ZILA COUNCIL, JHELUM Versus I.C.I. PAKISTAN LTD. (FORMERLY ICI PAKISTAN MANUFACTURERS LIMITED), KHEWRA, DISTRICT JHELUM

1. WALI MUHAMMAD KHAN, J. ‑‑‑Zila Council, Jhelum, appellant, through leave of the Court calls in question the judgment dated 27‑11‑1990 passed by the Lahore High Court, Rawalpindi Bench, whereby the Writ Petition No.186/87 filed by I.C.I. Pakistan Limited, respondent No.1 herein, was. accepted and the Notification dated 30‑6‑1985 passed by the appellant with regard to the imposition of Export Tax on soda ash being manufactured by respondent 1 was declared as without lawful authority and of no legal effect and as a necessary corollary thereto the order of the Commissioner, Rawalpindi Division was also set aside as being arbitrary and illegal. The leave granting order is as follows:‑‑‑

2. "The learned Single Judge held that the competence of the Zilla Council to levy export tax did not extend to urban areas and that while imposing the said tax the petitioner did not follow the relevant rules. It is contended on behalf of the petitioner that the finding of the learned Judge on both the questions was unsustainable.

3. After hearing the learned counsel for the parties, we are of the opinion that the contentions raised on behalf of the petitioner need examination. Leave to appeal is granted."

4. The undisputed facts of the case are that the respondent Company manufactures soda ash having its plant within the territorial limits of Municipal Committee, Khewra, District Jhelum. The appellant vide Notification No.ZC.1/T‑84/773, dated 22‑3‑1984 levied tax on the export of goods and animals from its limits on several items including soda ash which was published in the Punjab Gazette dated 19‑4‑1984 and the rate of tax on soda ash was fixed at Rs.10 per ton. This levy was challenged by the respondent before the 'Commissioner, but during the pendency of, the said appeal, the appellant modified the rate of tax on other items other than soda ash vide Notification dated 25‑5‑1985 and the respondent‑Company did not pursue its appeal. Later on the Punjab Government framed Model Tax Schedule wherein the rate of export tax on soda ash was reduced from Rs.10 per ton to Rs.50 per truck, in consequence whereof, the appellant modified the export tax and brought it at par with the Model Tax Schedule vide notification dated 30‑6‑1985. The respondent again questioned this notification through an appeal which was dismissed by the Commissioner vide order dated 9‑4‑1987 giving rise to the filing of the writ petition, the decision wehereof is impugned herein.

5. We have heard Mirza Anwar Baig, Advocate, for the appellant, Mr. Shahid Hamid, Advocate, for respondent No.1, and have perused the record of the case.

6. Challenge to the imposition of the tax on soda ash is made on two‑fold grounds, one, that the manufacture of the soda ash being made in the territorial limits of Municipal Committee, Khewra falling outside the jurisdiction of the Zila Council, Jhelum, the appellant could not legally levy tax thereon, and two, that the necessary formalities prerequisite for the imposition of tax were not complied with and on this score too the notification is without lawful authority and of no legal effect.

7. There is no dispute between the parties so far as the location of the plant in question is concerned and the same is admittedly within the limits of Municipal Committee and not within the limits of Zila Council. It is also not the case of the appellant that soda ash is also being manufactured by other persons having their plant within the limits of Zila Council and as such the levy of tax in question can only affect the respondent at the moment and none else. The case of the appellant, however, is that the goods crossing their Terminal limits are liable to pay export tax if they find mention in the schedule of items liable to export tax irrespective of the fact whether they arc produced or manufactured within the limits of Zila Council or imported into it from other local councils situated within their boundaries. The learned counsel for the respondent, on the other hand, strenuously argued that the Zila Council can levy tax only on items produced or manufactured within their limits and that they have no jurisdiction to levy export tax on goods produced/manufactured elsewhere which are only in transit for export to other places in the country.

8. To resolve the controversy between the parties it would be profitable to reproduce hereunder the relevant provisions of the Punjab Local Government Ordinance, 1979 and the rules framed thereunder.

3. Definitions.‑‑‑(1) In the Ordinance, unless the context otherwise requires:‑‑

(xvi) `local area' means the area under the jurisdiction of a local council.

(xvii) `local council' means a local council constituted under the Ordinance.

9. (xx‑a) `metropolis' means an area declared as such under the Ordinance.

(xxi) `municipality' means an area declared to be a municipality under the Ordinance.

10. (xxiii) `municipal corporation' means a municipal corporation constituted for a city under the Ordinance.

(xli) `rural local council' means a union council, a markaz council or a zila council.

(xlvi) `town committee' means a town committee constituted under the Ordinance.

(li) `union council' means a union council constituted under the Ordinance.

(Iii) `urban area' means a local area of a town, municipality, a city or a metropolis.

(liii) `urban local council' means a town committee, a municipal committee, a municipal corporation or a metropolitan corporation.

(lx) `zila' means a revenue district as notified under the Punjab Land Revenue Act, 1967 (XVII of 1967) but excluding its urban areas and cantonment areas.

(lxi) `zila council' means a zila council constituted under the Ordinance.

CONSTITUTION OF LOCAL COUNCILS

6. Constitution of local councils.‑‑‑(1) As soon as may be, the following local councils shall be constituted:‑‑

(a) a union council for each union;

(aa) a markaz council for each markaz;

(c) a zila council for each zila;

(d) a town committee for each town;

(e) a municipal committee for each municipality;

(f) a municipal corporation for each city;

(g) a metropolitan corporation for each metropolis.

(2) Government may by notification declare any area:

(a) comprising a village or a number of villages, excluding its urban areas and the cantonment areas, to be a union council;

(aa) comprising the area of one or more union councils to be a markaz;

(c) comprising the area of a revenue district; excluding its urban areas and the cantonment areas, to be a zila council;

137. Taxes to be levied. A local council subject to the provisions of any other law may, and, if directed by Government, shall, levy all or any of the taxes enumerated in the second Schedule.

144. Taxation rules.‑‑‑(1) All taxes and other charges levied by a local council shall be imposed, assessed, leased, compounded, administered and regulated in such manner as may be provided by rules.

(2) Rules framed under this section may among other matters provide for the obligation of the tax‑payer and the duties and powers of the officials and other agencies responsible for the assessment and collection of taxes.

THE SECOND SCHEDULE

TAXES TO BE LEVIED BY LOCAL COUNCILS

11. PART‑II

TAXES OF ZILA COUNCILS

12. Tax for the export of goods and animals from the zila

13. THE PUNJAB LOCAL COUNCILS (TAXATION) RULES, 1980,

14. 2.(d) `inhabitant' means any person ordinarily residing or carrying on business or owning or occupying immovable property in the local area.

15. The Government of Punjab vide Notification NOSOV‑5‑26/89 dated 24‑4‑1990 promulgated the Punjab Zila Council (Export Tax) Rules, 1990 and according to its definition `export' means export from the Zila Council limits. Under section 5(1) it is provided that the Zila. Council shall levy and collect export tax on export of goods produced within its limits or which, during their transit through the limits of the Zila Council, beyond the time allowed for the purpose, under these rules.

16. From the perusal of the aforequoted statutory provisions of law it is amply clear that every local council has defined territorial limits within which they have to perform the function/obligation assigned to them by the law and to levy/increase/decrease taxes for the accumulation of funds to meet the requirements of the local council. The taxes and fees leviable by each local council are enumerated in the Second Schedule appended to the Punjab Local Government Ordinance, 1979 and there is no overlapping. The Zila Councils have been empowered to impose tax on the export of goods and animals from the Zila whereas Urban Local Councils are authorised to levy tax on the import of goods and animals in the urban local council for consumption, use or sale therein. The definitions reproduced above leave no room for doubt that the Zila includes the entire revenue district notified under the Punjab Land Revenue Act except the urban and cantonment areas. Obviously Zila Council has jurisdiction over the area comprised in `Zila' as defined in the Ordinance ibid and not beyond its limits viz., the other local councils or municipal and cantonment areas for which separate local bodies i.e. Metropolis Corporations, Municipal Committees, Town Committees, Municipal Corporations and Cantonments Board are constituted.

17. The moot question requiring determination is whether the goods produced in the other local councils and while in transit passing through the Zila Council abutting it can be subjected to export tax while passing through its terminal. This question came up for consideration before this Court as far back as 1963 in case Pakistan Textile Mill‑Owners' Association, Karachi v. Administrator of Karachi PLD 1963 SC 137 wherein it was observed:‑‑

18. "The contention of the learned counsel for the appellants is that in respect of the goods whose ultimate destination is outside the Municipal limits of the Municipality the terminal tax cannot be levied merely on the ground that they pass through the Municipal limits in transit to their ultimate destination. He has sought to support this contention of his by a decision of the Supreme Court of India in the case of The Central India's Spinning, Weaving and Manufacturing Company Limited, The Empress Mills, Nagpur v. The Municipal Committee, Wardha AIR 1958 SC 341, where it was held that the terminal tax `is not leviable on goods which are in transit and are only carried across the limits of the Municipality'; because the word `terminal' must be `construed as having reference to terminus and has to be read to connote the idea of the end of something connected with a motion and not that of an intermediary stage of a journey.'

19. In that case the appellant‑Company transported cotton bales from Yeotmal where it had its Mills to Nagpur by road and vehicles carrying them had to pass through the limits of the Wardha Municipality but did no more than use the road which traversed the said Municipal limits. That was a case purely of goods passing through the Municipal limits. There was no loading or unloading done at any point within those limits.

20. The word `terminal' must also have reference to a terminus a quo or ad quem. Thus goods merely in transit are not liable for such a terminal tax, as their journey has really no terminal point within the Municipal limits."

21. This very proposition of law came up for consideration before a Division Bench of the High Court. of Sindh, Karachi in case Wazir Ali Industries Ltd. v. The Secretary to Government of Sindh 1985 CLC 1843 albeit under the Sindh Local Government Ordinance, 1979, the provisions whereof, more or less, are identical to those of the Punjab Ordinance and it was held that "for the purpose of imposition of toll on the export of goods i.e. Rawangi Mahsool the limits of peoples municipalities and town committees are excluded and, therefore, the levy is ultra vires of the power of the respondents district council." This judgment was followed in a later case by the Division Bench of the same High Court in case Aijaz Ahmed v. District Council, Sukkur 1990 CLC 1367.

22. The Government of Punjab vide Notification dated 24‑4‑1990, referred to above, issued a clarification that `export' means export from the Zila Council limits and to further illustrate it, it was specifically provided in para. 5 that Zila Council shall levy and collect export tax on export of goods produced within its limits or those which during their transit pass through the limits of Zila Council beyond the time allowed for the purpose under the rules.

23. The notification impugned in the writ petition before the High Court was not the original notification levying 'export tax on soda ash but was an amendment thereof in the rate of export tax whereby the rate of tax was, as a matter of fact, reduced. It is borne out from the record that against the original notification respondent No.1 had made representation but later on Withdrew, therefrom and thereby acquiesced in the right of the appellant to impose export tax on soda ash. Thus, respondent No.1 could not have grievance against the impugned notification whereby only the rate was amended.

24. It is the case of respondent No.1 itself that they do not manufacture/produce soda ash within the limits of Zila Council and that they transport their products through the limits of the appellant to the other areas in the country. As per the Notification dated 24‑4‑1990 referred to above, even goods in transit have been declared liable to payment of export tax if they remained in the limits of Zila Council beyond certain time limit which might have been fixed by now. As such, the burden of proof regarding each item of export of soda ash while in transit is on the exporter to satisfy the authorities of the Zila Council at the terminal that the goods are in transit and are being exported within the prescribed time limit. The impugned notification was not without lawful authority and the learned High Court has legally erred in declaring it as such.

25. As regards the objection that the‑ necessary procedural formalities have not been observed in the amending notification in question, suffice it to say, that through the same the rate of export tax was reduced and even if there were some omissions they could not affect the validity of the notification itself. Moreover. respondent No.1 having no business of soda ash within the limits of Zila Council had no cause of action to call in question the impugned notification on technicalities.

26. Resultantly, we accept this appeal, set aside the impugned judgment of the High Court and dismiss Writ Petition No.186 of 1987 filed by respondent No.1. There is no order as to costs.

27. AA./Z‑141/S Appeal accepted.