COLONY SUGAR MILLS LTD. VS PROVINCE OF PUNJAB
2017 P T D 406
[Lahore High Court]
Before Muhammad Sajid Mehmood Sethi, J
Messrs COLONY SUGAR MILLS LTD. through Deputy Manager
Versus
PROVINCE OF PUNJAB and 5 others
Writ Petition No.18345 of 2012, decided on 15/07/2016.
(a) Punjab Excise Act (I of 1914)---
----Ss. 3(6)(14) & 31---Constitution of Pakistan, Federal Legislative List, Entry 44---Ethanol (spirit), imposition of duty---Vires---Petitioners were license-holders engaged in business of extracting ethanol, commonly known as spirit and they were aggrieved of imposition of duty by Provincial Government---Plea raised by petitioners was that imposition of such duty was ultra vires the Constitution---Validity---"Spirit" squarely fell within the definition of liquor and alcoholic liquor was umbrella term which covered all liquors including spirit---Alcoholic liquor, which included 'spirit' as an excisable article and squarely fell within legislative competence of provincial legislature in terms of Entry No.44 of Federal Legislative List of the Constitution as well as S. 3(6) of Punjab Excise Act, 1914---No arbitrariness, unreasonableness, irrationality and unconstitutionality was found in S. 31 read with Ss. 3(6) & (14) of Punjab Excise Act, 1914 and it was a valid piece of legislation---High Court declared that notification issued by Provincial Government levying duty on product i.e. spirit being manufactured by petitioners and others was validly issued on the strength of S. 31 of Punjab Excise Act, 1914---Petition was dismissed in circumstances.
Case-law referred.
(b) Interpretation of statutes---
----Terms used in statute---Principle---Rule of construction teaches that meaning of particular terms in a statute may be ascertained by reference to words associated with them in the statute---Where two or more words of analogous meaning are employed together in a statute, they are understood to be used in their cognate sense to express same relationship and give colour and expression to each other---Statute has to be construed and interpreted in the context embodied in it and any import into it may render different meaning and different sense which the law-maker may not have intended to assign to it---Defined words should not be given wider meanings than the one already given in the definition, lest it may defeat the very purpose of the law itself.
Case-law referred.
(c) Punjab Excise Act (I of 1914)---
----S. 31---Punjab Liquor Import, Export, Transport and Possession Orders, Chapter 6, order 6.12(3)(f)---Ethanol (spirit), imposition of duty---Petitioners were license-holders engaged in business of extracting ethanol, commonly known as spirit and they were aggrieved of imposing of duty by Provincial Government---Plea raised by petitioners was that ethanol was an export product and protected under order 6.12(3)(f) of Chapter 6 of Punjab Liquor Import, Export, Transport and Possession Orders---Validity---Levy of duty by its very nature was altogether distinct from levy of export tax, which was an inland tax leviable on manufacturers within the country or licensed for specific activities---Levy was not a border tax and did not purport to have any nexus with export of ethanol---Levy in question was imposed regardless of the ultimate destination of excisable article but was primarily leviable on the quantum of its manufacture---Immunity to pay tax was not relevant in circumstances.
(d) Constitution of Pakistan---
----Art. 25---Equality---Taxation---Imposition of tax/duty---Classification of persons---Scope---Legislature is competent to classify persons or properties into different categories subject to different rates of taxes---If same class of person is subjected to an incidence of taxation, resulting in inequality amongst them, is liable to be struck down on account of infringement of Fundamental Right of equality---Neither discrimination can be pleaded in fiscal statutes nor such statute can be struck down at the touchstone of Art. 25 of the Constitution---Equal protection of law does not envisage that every citizen is treated alike in all circumstances but it contemplates that persons similarly situated or similarly placed are to be treated alike.
Case-law referred.
(e) Punjab Excise Act (I of 1914)---
----S. 31---Ethanol (spirit), imposition of duty---Subsequent stage---Petitioners were license-holders engaged in business of extracting ethanol, commonly known as spirit and they were aggrieved of imposing of duty by Provincial Government---Plea raised by petitioners was that levy in question was not imposed at the time of issuance of license by authorities to petitioners---Validity---Non-imposition of levy in question at the time of issuance of license by authorities did not create an embargo upon Provincial Government to levy duty on excisable items at a subsequent time as it was competent under S. 31 of Punjab Excise Act, 1914.
(f) Interpretation of statutes---
----Preamble of statute---Scope and object---Pre-amble to an Act is an introductory statement that explains purpose and underlying philosophy of that Act---Object of preamble is to clarify meaning or purpose of operative part of the text in case of any ambiguity or dispute---Pre-amble prevails only where it provides a clear and definite interpretation whereas meaning of enacting word is indefinite or unclear.
Case law Referred.
(g) Punjab Excise Act (I of 1914)---
----S. 34---License---Scope---License does not confer a right rather it creates a corresponding duty on the part of beneficiary to regulate manufacturing process as per law.
(h) Estoppel---
----Imposition of tax---Legislative power---Scope---Legislature cannot be estopped from issuing notification for the purpose of imposition of 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 faced by people, which the legislature in its wisdom through legislation seeks to resolve---No estoppel against Provincial Government to levy duty on excisable items.
Case-law referred.
(i) Constitution of Pakistan---
----Art. 199---Qanun-e-Shahadat (10 of 1984), Arts. 117 & 120---Constitutional petition---Vires of statute---Presumption---Burden to prove---When vires of any statute are challenged, strong presumption as to legislative competence and validity of the statue is always attached---Burden is always on the person challenging vires of any statute to show that statute in question is beyond the legislative competence or is in violation of any Constitutional provision or guarantee or in negation of rights guaranteed under the Constitution.
Case-law referred.
(j) Constitution of Pakistan---
----Art. 199---Constitutional petition---Vires of statute---Jurisdiction of High Court---Principle---Court cannot sit in judgment over the wisdom of legislature and strike it down, except on two grounds, namely lack of legislative competence and violation of any of the fundamental rights guaranteed in the Constitution.
Case law referred.
Ali Sibtain Fazli, Hasham Ahmad Khan, Muhammad Umer Riaz and Shehzad Maqsood for Petitioners.
Asma Hamid, Additional Advocate General, Muhammad Ejaz, Assistant Advocate General, Mian Abid Zia, Law Officer, Excise and Taxation Department, and Akhter Ali Kureshi, Standing Counsel for Pakistan for Respondents.
Date of hearing: 2nd May, 2016.
JUDGMENT
MUHAMMAD SAJID MEHMOOD SETHI, J.---This single judgment shall dispose of instant petition under Article 199 of the Constitution of the Islamic Republic of Pakistan, 1973 ("Constitution") as well as following connected Writ Petitions which have been heard together as common questions of law and facts have been raised therein:
1.W.P.No.18346 of 2012 titled Noon Sugar Mills Ltd. v. Province of the Punjab, etc.
2.W.P.No.18347 of 2012 titled Tandilianwala Sugar Mills Ltd. v. Province of the Punjab, etc.
3.W.P.No.18348 of 2012 titled Abdullah Sugar Mills Ltd. v. Province of the Punjab, etc.
4.W.P.No.18349 of 2012 titled Shakarganj Sugar Mills Ltd. v. Province of the Punjab, etc.
5.W.P.No.18350 of 2012 titled Chrystalline Chemicals Industries (Pvt.) Ltd. v. Province of the Punjab, etc.
6.W.P.No.18351 of 2012 titled Premier Industries Chemicals MFG. Co. (Pvt.) Ltd. v. Province of the Punjab, etc.
7.W.P.No.18378 of 2012 titled United Ethanol Industries (Pvt.) Ltd. v. Province of the Punjab, etc.
8.W.P.No.3913 of 2014 titled Hunza Sugar Mills v. Province of the Punjab, etc.
9.W.P.No.25447 of 2015 titled Madina Sugar Mills (Pvt.) Ltd. v. Province of the Punjab, etc.
2.Petitioner in the instant case and petitioners in above-referred connected petitions, are companies engaged in the business of manufacturing and sale of sugar, and inter-alia, produce molasses and other by-products. From molasses, ethanol, commonly known as spirit, is extracted. Petitioner is licensed to manufacture said product under the Punjab Excise Act, 1914 ("Act, 1914"). On 03.07.2012, Secretary Excise and Taxation, Government of the Punjab, Excise and Taxation Department, upon the powers having been exercised by the Governor of the Punjab, in terms of section 31 of the Act, 1914, issued Notification No.S.O.TAX(E and T)3-4/2012 ("impugned Notification") and imposed duty at the rate of Rs. 2 per liter on manufacturing of spirit in any distillery or brewery, w.e.f. 01.07.2012.
3.On the stamp of impugned Notification, Excise and Taxation Officer/respondent No.5 issued Show-Cause Notice dated 10.07.2012 ("SCN"), whereby petitioner was required to explain his failure to pay said duty and was warned that in case of failure, said duty would be recovered from petitioner by adopting coercive measures.
4.Through instant writ petition, petitioners have challenged aforesaid provisions of law, notification and subsequent SCN, with the following prayer:--
"In view of the above, it is most respectfully prayed that the impugned levy and demand of tax in terms of show cause notice as well as the impugned levy in terms of Notification dated 03.07.2012 may kindly be declared to be illegal, without lawful authority, and of no legal effect.
It is further prayed that Section 31 of the Punjab Excise Act, 1914 read with Sections 3(6) and 3(14) thereof as applied to the Petitioner may kindly be declared to be ultra vires the Constitution and thus illegal, without lawful authority and of no legal effect.
It is further prayed that pending disposal of writ petition the respondents be restrained from recovering the impugned amount of tax from the Petitioner.
It is further prayed that pending disposal of the writ petition, proceedings/operation of the impugned Show Cause Notice may kindly be suspended and the respondent No.5 be restrained from taking any coercive measure against the petitioner."
5.Mr. Ali Sibtain Fazli, Advocate, learned counsel for petitioners submits that product manufactured by petitioners is not spirit rather it is 'ethanol'; that even otherwise, the word 'spirit', as defined in section 2(19) of the Act, 1914, means any liquor containing alcohol manufactured by distillation whether denatured or not, which means it has to be a liquor containing alcohol and not alcohol simplicitor; that ethanol is alcohol having formula as C2H5OH; that it cannot be consumed as it is not a drink and being pure alcohol it is poisonous and not drinkable; that ethanol/spirit being manufactured by petitioners does not fall in any of the items listed in Section 31 and excisable articles mentioned in Section 3(6) of the Act; that ethanol/spirit also does not come within the definition of liquor as provided in Section 3(14) of the Act for the reason that ethanol/spirit is a distilled alcoholic drink or volatile liquid obtained by distillation, therefore, it is not an excisable article and no duty can be imposed on it.
Learned counsel for petitioners contends that levy of excise duty under section 31 of the Act, 1914, read with sections 3(6) and 3(14), is unconstitutional because in terms of Article 142 of the Constitution, Provincial Assembly can only legislate in respect of matters which have not been listed in the Federal Legislative List of the Fourth Schedule of the Constitution, and, against Entry No.44 of the Federal Legislative List, it is mentioned that excise duty can be levied by Parliament on all goods except alcoholic liquors, opium and other narcotics. The provincial legislature can levy duty on alcoholic liquor and not on alcohol; therefore, petitioners' product, being pure alcohol, is exempted from levy of excise duty under the Act, 1914. Learned counsel for petitioner has relied on Hirjina and Co. v. Islamic Republic of Pakistan and another (1993 SCMR 1342). He has also placed reliance on the judgment rendered by Indian Supreme Court in case of Synthetics and Chemicals Ltd. and others v. State of U.P. and others ((1990) 1 Supreme Court Cases 109). He further argues that impugned Notification is also violative of Article 142 read with Entry No.27 in the Fourth Schedule of the Constitution, according to which Provincial Legislature has no jurisdiction to legislate on inter-provincial trade and commerce as well as trade and commerce with foreign countries. He adds that most of the ethanol produced by petitioners is exported out of Pakistan and, therefore, Provincial Government cannot impose any tax on such goods as it is not within the legislative domain of the Provincial Legislature.
Learned counsel for petitioners challenges the vires of Section 31 of the Act, 1914, read with Sections 3(6) and 3(14) of the Act and Notification dated 03.07.2012 issued on the strength of Section 31 ibid, allegedly being violative of Article 151 of the Constitution. It is argued that as per said Article, Parliament is empowered to impose restrictions on freedom of trade, commerce or intercourse between one Province and another or within any part of Pakistan and Provincial Assembly or a Provincial Government is not vested with such powers. He submits that imposition of duty @ Rs.2/- per liter on manufacture of spirit in Punjab tantamounts to impose restriction on free trade and would badly affect the business of petitioner and other manufacturers, as same product would be available in other provinces of Pakistan at cheaper rates and would ultimately affect competitiveness of the product outside Punjab. He adds that by levying impugned duty the respondent-Government has discriminated between the goods produced by the petitioners and the goods produced in other provinces of Pakistan, which is in violation of Article 151(3)(b) of the Constitution. He has relied on Murree Brewery Company Ltd. through Secretary v. Province of Balochistan through Secretary, Excise and Taxation, Quretta and 2 others (2003 PTD 2140), Murree Brewery Co. Ltd. through Manager Tops, M.B.C. v. Province of Punjab through Secretary, Excise and Taxation, Lahore and another (2001 CLC 1842) and Mirpurkhas Sugar Mills Ltd. v. District Council, Tharparkar and 2 others (1990 MLD 317). He submits that Article 151 of the Constitution does not permit the Provincial Assembly to impose tax affecting inter-provincial trade on the ground that said Article is intended to provide facilities or amenities which will improve the flow of trade. He adds that even if such tax is in the larger interest of public as specified in Article 151(4) of the Constitution, it must have consent of the President, but in the instant case no such consent has been sought by respondent-Government. He further submits that tax is a restriction on enjoyment of property and a 'deterrent against free flow' of trade. He has placed reliance on Mirpurkhas Sugar Mills Limited v. District Council, Tharparkar through Chairman and 3 others (1991 MLD 715).
Learned counsel for petitioners contends that product of petitioners is mostly exported out of Punjab as well as out of Pakistan, so it is exempted from levy of any duty as provided in Chapter 6 of the Punjab Liquor Import, Export, Transportation and Possessions Orders. Order 6.12(3)(f) ibid provides that Country spirit, Pakistan Made Foreign Spirit and rectified spirit may be exported in bond without payment of duty from any licensed distillery in the Punjab to any province of Pakistan to which the said privilege has been extended by the Punjab Government, subject to any conditions or restrictions which the Punjab Government may impose.
Learned counsel for petitioners submits that respondents have already levied duty on spirit vide Notification No. S.O. (Excise) E&T-II-7/2015 dated 30.06.2005 but without any reference of already imposed duty, respondents have levied a new duty vide impugned Notification. Thus, it amounts to double taxation, which is not permissible under the law.
Learned counsel for petitioners maintains that impugned Notification has been issued without complying with the procedural requirement of law as given in the Act, 1914, because said notification does not provide any mechanism for recovery of the duty, and subsequent SCN issued by respondent No.5, on the basis of impugned Notification, is also illegal and without jurisdiction.
Learned counsel further argues that section 3 of the Federal Excise Act, 2005 states that there should be levied and collected, prescribed duties of excise on goods produced or manufactured in Pakistan; goods imported into Pakistan etc.; such goods as the Federal Government may specify, and services provided or rendered in Pakistan @ 15 % ad-valorem, except the goods and services specified in the First Schedule, which shall be charged to Federal Excise Duty, at the rate set forth therein. He adds that section 16 of the said Act states that all goods imported, produced or manufactured in Pakistan and services provided or rendered except such goods and services as specified in the First Schedule shall be exempted from the whole of excise duties levied under section 3. He submits that alcohol has not been listed as goods in the First Schedule and, therefore, it stands exempted from the levy of Federal Excise Duty under the Federal Excise Act, 2005.
Learned counsel for petitioners challenges the impugned Notification on the strength of Articles 18 and 25 of the Constitution and submits that petitioners have fundamental right to conduct any lawful trade and business but levy of such huge duty on the product of petitioners would amount to deprive them to continue their lawful business to earn livelihood. Reliance has been placed on Dr. Naveeda Tufail and 72 others v. Government of Punjab and others (2003 SCMR 291), Government of Balochistan through Additional Chief Secretary v. Azizullah Memon and 16 others (PLD 1993 SC 341), Mian Manzoor Ahmad Wattoo v. Federation of Pakistan and 3 others (PLD 1997 Lah. 38), Collector of Customs and others v. Sheikh Spinning Mills (1999 SCMR 1402), The Province of Punjab and another v. National Industrial Cooperative Credit Corporation and another (2000 SCMR 567), Nishat Tek Limited v. The Federation of Pakistan, and others (PLD 1994 Lah. 347), Messrs Nafees Dry Cleaners, Wahadat Road, Lahore v. The Government of Punjab through Secretary Law and Parliamentary Affairs Department, Lahore and another (2001 PTD 2018) and Kesar Enterprises Ltd. v. State of U.P. and others ((2011) 9 SCR 19).
6.On the other hand, Ms. Asma Hamid, learned Additional Advocate General assisted by learned Assistant Advocate General and learned Standing Counsel for Federation, contends that Ethanol also called Ethyl Alcohol, commonly known as Spirit, is primary alcohol; that it derives its chemical formula from its parent family of alcohol-OH group; that it is produced by fractional distillation after the process of fermentation between sugar containing materials and bacteria/yeast; that ethanol is the intoxicating agent in fermented and distilled liquors and is used in its pure or denatured form as a solvent in medicines, perfumes, cleaning agents and in fuel. She refutes the contention of petitioners that ethanol is not excisable being inconsumable item, by contending that ethanol, as a rectified spirit, is a consumable item unless it has been specifically denatured to render it unfit for human consumption. She adds that Section 3(6) of the Act does not provide any distinction of consumable or non-consumable products when it defines 'alcoholic liquors'; that the tax statute must be read as it is and nothing can be read in or implied, rather plain meaning is considered, which is conveyed by the language used; that Section 3(14) of the Act defines liquor as intoxicating liquor, and includes all liquids consisting of or containing alcohol and also any substance which the Provincial Government may, by notification, declare to be liquor for the purposes of the Act. Ethanol being liquid and primary alcohol coming within the definition of liquor, is, thus, an excisable item. She further submits that plea of the petitioners that ethanol, being poisonous and not drinkable, is not 'alcoholic liquor', has no legs to stand because ethanol/ethyl alcohol is produced through fermentation and being a dilute liquid is concentrated by fractional distillation. Therefore, it is denatured purposely to make it unfit for human consumption. She maintains that the petitioners applied for and, subsequently, obtained license for the manufacture of distilled and rectified spirits, which are excisable articles within the ambit and scope of provisions of the same Act, under which the license is issued, therefore, petitioners are estopped from approbating and reprobating in terms of what they are subject to when their own words and conduct are illustrative of their having taken advantage of the Act to commence business as distilleries.
Learned Law Officer further argues that Article 142(c) of the Constitution contemplates that it is only the Provincial Legislature that is empowered to legislate and impose tax in relation to matters not specified in the Fourth Schedule and perusal of the same reveals that alcohol/alcoholic liquors are not covered in the Fourth Schedule. Adds that the impugned Notification has been issued by the competent authority under section 31 of the Act, therefore, neither any special procedure was required nor any mechanism was needed, however, demand notices have been issued to petitioners wherein they have been asked to show cause as to why they are not liable to pay the accrued tax but the petitioners did not bother to file reply to said SCNs.
Learned Addl. Advocate General maintains that there is no discrimination against petitioners regarding levy of duty as it has been levied throughout Punjab. It was imposed after due deliberations by the legislature and the executive. Purpose behind levy of said duty is to generate public revenue, which would ultimately be used in public interest and welfare. She adds that it is well within the sovereign power of the State to impose taxes to raise revenue. Reliance has been placed on Molasses Trading and Export (Pvt.) Limited v. Federation of Pakistan and others (1993 SCMR 1905) and Government of Pakistan and others v. Muhammad Ashraf and others (PLD 1993 SC 176). She argues that even otherwise, discrimination can only be claimed by a citizen and not a company as held in Federation of Pakistan through Secretary, Ministry of Finance and others v. Haji Muhammad Sadiq and others (PLD 2007 SC 133). She continues to argue that no discrimination can be pleaded in fiscal statutes. The respondents have issued D-2 license in favour of petitioners for the manufacture of spirit and the petitioners are liable to pay excise duty levied on the manufacture of said product, which in no way amounts to encroachment upon their fundamental rights, as alleged by them. Fundamental rights are subject to other constitutional and legal restraints and regulations, and are not unfettered in their scope. She finally prays that this writ petition along with connected cases may be dismissed with costs. Reliance has been placed on State of M.P. v. Rakesh Kohli and another (2013 SCMR 34), Messrs Elahi Cotton Mills Ltd. and others v. Federation of Pakistan through Secretary M/o Finance, Islamabad and 6 others (PLD 1997 SC 582), Sohail Jute Mills Ltd. and others v. Federation of Pakistan through Secretary, Ministry of Finance and others (PLD 1991 SC 329), Mian Ejaz Shafi and others v. Federation of Pakistan and others (PLD 1997 Karachi 604), Anoud Power Generation Limited and others v. Federation of Pakistan and others (PLD 2001 SC 340), Messrs Bisvil Spinners Ltd. v. Superintendent, Central Excise and Land Customs Circule, Sheikhupura and another (PLD 1988 SC 370), Abdul Rahim and 2 others v. Messrs United Bank Ltd. of Pakistan (PLD 1997 Karachi 62), Government of Pakistan and others v. Messrs Hashwani Hotel Ltd. (PLD 1990 SC 68), Messrs Army Welfare Sugar Mills Ltd. and others v. Federation of Pakistan and others (1992 SCMR 1652), I.C.C. Textiles Ltd. v. Federation of Pakistan and others (2003 PTD 1017), The Commissioner of Agricultural Income Tax, East Bengal v. B.W.M. Abdur Rehman, Manager, Taki Bara Taraf Wards Estate (1973 SCMR 445), I.T.As. Nos.1386/LB and 1387/LB of 2009, decided on 1st February, 2010 (2010 PTD 1255), (1195 (1) SCR 682), Pakistan Tobacco Company Ltd. and others v. Government of N.-W.F.P. through Secretary Law and others (PLD 2002 SC 460), (1970 (1) SCR 710), Shree Digvijay Cement Co. Ltd. and others v. State of Rajasthan and others (AIR 2000 Supreme Court 680), Messrs Quetta Textile Limited through Chief Executive v. Province of Sindh through Secretary Excise and Taxation, Karachi and another (PLD 2005 Karachi 55), Shahtaj Sugar Mills Limited v. Province of Punjab through Secretary, Food, Civil Secretariat, Lahore and 3 others (1998 CLC 1912), Messrs Saif Nadeem Kawasaki Motors Limited v. The Government of N.-W.F.P. through Secretary, Local Government Peshawar and another (PLD 1992 Peshawar 166), Mirpurkhas Sugar Mills Ltd. v. District Council, Tharparkar and 2 others (1990 MLD 317), Shahtaj Sugar Mills Ltd and 3 others v. Province of Punjab and others (1998 SCMR 2492), Pakistan Flour Mills Association and another v. Government of Sindh and others (2003 SCMR 162), The State of Bombay and another v. F. N. Balsara (AIR (38) 1951 Supreme Court 318 (C.N.55), Messrs Motipur Zamindary Co. (P) Ltd. v. The State of Bihar ((1962) SCR 498), Indian Mica and Micanite Industries Ltd. v. State of Bihar and others ((1971) SCR 319), Vam Organic Chemicals Ltd. and another v. State of U.P. and others ((1997) 2 Supreme Court Cases 715), Bihar Distillery and another v. Union of India and others ((1997) 2 Supreme Court Cases 727) and Mohd. Bin Salem v. Umaji (AIR 1955 Hyderabad 113 (Vol. 42, CN 31)).
7.I have given anxious consideration to the arguments of learned representatives of both the parties and perused the record with their able assistance.
8.The impugned Notification as well as provisions of section 31 of the Act, 1914 read with section 3(6) and section 3(14) of the said Act assailed through instant petition are reproduced hereunder:-
Notification dated 03.07.2012:
"No.SO.TAX(E and T) 3-4/2012. In exercise of the powers conferred under section 31 of the Punjab Excise Act, 1914 (I of 1914), Governor of the Punjab is pleased to impose a duty at the rate of Rs.2/- per liter on manufacturing of spirit in any distillery or brewery with effect from 1st July, 2012.
2. They duty shall be recovered from the distillery or the brewery, established or licensed under section 21 of the said Act."
Section 3(6) of the Act, 1914:
"excisable article means
(a) any alcoholic liquor, or
(b) any intoxicating drug, or
any medicinal or toilet preparation containing alcohol."
Section 3(14) of the Act, 1914:
"'liquor' means intoxicating liquor, and includes all liquids consisting of or containing alcohol; also any substance which the Provincial Government may by notification declare to be liquor for the purposes of this Act."
Section 31 of the Act, 1914:
"31. Duty on excisable articles. A duty at such rate or rates as the Provincial Government shall direct, may be imposed, either generally or for any specified local area, on any excisable article--
(a)imported, exported or transported in accordance with the provisions of section 16; or
(b)manufactured or cultivated under any license granted under section 20; or
(c)manufactured in any distillery established, or any distillery or brewery licensed under section 21;
9.Petitioners have challenged Section 31 of the Act, 1914, and impugned Notification on the strength of Article 142 of the Constitution with the contention that Provincial Legislature can levy duty on alcoholic liquor and not on alcohol, so petitioners' product being alcohol is exempted from levy of duty. In this regard, learned counsel for the petitioners has placed reliance on the case of Hirjina and Co. supra.
Part V of the Constitution deals with distribution of legislative powers. Dispensation of legislative authority between the Federation and the Provinces in the Constitution is conceded through Federal Legislative List available in Fourth Schedule of the Constitution consisting of two parts. There are 59 entries in Part I and 18 in Part II. After 18th amendment, in terms of Article 142 of the Constitution, Parliament has exclusive power to make laws with respect to any matter in the Federal Legislative List with power to make laws pertaining to such areas in the Federation as are not included in any Province. Provincial Assembly has power to make laws in respect to any matter not enumerated in the Federal Legislative List.
Entry No.44 appearing in the Federal Legislative List empowers the Parliament to make law for levy of excise duties including duties of sale. At the same time, levy of duties on alcoholic liquors, opium and other narcotics have been excluded from the domain of Parliament. The provisions of Article 142 and Entry No. 44 of the Federal Legislative List are reproduced below for ready reference.
Article 142 of the Constitution reads as under:--
"142. Subject-matter of Federal and Provincial laws. Subject to the Constitution
(a)Majlis-e-Shoora (Parliament) shall have exclusive power to make laws with respect to any matter in the Federal Legislative List;
(b)Majlis-e-Shoora (Parliament) and a Provincial Assembly shall have power to make laws with respect to criminal law, criminal procedure and evidence.
(c)Subject to paragraph (b), a Provincial Assembly shall, and Majlis-e-Shoora (Parliament) shall not, have power to make laws with respect to any matter not enumerated in the Federal Legislative List.
(d)Majlis-e-Shoora (Parliament) shall have exclusive power to make laws with respect to all matters pertaining to such areas in the Federation as are not included in any Province.
Entry No.44 of the Federal Legislative List reads as under:
"44. Duties of excise, including duties on sale, but not including duties on alcoholic liquors, opium and other narcotics."
10.The primary question that requires determination by this Court is whether 'spirit' is an alcoholic liquor coming within the purview of Entry No.44 of the Federal Legislative List and thus, within the legislative competence of provincial legislature? Let us have a visit of definitions of word 'spirit', necessary to resolve the query, as provided in the Act, 1914, as well as different dictionaries. Definition of 'spirit' provided in Section 3(19) of the Act, 1914, reads as under:--
"'spirit' means any liquor containing alcohol obtained by distillation, whether denatured or not."
'Spirit' as defined in the Oxford English Dictionary Volume-I:--
21. A liquid of the nature of an essence or extract from some substance, esp. one obtained by distillation; a solution in alcohol of some essential or volatile principle.
22. An essence, distilled extract, or alcoholic solution, of a specified substance.
'Spirit' has been defined in Words and Phrases (Permanent Edition) Volume 39C, in the following words:
N.C. 1887. "Spirit," or "Spirits," has a general meaning, as applied to fluids, mostly of a lighter character than ordinary water, obtained, but not produced, by distillation; but, as applied particularly to liquors, they signify the essence, the extract, the purest solution, the highly rectified spirit-the pure alcohol contained in them. The spirit of liquors is really the alcohol in them. It is this characteristic, this essential element, that makes them spirituous.-State v. Giersch, 4 S.E. 193, N.C. 720.
11.'Spirit' is the common name of 'ethanol' and its chemical name is 'ethyl alcohol'. The New Shorter Oxford Dictionary on Historical Principles edited by Lesley Brown Volume 1 defines 'ethanol': A colourless volatile flammable liquid alcohol, C2H5OH, present in alcoholic drinks (cf. ALCOHOL 4), produced by the fermentation of hexose sugars, and used as a solvent, antifreeze, fuel, and intermediate; ethyl alcohol. Ethyl alcohol is also the intoxicating ingredient of many alcoholic beverages such as beer, wine and distilled spirits. There are two main processes for the manufacture of ethyl alcohol: the fermentation of carbohydrates (the method used for alcoholic beverages) and the hydration of ethylene. Fermentation involves transformation of carbohydrates to ethyl alcohol by growing yeast cells. Ethyl alcohol produced either by fermentation or by synthesis, is obtained as a dilute aqueous solution and must be concentrated by fractional distillation. Ethyl alcohol intended for industrial use is usually denatured (rendered unfit to drink), typically with methanol, benzene or kerosene, which is basically an industrial alcohol used for the manufacture and production of a thousand products. Denatured spirit is a form of alcohol i.e. liquid containing alcohol mixed with very small percentages of chemicals or other poisonous liquids, so as to render it unfit for human consumption.
12.The words 'liquor', 'alcohol', 'alcoholic', and 'denatured' occurring in the above definition of 'spirit' are defined and explained below:-
"'liquor' means intoxicating liquor, and includes all liquids consisting of or containing alcohol; also any substance which the Provincial Government may by notification declare to be liquor for the purposes of this Act." (Section 3(14) of the Act, 1914).
"liquor" A liquid; matter in a liquid state; occas. in wider sense, a fluid.
A drink (of an intoxicating beverage).
(The Oxford English Dictionary Volume-I).
"denatured" means effectually and permanently rendered unfit for human consumption.
(Section 3(5) of the Act, 1914).
"alcohol" 3. By extension of fluids of the idea of sublimation: An essence, quintessence, or 'spirit' obtained by distillation or 'rectification';
5. Organ. Chem. An extensive class of compounds, of the same type as spirit of wine, composed of carbon, hydrogen, and oxygen, some of which are liquid and others solid.
"alcoholic" Of or belonging to alcohol.
(The Oxford English Dictionary Volume-I).
13.In the case of The State of Bombay and another supra, after discussing definition of 'liquor' in various Acts, it was held as under:--
"(16). Coming now to the various definitions given in the Indian Acts, I may refer in the first instant to the Bombay Abkari Act of 1878 as amended by subsequent Acts, where the definition is substantially the same as in the Act with which we are concerned. In the Bengal Excise Act, 1909, "liquor" is said to mean:
"liquid consisting of or containing alcohol, and includes spirits of wine, spirit, wine, tari pachwai, beer, and any substance which the Provincial Govt. may .declare to be liquor for the purposes of the Act."
In several other Provincial Acts, e.g., the Punjab Excise Act, 1914, the U.P. Excise Act, 1910, "liquor" is used as meaning intoxicating liquor and as including alcohol. The definition of "liquor" in the Madras Abkari Act, 1886 is the same as in the Bombay Act of 1878. Even if we exclude the American and English Acts from our consideration, we find that all the Provincial Acts of this country have consistently included liquids containing alcohol in the definition of 'liquor' and 'intoxicating liquor'. The framers of the Govt. of India Act, 1935, could not have been entirely ignorant of the accepted sense in which the word "liquor" has been used in the various excise Acts of this country, and, accordingly I consider the appropriate conclusion to be that the word "liquor" covers not only those alcoholic liquids which are generally used for beverage purpose and produce intoxication, but also liquids containing alcohol. It may be that the latter meaning is not the meaning which is attributed to the word "liquor" in common paralance especially when that word is prefixed by the qualifying word 'intoxicating', but in my opinion having regard to the numerous statutory definitions of that word, such a meaning could not have been intended to be excluded from the scope of the term "intoxicating liquor" as used in entry 31 of List II."
14.An exhaustive and lengthy discussion over definitions of "liquor", "intoxicating liquor", "intoxicant" and word "includes" occurring in some definition, was made in case reported as Mushtaq Ahmad v. The State (1991 PSC 511), which is actually a criminal appeal arising out of Prohibition (Enforcement of Hadd) Order, 1979 ("PEHO"). Though elaboration on the definition of above words has been with reference of PEHO, 1979 but same are also helpful to understand their exact meaning, as these words are also used in the Act, 1914. Relevant para of the said judgment reads as under:--
"8. Article 2(h) of the Order defines "intoxicating liquor" to include toddy, spirits of wine, wine, beer and all liquids of or containing alcohol normally used for purposes of intoxication, but does not include a solid intoxication even if liquefied. The word "liquor" does not necessarily mean liquid containing alcohol, such as beverage drink produced by fermentation or distillation. In common paralance it also denotes liquids, fluids or matters in a liquid state; chemical solutions; liquid solutions used as a wash or bath, or to cure or purify Articles etc. The expression "intoxicating liquor", therefore, obviously has reference to liquids consisting of or containing something which produce intoxication. The word "includes" contained in Article 2(h) of the Order requires examination. In Dilworth v. Commissioner for Land and Income Tax (1899 A.C. 99 P.C.), Lord Watson observed:
"The word 'include' is very generally used in interpretation clauses in order to enlarge the meaning of the words or phrases occurring in the body of the statutes; and when it is so used these words or phrases must be construed as comprehending, not only such things which the interpretation clause declares that they shall include. But the word 'include' is susceptible of another construction, which may become imperative, if the context of the Act is sufficient to show that it was not merely employed for the purpose of adding to the natural significance of the words or expressions defined. It may be equivalent to 'mean and include' and in that case it may afford an exhaustive explanation of the meaning which for the purposes of the Act, must invariably be attached to these words or expressions."
The question, therefore, that arises is whether the word "includes" has been used to enlarge the meaning of the expression "intoxicating liquor" or to limit its meaning and render it exhaustive. As a general rule, the word "includes" is used as a word of enlargement and ordinarily implies that something else also falls within the definition beyond the general or generic meaning of that expression which precedes it, i.e. a species which does not naturally belong to it or a species which normally or naturally attaches to it. What is the general or generic meaning attaching to the expression "intoxicating liquor", so that the items that succeed the word "includes" either constitute a species which do not naturally belong to it or a species deemed included in the general or generic meaning of that expression or to its natural import. The word "intoxicant" has been defined in Article 2(g). The items listed in the Schedule to the Order are derivatives of plants. These Articles when consumed produce intoxication. They are also normally used by persons for purposes of intoxication. Some of these items can be consumed in liquid form. The expression therefore "intoxicating liquor" as used in its general or generic sense would therefore include all forms of drinks, beverages or liquids containing the Articles specified in the Schedule to the Order, i.e. intoxicants which are derivatives of certain stated plants, which are normally used by persons for the purposes of intoxication. "Toddy, spirits or wine " are derivatives of cereals and fruits. These Articles when consumed also produce intoxication. What is common to them is alcohol. Thus, if the expression "intoxicating liquor" covers liquids containing intoxicants derived from plants, the words "toddy, spirits of wine, " which follow the word "includes" refer to the species of liquids consisting of or containing alcohol derived from the fermentation or distillation of cereals or fruits. In short, the expression "intoxicating liquor" in its totality would cover all drinks, beverages or liquids consisting of or containing the Articles stated in the Schedule or alcohol which are normally used by persons for purposes of intoxication. The word "intoxication" in Article 2(h) of the Order does not mean to get drunk or unconscious or inebriated or elated beyond the bunds of sobriety. What is intended to convey is that the liquid can produce a state of intoxication, i.e. stimulation, depression, elation, semi-consciousness, etc."
15.The above narrated definitions of different words relating to matter in hand, when read in juxtaposition, lead to the conclusion, with no ambiguity, that spirit squarely falls within the definition of liquor and alcoholic liquor is an umbrella term which covers all liquors including spirit. Alcoholic liquor, which includes 'spirit', is surely an excisable article, which squarely falls within legislative competence of provincial legislature in terms of Entry No.44 of the Federal Legislative List as well as Section 3(6) of the Act, 1914.
16.The doctrine of noscitur a sociss has been interpreted at page 195 of "Reading Law" Antonin Scalia and Bryan A. Garner, as a rule of construction which teaches that the meaning of particular terms in a statute may be ascertained by reference to words associated with them in the statute; and that where two or more words of analogous meaning are employed together in a statute, they are understood to be used in their cognate sense, to express the same relations and give color and expression to each other. Thus, rectified and denatured spirits are listed as liquors containing alcohol.
17.The contention of petitioners that spirit, being inconsumable, non-potable or un-fit for human consumption, is not alcoholic liquor, is totally misconceived because the Act does not mention any such criteria to include or exclude a product from the purview of 'alcoholic liquor'. It is well settled that every law and every word in a statute has to be construed and interpreted in the context embodied in it and any import into it may render different meaning and different sense which the law-maker may not have intended to assign to it. The defined words should not be given wider meanings than the one already given in the definition, lest it may defeat the very purpose of the law itself, as has been held in the case of Messrs Saif Nadeem Kawasaki Motors Limited supra.
18.While challenging vires of Section 31 of the Act, 1914, and impugned Notification, learned counsel for petitioners also takes support from the judgment rendered by Indian Supreme Court in case Synthetics and Chemicals Ltd. and others supra, and contends that 'intoxicating liquor' appearing in Entry No.51 List II or 'alcoholic liquors for human consumption' appearing in Entry No.51 List II of the Indian Constitution do not cover industrial alcohol being incapable of consumption, therefore, State Legislature had no authority to levy duty on it and at the most regulatory fee could be imposed.
The said case is distinguishable with the present matter due to the fact that constitutional scheme of India provides separate legislative entries with regard to Centre and States. Separate Legislative Lists are clearly demarcated and bifurcated therein. In India, alcoholic liquors for human consumption fall in Entry No.51 List II, wherein the State legislature has been authorized to levy tax whereas alcoholic liquors other than for human consumption, have been left to the Central legislature, under Entry No.84 for levy of duty of excise. This scheme of these two entries in Lists I and II is clear enough to indicate the line of demarcation for purposes of taxation of alcoholic liquors. What has been excluded in Entry No.84 has specifically been put within the authority of the State for purposes of taxation.
Entry No.8 in List II talks of intoxicating liquors and also refers to production, manufacture, possession, transport, purchase and sale of these liquors. It was held in the judgment that Entry No.51 authorizes the State legislature to levy tax and duties on alcoholic liquors falling in Entry No.51 and Entry No.8 confers authority on the State legislature to enact laws for regulation.
In Pakistan, the constitutional scheme of separating the legislative competence on various subjects is governed by Article 142, by virtue of which a Provincial Assembly shall, and Parliament shall not, have power to make laws with respect to any matter not enumerated in the Federal Legislative List. The "alcoholic liquor", being not mentioned in the Federal Legislative List, squarely falls within the legislative competence of the Provincial Legislature. Furthermore, the Act, 1914, does not create distinction of alcoholic liquors as for human consumption or otherwise.
19.High Courts and Supreme Court of India, in various decisions, have elaborated legislative jurisdiction of the State and the Union over matters enumerated in the Legislative Lists of their Constitution. They have also made observations by drawing lines of demarcation of the legislative authorities over liquors, intoxicating liquors and alcoholic liquors. Though in the scheme of Indian Constitution, their legislative lists and division of legislative powers over matters of liquor are quite different to that of Pakistan but in order to answer various queries raised by petitioners while relying on the case of Synthetics Chemicals supra, this Court feels it appropriate to cite famous decisions of Supreme Court of India wherein ratio of Synthetics Chemical supra has been discussed, elaborated and distinguished.
20.Facts as reported in the case of Vam Organic Chemicals Ltd. and another supra, are that two appeals were filed against the judgment of High Court of Allahabad dated 09.09.1991 whereby writ petitions filed by appellants were dismissed wherein Notification issued by the Excise Commissioner, Uttar Pradesh was challenged. Through said notification, certain amendments were made in the Rules for regulating the manufacture, supply, storage or sale of any intoxicant. It was further held that distilleries holding license for denaturation of spirit shall be liable to pay a denaturation fee @ 7 paise per liter in advance. The said notification was challenged by appellants on the grounds that the State of Uttar Pradesh had no power to legislate in respect of industrial alcohol or to levy taxes in respect thereof and further that levy being not based on quid pro quo was otherwise bad. The High Court rejected all the contentions of appellants and their writ petitions were dismissed. Supreme Court of India also dismissed appeal of appellants by upholding the decision of High Court.
In those appeals the appellants contended that the Supreme Court by its decision in Synthetics Chemicals had expressly ruled against legislative competence of the State so far as ethyl alcohol/rectified spirit is concerned. Further, they contended that even if the State is left with regulatory power to prevent misuse of industrial alcohol for potable purposes, such power did not include power to levy any impost. Further, the appellants contended that denaturation is a statutory duty imposed by a notification under the U.P. Excise Act and no service by the State being provided for the same, no fee could be charged and in any case even if the State has to incur any expenses for enforcement of the requirement of denaturation, there is no quid pro quo between the expenses incurred and the fees charged.
Those appeals were dismissed and contentions raised by appellants were rejected, with the following observations:--
"10. This Court dealt with the question of legislative competence of the State to impose tax or levy on industrial alcohol in the case of Synthetics and Chemicals Ltd. v. State of U.P. and ruled in the negative. The High Court took the view that the distinction between ethyl alcohol/rectified spirit as such and denatured spirit was not in issue, nor was it considered in that judgment and held that this Court cannot be said to have ruled that every rectified spirit/ethyl alcohol is industrial alcohol. The High Court reiterated that once denatured, the alcohol becomes exclusively industrial alcohol since it cannot be used for obtaining country liquor or for manufacturing IMFLs and said that it is to ensure that ethyl alcohol meant for industrial use is not misused or diverted for human consumption that impugned regulation is provided for by the State and further that the regulation being part of general regulation of the trade in alcohol in the interest of public health is relatable to Entries 6 and 8 of List II."
It was further noted in paras 13 and 14:--
"13. We may note that the term "industrial alcohol" is not used in any of the Lists in the Seventh Schedule of the Constitution. All the entries quoted in the earlier part of the judgment have to be read with Article 248 of the Constitution which specifies residuary powers of the Union:
"248. Residuary powers of legislation.---(1) Parliament has exclusive power to make any law with respect to any matter not enumerated in the Concurrent List or State List.
(2) Such power shall include the power of making any law imposing a tax not mentioned in either of those Lists."
This is reflected in Entry 97 of List I:
"97. Any other matter not enumerated in List II or List III including any tax not mentioned in either of those List."
Whether alcoholic liquors other than "alcoholic liquors for human consumption" or "intoxicating liquor" was a State subject or a Union subject should be the real controversy. It is with a view to describing this kind of liquor that the term "industrial alcohol" is used. After an analysis of all the provisions of law giving the Union Parliament and the State Legislature jurisdiction to legislate on alcohol, this Court in the Synthetics Chemicals case held that the impugned notifications imposing certain fees as vend fee or transport fee, etc. were held to be within the legislative competence of the State. A careful reading of that judgment shows that the Court was fully aware of the fact that rectified spirit was the ingredient for intoxicating liquor or alcoholic liquor for human consumption although rectified spirit/ ethyl alcohol as well as denatured spirit are referred to as "industrial alcohol" in that judgment. This Court did not hold that the State will have no power whatsoever in relation to "industrial alcohol". In fact, in the judgment itself, the Court has enumerated the various areas relating to industrial alcohol in which the State could still legislate or make rules ....
14. It is to be noticed that the States under Entries 8 and 51 of List II read with Entry 84 of List I have exclusive privilege to legislate on intoxicating liquor or alcoholic liquor for human consumption. Hence, so long as any alcoholic preparation can be diverted to human consumption, the States shall have the power to legislate as also to impose taxes etc. In this view, denaturation of spirit is not only an obligation on the States but also within the competence of the States to enforce.
21.The case of Bihar Distillery and another supra describes respective spheres of control of Union and State Governments with regard to different entries in legislative lists of Indian Constitution regarding alcoholic liquors, rectified spirit, and intoxicating liquors. Bihar Distillery was getting its license renewed under the provisions of the Bihar Excise Act. In the year 1992, the authorities of the Bihar State proposed to cancel its license to which it objected on the ground that grant and cancellation of license was exclusive domain of Government of India and State Government had no say in the matter. It relied upon the decision rendered in the case of Synthetics and Chemicals Ltd. and others supra, and observed that Entry No.51 in List II and Entry No.84 in List I compliment each other. Both provide for duties of excise but while the States are empowered to levy duties of excise on (a) alcoholic liquors for human consumption and (b) opium, Indian hemp and narcotics manufactured or produced in the State and countervailing duties at the same or lower rates on similar goods manufactured or produced elsewhere in India but excluding medicinal and toilet preparation containing alcohol or any substance included in sub-para (b) of this Entry and the Union is empowered to levy duties of excise on tobacco and other goods manufactured or produced in India except (a) alcoholic liquors for human consumption and (b) opium, Indian hemp and other narcotic including drugs and narcotics. Medicinal and toilet preparations containing alcohol or any substance included in sub-para (b) which are excluded from Entry No.51 in List II are expressly included in this entry.
It was further observed that as per Entry No.8 in List II, production, manufacture, possession, transport, purchase and sale of intoxicating liquors is placed within exclusive domain of the States. It was also noted that even though control of certain industries may have been taken over by the Union by virtue of a declaration made by Parliament in terms of Entry No.52 in List I, yet the "trade, commerce in, and the production, supply and distribution of the products" of such industry is placed in the concurrent field, which in the present context means that though the control of alcohol industry is taken over by the Union, trade, commerce in and the production, supply and distribution of the products of alcohol industry can be regulated both by the Union and the States subject, of course, to Article 254. It was also noted that insofar as the field is not occupied by the laws made by the Union, the States are free to legislate.
The observations contained in Vam Organic's case supra, already affirmed by Supreme Court of India, were endorsed in paras 16, 17, 18 and 21 of the judgment.
22.Now I advert to the argument of learned counsel for petitioners that Section 31 of the Act and impugned Notification are violative of Article 151 of the Constitution. Learned Addl. Advocate General controverted this submission by reiterating that the respondent-Government has exclusive power to impose duty on an excisable item under Section 31 of the Act, 1914, and argues that mere imposition of duty is not a restriction upon free trade, which is prohibited by Article 151 of the Constitution. It is necessary to explore the object, scope and purpose of Article 151 of the Constitution. For convenience, Article 151 is reproduced hereunder:--
"151. Inter-Provincial trade. (1) Subject to clause (2), trade, commerce and intercourse throughout Pakistan shall be free.
(2) Majlis-e-Shoora (Parliament) may by law impose such restrictions on the freedom of trade, commerce or intercourse between one Province and another or within any part of Pakistan as may be required in the public interest.
(3) A Provincial Assembly or a Provincial Government shall not have power to
(a) make any law, or take any executive action, prohibiting or restricting the entry into, or the export from, the Province of goods of any class or description, or
(b) impose a tax which, as between goods manufactured or produced in the Province and similar goods not so manufactured or produced, discriminates in favour of the former goods or which, in the case of goods manufactured or produced outside the Province discriminates between goods manufactured or produced in any area in Pakistan and similar goods manufactured or produced in any other area in Pakistan.
(4) An Act of a Provincial Assembly which imposes any reasonable restriction in the interest of public health, public order or morality, or for the alleviating any serious shortage in the Province of an essential commodity shall not, if it was made with the consent of the President, be invalid."
It is evident from above narration that Article 151(1) guarantees trade, commerce and intercourse throughout Pakistan to be free, subject, however, to the power of Parliament to impose, by law, such restrictions on the freedom of trade, commerce or intercourse between one province and another, or within any part of Pakistan, as may be required in public interest, under Article 151(2). Article 151(3)(a) of the Constitution also, negatively, provides that a Provincial Assembly or a Provincial Government shall not have power to make any law or take any executive action prohibiting or restricting entry into or export from the province, of goods of any class or description. Article 151(3)(b) debars the Provincial Government to impose a tax which discriminates in favour of goods manufactured or produced in the province over similar goods not so manufactured or produced. Article 151(4), however, permits the Provincial Assembly to make law imposing reasonable restrictions in public interest as specified therein with the consent of the President.
In order to show that Section 31 of the Act, 1914, and impugned Notification are violative of Article 151 of the Constitution, learned counsel for petitioners has relied on the case of Murree Brewery Company Ltd. through Secretary supra. In my view, this case is based on entirely different facts. In the said case, vires of notification and memorandum issued by the Provincial Government, whereby tax had been imposed on the import of Pakistan Made Foreign Liquor, were challenged, which is not the case here because the respondents through impugned Notification, have levied duty on the manufacture of spirit.
23.Learned counsel for petitioners has also relied on the case of Murree Brewery Co. Ltd. through Manager Tops, M.B.C. supra. To better understand the ratio of said judgment, para 9 is reproduced hereunder, whereby while interpreting Section 31 of the Act, 1914, it was held:--
"The section enables the Provincial Government to impose on any excisable article a duty, at such rate or rates as the Provincial Government shall direct, on such excisable article being imported, exported or transported in accordance with the provisions of section 16 or manufactured or collected under any license granted under section 20 or manufactured in any distillery established or any distillery or brewery licensed under section 21. It is to be seen that clauses (a), (b) and (c) are disjunctive. The word "or" separates all the three clauses, which would indicate the intention of the Legislature that the duty can be imposed either under clause (a) or (b) or (c) but cannot be imposed under (a), and also under clauses (b) and (c). As I understand this section it does not authorize the Government to impose the duty twice on an excisable article. In other words if an excisable article has been subjected to duty under clause (b) or (c) it cannot again be subject to duty under clause (a). This interpretation is supported by language of section 16, which lays down that intoxicants shall not be imported, exported or transported except after payment of any duty to which it may be liable under this Act. The word "or" separating the three clauses cannot be read as "and"."
Admittedly, in the present cases, respondents have levied only one duty i.e. on the manufacture of liquor, which is apparently only under one clause of Section 31. So, the judgment cited by learned counsel for petitioner is not attracted to the facts of instant cases.
24.Learned counsel for petitioners further placed reliance on the case of Mirpurkhas Sugar Mills Ltd. supra. I have gone through the said judgment wherein imposition of export tax/toll tax by Local Councils on sugar leaving physical limits of their jurisdiction for delivery on destinations in other provinces, was challenged on the touchstone of Article 151 of the Constitution. It was held that imposition of said export will amount to restraint of freedom of trade, commerce or intercourse between one province and another. But in the case in hand, no such tax has been levied which may lead to infer that Provincial Government has imposed any restriction on the freedom of trade in Pakistan.
25.While relying on the case Messrs H.A. Rahim and Sons (Pvt.) Ltd. v. Province of Sindh and another (2003 CLC 649), learned counsel for petitioners contends that Article 151(3)(a) of the Constitution prohibited imposition of any restriction by Provincial Legislature in relation to inter-provincial trade i.e. movement of goods from one Province to another and any fiscal measure being a tax or a fee would amount to a restriction on such inter-provincial trade. They contend that any mode of taxation/fiscal measure would impair freedom of trade, commerce and intercourse because tax was a restriction on enjoyment of property and deterrent against free flow of trade.
The afore-referred case is quite distinguishable because in said case, plaintiff challenged vires of Sections 9 and 10 of Sindh Finance Act, 1994 whereby Government had imposed a levy known as 'infrastructure fee'. Impugned levy was directly chargeable on the exit or entry of goods from/in the Province of Sindh. Power to legislate in relation to inter-provincial trade vests with Federation, so it was held in the said case that impugned levy by Provincial Legislature on movement of goods from one Province to another was violative of Item 27 of Federal Legislative List read with Article 142 of the Constitution and was declared unconstitutional.
It has been held by Hon'ble Supreme Court of Pakistan in the case of Pakistan Tobacco Company Ltd. and others supra, that liberal and dynamic interpretation of the word "free" does not mean an unqualified freedom at all in the trade, commerce and intercourse between the Provinces because unchecked freedom in the trade, commerce and intercourse without any reasonable prohibition and restriction would not be beneficial for an orderly society inasmuch as even there would be lack of discipline and the Provincial administration would not be in a position to control trade and commerce of prohibited/contraband articles, therefore, a qualified restriction, if imposed up to the trade had not impeded the flow of trade and commerce, would not tantamount to placing any prohibition or restriction on the trade, commerce and intercourse between the Provinces. But in the instant case, situation is drastically different. The matter of inter-provincial trade is not involved here rather respondent-Government levied duty on the manufacture of spirit, which has not created any restriction on inter-provincial trade. A bare perusal of the contents of impugned Notification makes it clear that levy has been imposed on the manufacture of product i.e. spirit and not on its movement. Therefore, by any stretch of the imagination, it cannot be construed that said notification is creating any hindrance/restriction in the freedom of trade of petitioners, in terms of Article 151 of the Constitution.
26.The stance of petitioners is that levy of Rs.2/- per liter would increase the cost of production and ultimately high price of the product in Punjab, as compared to its price in other Provinces, would damage their business. The mere fact that the local sale of 'spirit' as compared to other Provinces of Pakistan, may have been adversely affected, due to imposition of duty, cannot result in terming the impugned Notification, as adversely affecting the free flow of trade and violative of Article 151 of the Constitution. Reliance can safely be placed on the case of Shree Digvijay Cement Co. Ltd. and others supra. It has been held, in a number of judgments, by the apex Court that unless there must exist prohibition by law and some actual restriction on freedom of trade only then it can be declared to be in violation of the mandate of Article 151 of the Constitution. Reliance can safely be placed on Pakistan Tobacco Company Ltd. and others supra. In my view, this alleged discrimination with regard to levy of impugned duty does not seem to be in favour of petitioners and as such may not be hit by Article 151(3)(b) of the Constitution.
27.Articles 301, 302, 303, 304 and 305 of the Constitution of India deal with the subject of trade, commerce and intercourse, and embody the rule contained in Article 151 of the Constitution of Pakistan. A similar question whether taxing the sales and purchases of tendu leaves at a higher rate than in the neighboring State violates Article 301 by impeding the free trade and commerce in tendu leaves throughout the territory of India, came under consideration before Supreme Court of India in case titled Messrs Vrajlal Manilal and Co. and another v. State of M.P. and another (AIR 1986 SC 1085), wherein it was held that an increase in the rate of tax on a particular commodity cannot per se be said to impede free trade and commerce of that commodity. Said Articles of Indian Constitution are reproduced below:--
"Art. 301. Freedom of trade, commerce and intercourse.---Subject to the other provisions of this Part, trade, commerce and intercourse throughout the territory of India shall be free.
Art. 302. Power of Parliament to impose restrictions on trade, commerce and intercourse.---Parliament may by law impose such restrictions on the freedom of trade, commerce or intercourse between one State and another or within any part of the territory of India as may be required in the public interest.
Art. 303. Restrictions on the legislative powers of the Union and of the States with regard to trade and commerce.---(1) Notwithstanding anything in Article 302, neither Parliament nor the Legislature of a State shall have power to make any law giving, or authorizing the giving of, any preference to one State over another, or making, or authorizing the making of, any discrimination between one State and another, by virtue of any entry relating to trade and commerce in any of the Lists in the Seventh Schedule.
(2) Nothing in clause (1) shall prevent Parliament from making any law giving or authorizing the giving of, any preference or making, or authorizing the making of, any discrimination if it is declared by such law that it is necessary to do so for the purpose of dealing with a situation arising from scarcity of goods in any part of the territory of India.
Art. 304. Restrictions on trade, commerce and intercourse among States.---Notwithstanding anything in Article 301 or Article 303, the Legislature of a State may by law-
(a) impose on goods imported from other States or the Union territories any tax to which similar goods manufactured or produced in that State are subject, so, however, as not to discriminate between goods so imported and goods so manufactured or produced; and
(b) impose such reasonable restrictions on the freedom of trade, commerce or intercourse with or within that State as may be required in the public interest:
Provided that no Bill or amendment for the purposes of clause (b) shall be introduced or moved in the Legislature of a State without the previous sanction of the President.
Art. 305. Saving of existing laws and laws providing for State monopolies.---Nothing in Articles 301 and 303 shall affect the provisions of any existing law except insofar as the President may by order otherwise direct, and nothing in Article 301 shall affect the operation of any law made before the commencement of the Constitution (Fourth Amendment) Act, 1955, insofar as it relates to, or prevent Parliament or the Legislature of a State from making any law relating to, any such matter as is referred to in sub-clause (ii) of clause 6 of Article 19."
In State of Kerala v. A.B. Abdul Kadir (1970) 1 SCR 700: AIR 1970 SC 1912), after referring to and explaining the earlier decisions on this subject, Supreme Court of India held at page 710 of S.C.R. and page 1918 of AIR as follows:--
"As we have already pointed out it is well established by numerous authorities of this Court that only such restrictions or impediments which directly and immediately impede the free flow of trade, commerce and intercourse fall within the prohibition imposed by Art. 301. A tax may in certain cases directly and immediately restrict or hamper the flow of trade, but every imposition of tax does not do so. Every case must be judged on its own facts and in its own setting of time and circumstances."
28.Even otherwise, contention of the petitioners is that disparity in rate of the product, arrived at after levy of said duty, is affecting the inter-provincial trade. Apparently this assertion is based on conjectures and surmises because petitioners have brought nothing on record in shape of evidence, which may show any damage or loss to inter-provincial trade. Similar proposition came up for hearing before Hon'ble Supreme Court of Pakistan in the case of Shahtaj Sugar Mills supra, wherein it was held in para 10 at page 2500, as under:--
"Now adverting to next contention concerning possible adverse economic effect on inter-provincial trade resulting from disparity with regard to sugarcane development cess, in the Provinces of N.W.F.P. and Punjab. Suffice it to observe that absolutely no material or details have been mentioned or placed on record, which may even approximately disclose quantum of sugarcane transported from one province to another and its consumption in the Sugar Mills/Factories, from different areas. The apprehension of economic imbalance or disadvantage toward inter-provincial trade is apparently based upon propitiates or imagination, therefore, without existence of tangible material and substantial reasons, possibility of loss or damage relating to inter-provincial trade cannot be assumed as basis for violating or affecting any legal right ."
29.The petitioners have laid much stress on the exemption of ethanol from levy of any duty on the ground that it is an export product and thereby protected under order 6.12(3) (f) of Chapter 6 of the Punjab Liquor Import, Export, Transport and Possession Orders. This stance of petitioners is misconceived as levy of impugned duty by its very nature, is altogether distinct from levy of export tax, which is an inland tax leviable on manufacturers within the country or licensed for specific activities. It is not a border tax and does not purport to have any nexus with the export of ethanol. The impugned levy has been imposed regardless of the ultimate destination of the excisable article, but is primarily leviable on the quantum of its manufacture, therefore, the aforesaid immunity to pay tax is not relevant and of no help to petitioners.
30.The petitioners have challenged not only said provision of law and Notification but also the impugned SCN, which reads as "As you have already been conveyed through above mentioned letters that the Government of the Punjab has imposed duty on manufactured spirit @ Rs.2 per liter. Challan forms for payment of duty have already been provided to you but the payment has not yet been deposited into the Government treasury. You are, therefore, directed to explain your position within 2 days otherwise the duty will be recovered through coercive measures under Land Revenue Act, 1967.", on the touchstone of Articles 18 and 25 of the Constitution. It has been argued that Constitution guarantees right of every citizen to enter upon any lawful profession or occupation and to conduct any lawful trade or business and all citizens are entitled to enjoy equal protection of law but levy of impugned duty and that too at a high rate would deprive them to continue their lawful business, which is the source to earn their livelihood. Article 18 of the Constitution starts with the words "subject to such qualifications", which means that Legislature can impose certain conditions to carry on a lawful business. The respondents through impugned Notification have not restrained petitioners from their lawful business but only imposed a certain duty on a specific product being manufactured by them.
31.Legislature is competent to classify persons or properties into different categories subject to different rates of tax. If the same class of persons is subjected to an incidence of taxation, resulting in inequality amongst them, is liable to be struck down on account of infringement of the fundamental right of equality. But, in the present case, there is no discrimination caused by respondents to the petitioners as the impugned Notification applies on all the manufacturers of spirit throughout Punjab.
Interpretation of Article 14 of the Indian Constitution, which is parallel to Article 25 of the Constitution of Pakistan, has been provided in the case of F. N. Balsara supra, in the following lines:--
"19. I now come to S.39 of the Act which has been impugned on the ground that it offends against Art.14 of the Constitution which states that "the State shall not deny to any person equality before the law or the equal protection of the laws within the territory of India". The meaning and scope of this Article has been fully discussed in the case of 'Chiranjit Lal v. The Union of India, 1950 S C R 869, and the principles laid down in that case may be summarized as follows:
"1. The presumption is always in favour of the constitutionality of an enactment, since it must be assumed that the legislature understands and correctly appreciates the needs of its own people, that its laws are directed to problems made manifest by experience and its discriminations are based on adequate grounds.
2. The presumption may be rebutted in certain cases by showing that on the face of the statute, there is no classification at all and no difference peculiar to any individual or class and not applicable to any other individual or class, and yet the law hits only a particular individual or class.
3. The principle of equality does not mean that every law must have universal application for all persons who are not by nature, attainment or circumstances in the same position, and the varying needs of different classes of persons often require separate treatment.
4. The principle does not take away from the State the power of classifying persons for legitimate purposes.
5. Every classification is in some degree likely to produce some inequality, and mere production of inequality is not enough.
6. If a law deals equally with members of a well-defined class, it is not obnoxious and it is not open to the charge of denial of equal protection on the ground that it has no application to other persons.
7. While reasonable classification is permissible, such classification must be based upon some real and substantial distinction bearing a reasonable and must relation to the object sought to be attained, and the classification cannot be made arbitrarily and without any substantial basis."
32.While dealing with the subject of 'discrimination' in case of Messrs Elahi Cotton Mills Ltd. and others supra, it was held that tests of the vice of discrimination in a taxing law are less rigorous. If there is equality and uniformity within each group founded on intelligible differentia having a rational nexus with the object sought to be achieved by the law, the constitutional mandate that a law should not be discriminatory is fulfilled. It was further held that policy of a tax, in its operation may result in hardships or advantages or disadvantages to individual assessees, which are accidental and inevitable but simpliciter such a situation will not constitute violation of any of the fundamental rights. It was guided that judicial approach should be dynamic rather than static, pragmatic and not pedantic and elastic rather than rigid. 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 presumption in favour of constitutionality of the legislative enactments unless ex facie it is violative of a constitutional provision.
Furthermore, neither discrimination can be pleaded in fiscal statutes nor such statute can be struck down at the touchstone of Article 25 of the Constitution. The equal protection of law does not envisage that every citizen is treated alike in all circumstances, but it contemplates that persons similarly situated or similarly placed are to be treated alike. In the instant case, petitioners have failed to establish any discrimination amongst manufactures of 'spirit' throughout Punjab, as impugned Notification is applicable on all the manufactures in Punjab. Duty has been levied under lawful authority vested in Provincial Government, in terms of the Punjab Excise Act, 1914, and is in the public interest to raise public revenue.
Even otherwise, it was also held in the case of Haji Muhammad Sadiq and others supra that a company incorporated under the Companies Act, 1913 or the Companies Ordinance, 1984 does not fall within the definition of a citizen. It was held that incorporated bodies/ companies do 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. Hon'ble Supreme Court of Pakistan also laid down distinction between the expression of a person and a citizen by saying:--
" .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."
It was also held that:--
" .Undoubtedly the companies have no 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 "
33.The petitioners have also raised plea that such condition/levy was not available at the time when license was issued in their favour, so it is not sustainable. Similar question came up for hearing before Hon'ble Supreme Court of Pakistan in the cases of Muhammad Ashraf and others supra, and Haji Muhammad Sadiq and others supra, wherein it was held that abstention of authority 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. Principle of promissory estoppel does not arise because 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. The operation of doctrine of promissory estoppel is subject to several limitations including the one that it cannot be invoked against the legislature or the laws framed by it because legislature cannot make a representation.
Thus, it becomes very clear that non-imposition of impugned levy at the time of issuance of license by the respondents does not create an embargo upon the Provincial Government to levy duty on excisable items at a subsequent time, in view of the fact that Provincial Government is competent under Section 31 of the Act, 1914. The respondents have issued D-2 licenses in favour of petitioners to manufacture spirit and the petitioners are liable to pay excise duty levied on said product, which in no way amounts to an infringement of their fundamental rights.
34.In the case of Messrs Elahi Cotton Mills Ltd. supra, the Hon'ble apex Court laid down that once the Court finds that a fiscal statute does not suffer from any constitutional infirmity, it is not supposed to entangle itself with the technical questions as to the scope and modality of its working etc. Such questions pre-eminently deserve to be decided by the Government which possesses expert's services and the relevant information which necessitated imposition of the tax involved unless the same suffers from any legal infirmity which may warrant interference by the Court.
35.Furthermore, the only consideration, while construing a taxing measure for determining its constitutional validity, is whether the legislation under challenge is permissible by the Constitution. The reasonableness or otherwise of such statute is a matter of legislative policy and it is not for the Courts for adjudication. It was so commented by N.S. Bindra in his book "Interpretation of Statutes" (7th Edition) at page 771 and was reiterated and relied upon in the cases of Anoud Power Generation Limited and others v. Federation of Pakistan and others (PLD 2001 SC 340) and Haji Muhammad Sadiq and others supra.
36.Preamble to an Act is an introductory statement that explains the purpose and underlying philosophy of that Act. Its object is to clarify the meaning or purpose of the operative part of the text in case of an ambiguity or dispute. However, preamble prevails only where it provides a clear and definite interpretation whereas the meaning of the enacting words is indefinite or unclear. Characteristics of Preamble have also been noted in the case of Mohd. Bin Salem supra, whose relevant portion says:--
"It may be that the preamble to an Act as observed in 'Shamshir Ali's case (A)' gives an indication of the legislative intent of the instrument which is being construed but where radical amendments are effected in an Act showing a different intention to that expressed in the preamble, the fact that the preamble has not been amended does not in any way indicate that the legislative intention is unchanged .
Where the wording or object of a Statute given rise to doubts as to its proper construction the preamble affords a key to it. Though a preamble can throw a useful light as to what a Statute intends, it is a well settled rule that it cannot for any purpose control, restrict, extend, alter, qualify, detract from or add to the provisions where those provisions are expressed in clear and unmistakable terms."
37.Preamble of the Punjab Excise Act, 1914, reads as under:--
"Whereas it is expedient to consolidate and amend the law in the Punjab relating to the import, export, transport, manufacture, sale and possession of intoxicating liquor and of intoxicating drugs."
The object of promulgation of the Act, 1914, is very much clear from its Preamble. Clause (c) of Section 31 of the Act, 1914, authorizes the Provincial Government to levy duty on the manufacture of excisable item at such rate/rates determined by it, which provision is thus, true manifestation of purpose of the said Act. The Punjab Rules of Business, 2011, make it the duty of the Excise and Taxation Department to assess and collect taxes/duties on manufacturing, import, export of liquor, vend fee on retail sale of liquor and fees on grant and renewal of licenses/ permits for liquor, as provided in the Second Schedule.
38.The word 'intoxicant' as defined in Section 3(12-a) of the Act means any liquor or intoxicating drug. The Act also empowers Provincial Government to issue license for establishment of distilleries and breweries for the manufacture of intoxicants otherwise prohibited. Admittedly, the petitioners obtained licenses to establish distilleries for the manufacture of spirit, under Section 21 of the Act, 1914, and in this way, are bound to abide by the restrictions and conditions imposed by the Provincial Government. It is argued on behalf of petitioners that duty cannot be levied under the provisions of the Act, 1914, as it confers permission/license to petitioners to manufacture ethanol in their capacity as distilleries, but this argument is not sustainable as petitioners are stopped to raise such objection. They cannot choose to reap from benefit of the license and avoid incidental disadvantages arising therefrom. I have gone through the contents of Distillery License and at Condition No.1 it has specifically been mentioned that licensee shall observe the provisions of the Punjab Excise Act, 1 of 1914 and rules made thereunder, and all rules made under any other law for the time being in force applicable to the manufacture, issue and sale of Spirit. Petitioners are estopped from approbating and reprobating in terms of what they are subject to, when their own words and conduct are illustrative of their having taken advantage of the Act to commence business as distilleries. A license does not confer a right rather it creates a corresponding duty on the part of beneficiary to regulate the manufacturing process as per law.
39.It was the argument of petitioners that respondents have already charged duty on their product vide Notification No.S.O. (Excise) E&T-II-7/2005 dated 30.06.2005, therefore, they cannot charge further duty vide impugned Notification as it would amount to double taxation, which is not permissible. Notification dated 30.06.2005 reads as under:--
"No. S.O.(Excise)E&T-II-7/2005. In exercise of the powers conferred by sections 31 and 32 of the Punjab Excise Act, 1914 (I of 1914), the Government of the Punjab, in partial supersession of Notification No SO (Excise) E&T-II-22-97 dated 7-9-1998 and in further partial suppression of the existing rates provided in the Punjab Fiscal Orders contained in Chapter 2 of the Punjab Excise Manual Volume-II, is pleased to prescribe following rate if Excise Duty with effect from 1st day of July, 2005:--
Duty on rectified spiritRs. 75/- per LP Gallon "
As submitted by the learned Additional Advocate General, Punjab, Notification dated 30.06.2005 was issued to impose duty upon the purchaser/consumer of spirit produced by the distilleries. The petitioners have neither any nexus with the said tax nor they are under any burden of the same, which is basically on the consumption of the product. It is to be paid by the holders of permits, who purchase it for specific activities for a range of varied rates in accordance with the use specified in the permit, e.g. homeopathic medicines, varnish, perfumes, etc. In the instant case, the Provincial Government has imposed duty on an excisable item, as it is evident from the contents of Section 31 of the Act, 1914. Therefore, the legislature cannot be estopped from issuing notification for the purpose of imposition 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 faced by the people, which the legislature in its wisdom through legislation seeks to resolve. Therefore, there is no estoppel against Provincial Government to levy duty on excisable items. This power of legislature cannot be curtailed. Steering thought can be gathered from the cases of Haji Muhammad Sadiq and others supra, Messrs Elahi Cotton Mills Ltd. and others v. Federation of Pakistan through Secretary M/o Finance, Islamabad and 6 others (PLD 1997 SC 582), Molasses Trading and Export (Pvt.) Ltd. supra and Government of Pakistan v. Muhammad Ashraf (PLD 1993 SC 176).
40.It is stance of petitioners that the impugned Notification has been issued by the authority under section 31 of the Act, without describing any special procedure or manner for recovery of said duty from the manufacturers. Suffice it to say that after issuance of said notification, respondent No.5 issued SCNs to petitioners requiring them to render explanation for non-payment of said duty with specific indication that default in payment of said duty would invite coercive measures against them. This shows that proper opportunity of hearing has been offered to petitioners before taking adverse action against them. Thus, it is clear that due process and principles of natural justice have also been observed by respondents. Even otherwise, interference at the stage of issuance of Show-Cause Notice retards the adjudicatory process under the law. Reference can be made to Mughal-e-Azam Banquet Complex v. Federation of Pakistan and others (2011 PTD 2260):--
"6. Interference at the stage of issuance of Show-Cause Notice stultifies and retards the adjudicatory process provided under the relevant law, in this case Ordinance, 2000 read with Sales Tax Act, 1990. This unduly stalls the investigative machinery of the quasi judicial authorities and hampers discharge of their statutory duties which are to be done with a free hand independent from outside control. The petitioner has an opportunity to place its case before the concerned authority who is competent to look into the factual receipts besides there are elaborate procedures by way of appeal or revision against order passed in such proceedings. The petitioner has already filed its replies to the Show-Cause Notice and the matter is pending adjudication before the concerned authority.
7. Petitioner, however, can invoke the constitutional jurisdiction of this Court, if the Show-Cause Notice is not issued by a competent authority or the liability in the Show Cause Notice is palpably unlawful and without jurisdiction. This is not so in the present case. Show-Cause Notice is admittedly issued by a competent authority and its contents do not prima facie reveal that the liability is ultra vires the law. In fact the allegations raised in the Show-Cause Notices requires factual inquiry in order to determine whether the petitioner renders services as Caterers."
41.Guidelines for interpretation of a taxing statute have been detailed by Hon'ble Supreme Court of Pakistan in the case of Messrs Hashwani Hotel Ltd. supra. According to said judgment, the first and the foremost principle of interpretation is that words are to be taken in their literal meaning. The plain ordinary meaning of the word is to be adopted in construing a document. There have to be special circumstances where this principle is to be deviated and certain words have to be interpreted differently than their plain meanings with reference to the context. In a taxing statute, as in any other statute, there is no reason to depart from the general rule that words used in a statute must first be given their ordinary and natural meaning. It is only when such an ordinary meaning does not make sense that resort can be made to discovering their appropriate meanings. While interpreting the taxing statute the Court looks to the words of the statute and interpret them in the light of what is clearly expressed. It cannot import provisions in the statute so as to support assumed deficiency.
42.In the case of Messrs Bisvil Spinners Ltd. supra, the principle of interpretation of a taxing statute as expressed in Maxwell on the Interpretation of Statutes, 12th Edition, p.256 has been mentioned, which reads as under:-
"Statutes which impose pecuniary burdens are subject to the same rule of strict construction. It is well settled rule that all charges upon the subject must be imposed by clear and unambiguous language, because in some degree they operate as penalties: the subject is to be taxed unless the language of the statute clearly imposes obligation and language must not be constrained only tax a transaction which, had the legislature thought to it, would have been covered by appropriate words. "In a taxing Act," said Rowlatt B.J., "one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used ."
43.In the case of Sohail Jute Mills Ltd. and others supra, the principle laid down by Lord Cairns in Charles James Partington v. The Attorney General (1869) L.R.Vol.IV, H.L.100), has been reiterated in the following words:-
" .as I understand the principle of all fiscal legislation, it is this: If a person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently, within the spirit of the law the case might otherwise appear to be. In other words, if there be admissible, in any statute, what is called an equitable construction, certainly such a construction is not admissible in a taxing statute, where you can simply adhere to the words of the statute."
44.The concept of interpretation of statute in fiscal legislation is also available in the case of B. W. M. Abdur Rahman, Manager, Taki Bara Taraf Wards Estate supra, as below:-
"But indeed, in determining whether or not a particular matter, comes within a taxing statute, it is only the letter of the law which must be looked to. This ample authority for the proposition that in a fiscal case, form is of primary importance, the principle being that if the person sought to be taxed comes within letter of the law, he must be taxed, however great a hardship may thereby be involved but on the other hand if the Crown cannot bring the subject within the letter of the law he is free, however apparent it may be that his case is within what might be called the spirit of the Law. As was said by Rowlatt, J., in Cap Brandy Syndicate v. Inland Revenue Commissioner ((1921) K.B. 64).
45.As observed above, issue involved in the present case, relates to the legislative competence of Provincial Legislature. When vires of any statute are challenged, strong presumption as to legislative competence and validity of statute is always attached. Burden is on the person, challenging the vires of any statute to show that, the impugned statute is beyond the legislative competence or, is in violation of any constitutional provision or guarantee or, in negation of rights guaranteed under the Constitution. Reliance is placed on the cases of Messrs Quetta Textile Mills Limited through Chief Executive supra and Pakistan Flour Mills Association and another supra.
46.In the case of F. N. Balsara supra, it has been held as under:--
" .It is well settled that the validity of an Act is not affected if it incidentally trenches on matters outside the authorized field, and therefore it is necessary to inquire in each case what is the pith and substance of the Act impugned. If the Act, when so viewed, substantially falls within the powers expressly conferred upon the Legislature which enacted it, then it cannot be held to be invalid, merely because it incidentally encroaches on matters which have been assigned to another legislature. This was emphasized very clearly in 'Gallagher v. Lynn', 1937 A C 863 at p. 870, in these words: "It is well established that you are to look at the 'true nature and character of the legislation: 'Russell v. The Queen', 1882 7 A. C. 829' 'the pith and substance of the legislation'.
The same principle was reiterated by the Federal Court in 'Ralla Ram v. The Province of East Punjab', 1948 F C R 207 at p. 225 and was also referred to in 'Miss Kishori Chetty v. The King' 1949 F C R 650 at p. 655 in the following passage:
"It may be that a general adoption of the policy of prohibition by the Provinces will lead to a fail in the import of foreign liquors and to a consequential diminution of the Central customs revenue, but where the Constitution Act has given to the Provinces legislative power with respect to a certain matter in clear and unambiguous terms, the Court should not deny it to them or impose limitations on its exercise, on such extraneous considerations. It is now well settled that if an enactment according to its true nature, its pith and substance, clearly falls within one of the matters assigned to the Provincial Legislature, it is valid notwithstanding its incidental encroachment on a Federal subject."
47.So far as constitutional validity of Section 31 of the Act, 1914, is concerned, in case of Haji Muhammad Sadiq and others supra, principle to declare a law unconstitutional, as laid down by N.S. Bindra in his book on Interpretation of Statutes fourth edition at page 977, has been reproduced 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."
It was held in the judgment that:--
" 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) ."
48.Furthermore, Court could not sit in judgment over the wisdom of the legislature and strike it down, except on two grounds, namely lack of legislative competence and violation of any of the fundamental rights guaranteed in the Constitution. The petitioners have failed to establish any of said grounds which may provide basis to strike down Section 31 of the Act, 1914, and subsequent notification. Presumption is always in favour of constitutionality of an enactment and law would not be declared unconstitutional, unless the case was so clear to be free from doubt and that too on the basis of said two grounds. No enactment can be struck down just by saying that it was arbitrary and illegal or that the Court thought that it was unjustified. Motive of the legislature in passing a Statute was beyond the scrutiny of Courts coupled with any irregularity of procedure under Article 69 of the Constitution. Propriety, expediency and necessity of a legislative act was to be determined by the legislative authority and not the Courts. Where the validity of the Statute was questioned and there were two interpretations, the one which would make the law valid had to be prepared over the other which would render it void. Reliance is placed on Badshah Gul Wazir v. Govt. of Khyber Pakhtunkhwa (PLD 2014 Peshawar 210) and State of M.P. v. Rakesh Kohli and another (2013 SCMR 34).
49.In the case of Rakesh Kohli supra, it was held by Supreme Court of India that Statute enacted by Parliament or a Provincial legislature could not be declared unconstitutional lightly. Court must be able to hold beyond any iota of doubt that violation of the constitutional provisions was so glaring that the legislative provision under challenge could not stand. The petitioners have not brought on surface any material which may suggest flagrant violation of any of the constitutional provisions.
Likewise Hon'ble Supreme Court, in Lahore Development Authority through D.-G. and others v. Ms. Imrana Tiwana and others (2015 SCMR 1739), while referring to Cooley in his "Treatise on Constitutional Limitations", has summarized the principles of interpretation as follows:--
"I.There is a presumption in favour of constitutionality and a law must not be declared unconstitutional unless the statute is placed next to the Constitution and no way can be found in reconciling the two;
II.Where more than one interpretation is possible, one of which would make the law valid and the other void, the Court must prefer the interpretation which favours validity;
III.A statute must never be declared unconstitutional unless its invalidity is beyond reasonable doubt. A reasonable doubt must be resolved in favour of the statute being valid;
IV.If a case can be decided on other or narrower grounds, the Court will abstain from deciding the constitutional question;
V.The Court will not decide a larger constitutional question than is necessary for the determination of the case;
VI.The Court will not declare a statute unconstitutional on the ground that it violates the spirit of the Constitution unless it also violates the letter of the Constitution;
VII.The Court is not concerned with the wisdom or prudence of the legislation but only with its constitutionality;
VIII. The Court will not strike down statues on principles of republican or democratic government unless those principles are placed beyond legislative encroachment by the Constitution;
IX.Mala fides will not be attributed to the Legislature."
As mentioned in the aforementioned judgment, these principles have been repeatedly articulated by Hon'ble Supreme Court of Pakistan in the cases of Province of East Pakistan v. Sirajul Haq Patwari (PLD 1966 SC 854) at page 954, Mehreen Zaibun Nisa v. Land Commissioner (PLD 1975 SC 397) at page 433, Kaneez Fatima v. Wali Muhammad (PLD 1993 SC 901) at page 915 J, Multiline Associates v. Ardeshir Cowasjee (1995 SCMR 362) at page 381, Ellahi Cotton Mills supra at page 676, Dr. Tariq Nawaz v. Govt. of Pakistan (2000 SCMR 1956) at page 1959-1960, Mian Asif Aslam v. Mian Muhammad Asif (PLD 2001 SC 499) at page 511, Pakistan Muslim League (Q) v. Chief Executive of Pakistan (PLD 2002 SC 994) at pages 1010, 1031, 1032, Pakistan Lawyers Forum v. Federation of Pakistan (PLD 2005 SC 719) at pages 767 V, 773 CC and DD, 774 EE, Messrs Master Foam (Pvt.) Ltd. v. Government of Pakistan (2005 PTD 1537) at page 1556 F, Watan Party v. Federation of Pakistan, (PLD 2006 SC 697) at page 727, Haji Muhammad Sadiq supra at pages 160 L, 168 V, Dr. Mobashir Hassan and others v. Federation of Pakistan and others (PLD 2010 SC 265) at page 349 G and H, and Iqbal Zafar Jhagra v. Federation of Pakistan (2013 SCMR 1337) at page 1379 J.
50.Keeping in view the above discussion, this Court finds no arbitrariness, unreasonableness, irrationality and unconstitutionality in Section 31 read with Sections 3(6) and 3(14) of the Act, 1914, and feels no hesitation to hold that it is a valid piece of legislation. This Court is also of the opinion that Notification dated 03.07.2012 levying duty on the product i.e. spirit being manufactured by petitioners and others, was validly issued on the strength of Section 31 ibid.
51.In view of above discussion, instant petition along with connected petitions, being devoid of merit, are hereby dismissed with no order as to costs.
MH/C-12/C Petition dismissed.