YAQOOB MASIH Versus THE STATE

This petition under Article 199 of the Constitution of Islamic Republic of Pakistan, 1973 has been filed by Messrs National Fertilizers .Marketing Limited against Secretary, Local Government and Rural Development Department, Government of Punjab, Zila Council Multan and its contractor in which challenge has been made to the right of respondents Nos.2 and 3 to collect export tax on the fertilizer being manufactured by the petitioner.

2. The only ground as stated in this petition on which the recovery of the export tax has been challenged by the petitioner is that `Fertilizer' stand exempted from payment of export tax imposed by the Zila Council by virtue of letters of the Government of Punjab dated 1st of April, 1984 and 25th of September, 1990. These two letters copies of which have been placed as Annexures `A' and `D' to this petition read as under:‑‑

"I am directed to refer to, your letter No.I. 10‑7/76. F‑Accounts dated 1st March, 1984, on the subject noted above and to state that the Government of the Punjab, Local Government and Rural. Development Department have exempted the fertilizer from the levy of export tax and all the Zila Councils have been directed to comply with the same.

You are requested to please direct the Export Tax Contractor not to charge the export tax on Fertilizer as it is already exempted from the payment of export tax vide this Department memo. of No.SOVI(LG)1‑10/79(11), dated 1‑4‑1989 (copy enclosed):'

3. The learned counsel appearing on behalf of respondent No.3 has however challenged the authority of the Government to exempt any . article from the payment of export tax levied by the Zila Council under the Punjab Local Government Ordinance, 1979. This question was considered by the Supreme Court of Pakistan in a recent case namely Messrs Chandio Tahrani Food Industries (Pvt.) Ltd. v. Mukhtar Ahmad Sheikh and others Civil Appeal No.205‑K of 1991. That case related to Octroi duty and arose under the Sindh Local Government Ordinance, 1979 which is in para materia with the Punjab Local Government Ordinance, 1979. The Supreme Court of Pakistan was, pleased to rule that although the Government has the power under section 62 of the Sindh Local Government Ordinance, 1979 to direct any Council to suspend or abolish the levy of any tax rate, toll or fee but it cannot grant exemption from payment of any tax. In that case the Supreme Court was pleased to notice the distinction between suspension and exemption and quoted with approval the following passage appearing in an earlier judgment of the Supreme Court in Civil Appeal No.39‑K of 1984 decided by the Supreme Court on 8‑11‑1989:‑‑

"In view of the provision of clause (c) of subsection (1), the Government has undoubtedly the power to suspend or abolish the levy of any tax. But in this particular case, as will be noticed, the Government has not suspended or abolished the levy of octroi duty as such imposed by respondent No.5 within its limits. All that the letter of the Deputy Director states is that the octroi duty may not be `imposed' on the material brought by the appellant in the area. of the Union Council for the construction of its factory. This is thus a case of granting exemption from payment of the duty and not one of suspension of the duty. In fact in its application to the Deputy Commissioner, the appellant had not asked for the suspension of the octroi duty but had merely sought exemption from the payment thereof.

The word `suspension' and `exemption' have entirely different connotations.‑ In Black's Law Dictionary fifth edition, the word `suspension' has been translated as a temporary step, a temporary delay, interception, or cessation whereas the word `exemption' has been explained to mean freedom from a general duty or service; immunity from a general burden, tax, or charge, immunity from certain legal obligations or the payment of taxes. In other words when a tax is suspended its very incidence is put in abeyance whereas when exemption is granted, the incidence of the tax remains unaffected but the liability created thereunder is not enforced. Now there is no provision in Ordinance which reserved the power of granting exemption to the Government. The High Court was, therefore, right in taking the view that the Government was not competent to direct respondent No.5 not to impose octroi duty on the material brought within the limits by the appellant for the construction of its factory."

As section 62 of the Sindh Local Government Ordinance, 1979 is analogous to section 139 of the Punjab Local Government Ordinance, 1979, the law declared by the Supreme Court of Pakistan applies with full force and I have no hasitation in declaring that the Government had no power to exempt the fertilizers from payment of export duty.

4. The petitioner has applied for permission to amend this petition by filing an application under Order 6, Rule 17 of the C.P.C. so as to raise a plea that fertilizer is not one of the items on which tax can be charged by the Zila Council as it is not covered by the words `Chemicals and products, paints, Acid and Soda' appearing in item No.17 of the Schedule. The other ground sought to be raised by way of amendment is that the petitioner company which is owned by the Federal Government is not liable to pay any tax in view of Article 165(1) of the Constitution. The third amendment sought is that the tax has not been levied in accordance with the law and the rules on the subject.

5. I am afraid the application filed by the petitioner for amendment cannot be allowed as it would tantamount to permit the petitioner to set up altogether a new case which is inconsistent with the earlier stand taken in the main petition. The original petition proceeded on the ground that the fertilizers have been exempted from payment of export tax by the Provincial Government and for this reason no charge can be made. The fact that these goods were liable to pay export tax but for the exemption was not disputed. The petitioner cannot, therefore, now subsequently be permitted to turn round and set up a case that the tax was not leviable from the very beginning.

6. Be that as it may, there is hardly any force in all these three contentions raised by the learned counsel. Item No.17 of the schedule as reproduced above is sufficient in itself to include fertilizers which are nothing but chemicals. The fact that the Government had proceeded to exempt the fertilizers from the payment of export tax also leads to the conclusion that it was understood by all concerned that the export tax is payable on fertilizers.

7. So far as reference to Article 165 of the Constitution of the Islamic Republic of Pakistan, 1973, is concerned, it is to be seen that this Article exempts the income of Federal Government from payment of any tax leviable under any Act of Provincial Assembly. The petitioner is a company incorporated under the Companies Ordinance, 1984 and though its share may be held by the Government but neither its properties nor the income can be said to be the property or income of the Federal Government. The petitioner is a separate entity and is not even a department of the Government. The learned counsel for the petitioner has relied upon Chairman, District Council, Rahimyar Khan v. United Bank Limited, Rahimyar Khan 1989 C L C 1397 in support of his contention that the petitioner is not liable to pay the export tax. The precedent relied upon by the learned counsel has no applicability as the decision on that case turned upon the interpretation of section 5 of the Banks (Nationalization) Act (XIX of 1974) by virtue of which the ownership of all banks stood transferred to and vested in the Federal Government which is not the case there. Moreover that case related to payment of provincial tax.

8. As regards the last point suffice it to say that nothing has been placed on record to show that the tax has not been levied after following the prescribed procedure. It may be stated that the learned counsel for the petitioner has also referred to the judgment of this Court in Multan Chemicals v. District Council, Lahore 1991 M L D 910 which too has no application. .

For reasons aforesaid there is no force in this petition. It is dismissed, leaving the parties to bear their own costs.

A.A./N‑47/L Petition dismissed.