impairs the rights of the company as well. In that case, the Court entertained the petition under Art. 32 of the Constitution at the instance of a Director and shareholder of a company and granted relief. The two conflicting trends in this behalf were noticed by this Court in Bennett Coleman and Co. v. Union' of India (1973) 2 SCR 757: (AIR 1973 SC 106) where after review of the aforementioned decisions and several others, it was held as under (at p. 115 of AIR):--
"As a result of the Bank Nationalization case (supra) it follows that the Court finds out whether the legislative measures directly touches the company of which the petitioner is a shareholder. A shareholder is entitled to protection of Art. 19. That individual right is not lost by reason of the fact that he is a shareholder of the company. The Bank Nationalization case (supra) has established the view that fundamental rights of shareholders as citizens are not lost when they associate to form a company. When their fundamental rights as shareholders are impaired by State action their rights as shareholders are protected. The reason is that the shareholders' rights are equally and necessarily affected if the rights of the company are affected. The rights of shareholders with regard to Art. 19(1)(a) are projected and manifested by the newspapers owned and controlled by the shareholders through the medium of the corporation."
....Thus apart from the law being a nebulous state, the trend is in the direction of holding that in the matter of fundamental freedoms guaranteed by Art. 19 the rights of a shareholder and the company which the shareholders have formed are rather coextensive and the denial to one of the fundamental freedom would be denial to the others. It is time to put an end to this controversy???."
35. It may be noted that from the above observation as well as the observation made in the other judgments cited hereinabove it becomes abundantly clear that an incorporated company does not fall within the definition of citizen. However, constitutionality of a statute can be examined for violation of Article 25 of the Constitution if the vires of the Statute has been questioned by a shareholder, director along with the company itself and that the company independently cannot question the constitutionality of a legislation at the touchstone of Article 25 of the Constitution. The Courts are not debarred to examine the cases of company or others on the point other than the alleged violation of Article 25 of the Constitution as in the instant case number of other points have been examined on behalf of the respondents who are supporting the judgments pronounced by the Sindh High Court, reported in (2002 CLC 1714) and are also requesting to set aside the judgment on the same point of the Lahore High Court reported in (2003 PTD 1017). It is equally important to point out that we inquired from Mr. Khalid Anwar, learned Sr. Advocate Supreme Court appearing for some of the respondents whether constitutionality of item 14.14 of First Schedule Part-II was agitated before both the Courts namely Karachi and Lahore, he contended that in some of the cases the constitutionality of the impugned legislation was questioned being ultra vires to the Constitution. He further added that as Sindh High Court had declared the impugned legislation ultra vires to the Constitution, therefore, he is entitled to defend the impugned judgment of the Sindh High Court on any ground available to the respondents, because it is well settled that the Courts can maintain the judgments other than on the grounds on which the same were founded. We are inclined to agree with his contention but with the added observations that if a plea is not available under the law to defend the judgment, the arguments raised by him would not help him at all Whereas in the instant case on the basis of the above discussion it has been held that incorporated bodies/respondent companies does not fall within the definition of a citizen for the purpose of Article 25 of the Constitution therefore, without joining to the share/account holders the impugned legislation cannot be examined within the parameters of Article 25 of the Constitution. At this juncture Mr. A Karim Malik, learned counsel appearing for some of the respondents contended that he has raised objection before the Lahore High Court about the non-maintainability of the petition under Article 199 of the Constitution of the Islamic Republic of Pakistan, because according to him the imposition of excise duty on excisable services is a matter between C.B.R. and the Banks. As far as the respondents are concerned they have no locus standi to challenge the constitutionality of item 14.14 of the First Schedule part-II. In reply to his arguments, Mr. A.I. Chundrighar appearing on behalf of Industrial Development Banks contended that the banks actually passed on the burden of liability, being an indirect tax, to the customers, therefore, they can maintain the petition and if the judgment of Lahore High Court (2003 PTD 1017) is maintained and the judgment of the Sindh High Court (2002 CLC 1714) is set aside, bank shall recover' excise duty from the customers. We are not in agreement with the contention raised by Mr. A. Karim Malik with reference to the observations made hereinabove while examining the availability of the question of discrimination under Article 25 to an incorporated body but as far as the petition under Article 199 of the Constitution is concerned it would be maintainable on behalf of the respondent banking institutions if they fall within the definition of a person as it has been used in Article 199 of the Constitution. At this stage it would not be out of context to lay down a distinction between the expression of a person and a citizen. As far as the expression `person' is concerned it also includes a juristic person i.e. Incorporated bodies and so far expression citizen is concerned as it has been employed in Article 25 of the Constitution "person" which means as defined under the law. Essentially the law on the subject is Pakistan Citizenship Act, 1951 which by its implication excludes a juristic person from the definition of citizen. As far as the question of passing on the burden of the excise duty is concerned, in this context this Court in Elahi Cotton Mills Ltd. (ibid) has observed as follows:--
"(xxv) That a direct tax is one which is demanded from the very person, who it is intended or desired should pay it, whereas indirect taxes are those, which are demanded from one person in the expectation and intention that he shall indemnify himself at the expense of another, like customs duties, excise taxes and sales tax, which are borne by the consumers."
?
The consensus of opinion as per these observations leaves no room to form contrary view, therefore, excise duty on excisable services is required to be indirect tax, recoverable from a person to whom excisable service has been provided or rendered, therefore, the C.B.R. rightly considered the excise levy on excisable service to be indirect tax and vide circular dated Islamabad, the 26th September, 1991 issued clarification to the effect that all Banks, Financial Institutions, Insurance Companies, Cooperative Financial Societies, other Lending Banks or Institutions and other persons dealing in advancing of loans were/are required to realize the excise duty at the aforesaid rate from the amount of advances outstanding against each borrower.
36. Learned counsel had also objected upon the validity of this circular on the strength of the judgment of this Court in the case Messrs Central Insurance Co. v. The Central Board of Revenue (1993 SCMR 1232). We examined the facts of this case according to which C.B.R. issued Circular No.4 of 1988 to interpret the expression "definite information" as it has been implied in section 65 of the Income Tax Ordinance, 1979. This Court held that reopening of the assessment by Income Tax Officer on the basis of circular No.4 of 1988 by the C.B.R. was not justified. The observations made in this judgment are not applicable as the Circular under discussion has not incorporated any provision of law but had made clarification in respect of the recovery of excise levy of excisable services from the amount of advances outstanding against each borrower. Fully comprehending that the excise levy is an indirect tax, the legitimate burden of which has to be borne by a person to whom services have been provided or rendered by the Banks and Financial Institutions etc. at the rate mentioned in Column No.III of item 14.14, therefore, objection raised in this behalf has no substance.
37. Mr. Ali Zafar learned counsel contended that under item 14.14 no mechanism (criteria) has been laid down to levy the tax on different kinds of services as according to him the rate of excise levy as per column-II of the impugned item of First Schedule part-II in respect of long term and short term loans is the same, although alleged services rendered or provided would be different, therefore, it being vague in nature deserves to be declared unconstitutional.
38. Mr. Khalid Anwar learned counsel also contended that the impugned item of First Schedule Part-II is operating in a discriminatory manner and in absence of any reasonable classification and intelligible differentia, between the person who have obtained advances for a longer or shorter term, negates their fundamental rights under Article 25 of the Constitution which envisages that all citizens are equal before law and are entitled for equal protection of law. Reliance is this behalf has been placed by him on I.A. Sherwani v. Government of Pakistan (1991 SCMR 1041) and Inaam-ur-Rehman v. Federation of Pakistan (1992 SCMR 563).
39. Learned counsel for the Federation, Mr. Waseem Sajjad, contradicting their contentions stated that there is no discrimination because the persons having less loan have been charged with lesser amount and persons having greater loan have been charged with higher amount. In our considered opinion the arguments raised on behalf of the respondent need not be examined in view of the observations made hereinabove regarding non-availability of such agreements to a person in terms of Article 25 of the Constitution because no one amongst the affected persons i.e. share/accounts holders had approached the learned High Courts by Invoking its' jurisdiction under Article 199 of the Constitution nor a citizen of the same category is respondent before us. As far as respondent companies being Incorporated Bodies are concerned they do not fall within the definition of `citizen' as has been discussed hereinabove, therefore, the argument so raised is turned down.
40. Learned counsel for the private parties vigorously agitated that excise levy on excisable service as per item 14.14 shall be applicable on advances which were granted prior to the promulgation of Finance Act, 1991 in pursuance whereof item 14.14 of the First Schedule Part-II was inserted. He also added that excise levy is distinguishable only once at the time of the giving of loan, therefore, the duty cannot be charged on monthly basis. It was also argued by them that even if it is assumed that any excisable service is provided or rendered by Banking Companies or Financial Institutions it would be once at the time when the loan was extended and not afterward. He further contended on behalf of C.B.R. that item 14.14 of First Schedule part-II is not being implemented/enforced with retrospective effect from the date when it was promulgated i.e. 27th June, 1991 and excise levy is being charged on excisable services in respect of advances made to any person which were outstanding and excisable service was being provided/rendered in respect whereof as the banking companies have recurring cause of action against the respondents.
41. We having considered the arguments put forward by the learned counsel for the parties in this behalf. It is well settled principle of law that in absence of clear intention of the legislature to apply a provision of statute with retrospective effect it would be deemed that it would be applicable prospectively. This principle has been highlighted in the judgment relied upon by the learned counsel for the respondents. However, keeping in view the principles highlighted therein while proceeding ahead we have to examine as to whether services, facilities and utilities extended by the banking institutions and other persons shall be limited to the extent of the date when the loan was granted or excisable services shall continue till the final adjustment of the loan/advances. Leaned counsel appearing for the respondents had. not produced the copies of the loan agreement to ascertain the exact factual position in this behalf but from the pleading of the parties it is inferred that after the promulgation of Finance Act, 1991 in pursuance whereof item 14.14 First Schedule part-II was inserted and respondents were called upon to pay excise duty on excisable services, therefore, being aggrieved from such demand they instituted writ petitions before the High Court of Sindh and Lahore High Court, Lahore which have been disposed of vide impugned judgments expressing opinion against each other. Thus it is held that when the Banking Institutions are continuously providing/rendering excisable services including facilities, accommodation and utilities to the persons who have obtained the loan and same have not been adjusted so far, and cause of action continues in favour of Banking Institutions etc. till such loan/advance is not finally adjudicated or it has not been recovered through judicial process by invoking jurisdiction of a Court of law, the Bank shall continue extending excisable services and shall be liable to recover CED.
42. At this juncture it is important to point out that the excisable service is covered under section 3-C(1)(b) according to which in the case of services on the day on which services are provided or rendered. As per Column No.II item 14.14 of the First Schedule Part-II of the Act, 1944 has laid down conditions for excise levy whereas Column No.III provides the rate of duty as it has been noted hereinabove that the person who has obtained less loan, shall be charged with less amount of excise levy and person having obtained greater loan has to be charged with higher amount of levy. Column-III in fact is the transaction of section 3-C(1)(b) which deals in respect of rate of levy on the date on which services are rendered/provided. As we are of the opinion that until the adjustment of the loans the financing companies enjoy recurring cause of action therefore, the day on which the excisable service is rendered/provided that would be the date for the determination of excise levy. Column III had fixed on the last working day of each calendar month. Meaning thereby that during the month's period whatever services had been provided or rendered the excise duty will be levied upon the same on the last day of month keeping in view the amount of advances against the petitioner. It may be noted that unless such a measure is not adopted the provision of section 3-C(1)(b) read with item 14.14 of the Act, 1944 would be rendered unworkable. It may be noted that the rate of levy I.E. 1/12th of 1% of the amount as per Column-III was enhanced to 1/12th of 2% of the amount as per Finance Act, 1992. Question arises that what is the criteria for fixation of levy of excise at different rates as per Column-III. In this behalf it may be noted that the lawgivers before imposing the tax ordinarily undertake an exercise during the process whereof the tax payers are also examined and keeping in view their acceptable consensus the rate of tax is fixed. Besides at the same time it becomes very difficult to quantity the excise tax, therefore, a reasonable/moderate rate of tax is fixed keeping in view the suggestion of the tax payers and other person who matters in this behalf. This Court faced identical situation while dealing with the pre?sumptive tax under section 80-CC and minimum tax under section 80-D of the Income Tax Ordinance, 1979 in the case of Elahi Cotton Mills Ltd., wherein it was observed:
"The rate of half per cent of minimum tax adopted under section 80-D seems to be on the basis of minimum rate of tax suggested by Export Enhancement Committee."
Therefore, we are of the opinion that the rate of excise levy, as it stood finally incorporated, is just and proper thus free from any arbitrariness. As far as the respondents are concerned in fact they are not being burdened by the excise levy at the rates whatever mentioned in Column-III because it being an indirect tax has to be passed on by the respondent companies to their clients. In this behalf circular, dated 26th September, 1991 which has already been discussed hereinabove, is a clear demonstration of the factum of passing on the tax to the borrowers etc.
43. Raja Muhammad Akram, learned Sr. Advocate Supreme Court or some of the respondents contended that in majority of the cases, Banking Institutions forwarded advances to the respondents before the promulgation of item 14.14 in the First Schedule Part-II of the Act, 1944, therefore, the customers/loanees have attached legal expectancy that they will not be suffered with any other tax: To elaborate his arguments he relied upon the case of Al-Jehad Trust v. Federation of Pakistan (PLD 1996 SC 324) therefore, according to the Act of the Parliament no further tax can be levied and according to him such excise levy by the Government is contrary to Islamic Injunctions. Reference was made by him to Ayah No.1 of Sora' Almaida and Ayah No.34 of Sora' Bani Israel. He emphasized that as far as the banks are concerned they are bound to follow the contract (agreement) executed between the parties period to insertion of item 14.14. In this behalf he also relied upon in the judgment reported in Pakistan v. Public at large (PLD 1987 SC 304) and Mrs. Zehra Begum v. Pakistan Burma Shell Ltd. (PLD 1984 SC 38).
44. In this context it may be noted that neither the Banking Companies nor C.B.R. has imposed excise levy on excisable services as it is evident from the contents of Finance Act, 1991. Similarly the Federation of Pakistan who had legislated item 14.14 of First Schedule part-II is not a party to the agreement between the persons dealing in advances of loans and the banks. Therefore, the legislature cannot be stopped to promulgate a law for the purpose of imposing of the tax with a view to generate revenue keeping in view its growing requirement to generate funds to address burning problems of the day and the complex issues facing the people which the legislature in its wisdom through legislation seeks to solve (Elahi Cotton Mills (ibid)), therefore, there is no estoppel against the Federation to levy excise on the excisable services notwithstanding the fact that what are contents of the agreement. In this context it may be noted that the powers of the legislature to promulgate the law, imposing excise duty or other duties cannot be curtailed as it has been held in the case of Molasses Trading and Export (Pvt.) Ltd. v. Federation of Pakistan (1993 SCMR 1905) and Government of Pakistan v. Muhammad Ashraf (PLD 1993 SC 176). Relevant para. is reproduced herein below:-
"However, the question whether the ratio of Al-Samrez Enterprises would be attracted in the case of regulatory duty under section 18(2) of the Act is a separate matter. The case of Al-Samrez Enterprise dealt with the question of the effect of withdrawal of an exemption notification under section 19 of the Act. As discussed in Civil Appeal No.915-K of 1990 and others in Al-Samrez Enterprise the concept of examination as applied to taxation, which presupposes a liability and constitutes grant of immunity from the liability created by the charging section, was the essential principle on which the decision proceeded. So far as the power of the Government to impose a regulatory duty is concerned, the case falls within the domain of delegated legislation, whereby duty or tax is imposed under the law as authorized by Article 77 of the Constitution, under the authority of the Act of Parliament. Therefore, on no principle or rule of law, it can be urged that merely because at one time no regulatory duty was imposed and was in force, when the contract was entered into, any embargo is thereby created upon the delegate of the legislature to impose the tax at any time irrespective of any transaction entered into on the basis when no such tax was in force. We have not been shown any authority for the proposition that abstention of the Government or non-excise of delegated authority to impose that tax at a given time under delegated authority, gives a vested right to any one to be exempted from the payment of such tax ipso facto subsequently when such tax is imposed.??????????? .
Mr. Rahimtoola, learned counsel for some of the respondents besides arguing that duty could not be imposed so as to destroy vested rights created in favour of the importer after a contract of sale was concluded and L.C. opened, further urged that the policy announced by the Government imposing no regulatory duty on Soyabean Oil in the first instance constituted promissory estoppel as in the meantime his clients had acted on the initial declaration of policy providing no regulatory duty on the commodity in question, Mr. Fakhruddin G. Ebrahim and Mr. Khalid Anwar also advanced a similar argument in urging that, once the government takes a conscious decision on what articles regulatory duty should be imposed, if subsequently within the same financial year duty is imposed on one of the items free from such duty, a question of vested right and promissory estoppel does arise and the Government cannot be allowed to go back upon such representation. However, as already discussed abstentation from subjecting a particular item of goods from regulatory duty at a given time, or for that matter at the commencement of the financial year, does not create any vested right in favour of any party who may have entered into contracts on that basis, because the authority to levy the duty is the sovereign power of the State by the device of delegated legislation for imposing a tax. So far as the argument on promissory estoppel is concerned, there is no question of a representation on the part of the Government, which is an essential element of the principle of promissory estoppel, when particular item is not subjected to duty at the initial stage."
45. So far the principle highlighted in the Quranic Injunctions relied upon by the learned counsel is concerned, there is no denial of the same at all but same would be applicable between the parties who have signed the agreement. The Federation of Pakistan is not signatory to the loan agreement, therefore, it is not bound with the condition of the same. It is equally important to note that even the copies of the agreement have not been placed before us for the purpose of reading the condition noted therein. We may observe here that the respondent can also not claim a right for not paying a duty on excisable services in view of the fact that legislature under the Constitution is competent to levy excise according to the section 3 of the Act, 1944 which has already been declared a valid piece of legislature in the Hijina's case (ibid).
46. Thus for the foregoing reasons appeals filed against the judgments of High Court of Sindh at Karachi, dated 22-12-2000 and 23-10-2001 are accepted whereas the appeals filed against the judgment of the Lahore High Court, Lahore, dated 4-4-2002 and 27-5-2004, are rejected with costs throughout.
S.A.K./F-56/SC????????????????????????????????????????????????????????????????????????????????? Order accordingly.