KOHISAR FLOUR MILLS, MANSEHRA and others vs GOVERNMENT OF N.W.F.P.
This matter concerns a petition for leave to appeal against an order of the Peshawar High Court, which dismissed a constitutional challenge to a government notification enhancing the octroi tax on grains. The petitioners, representing flour mills, challenged the government's action of increasing the tax rate from Re.0.50 to Rs.2 per quintal, arguing that the enhancement was ultra vires the N.-W.F.P. Local Government Ordinance, 1979, and the N.-W.F.P. Local Councils (Imposition of Taxes) Rules, 1980. The core legal question is whether the government was legally competent to revise the Octroi Schedule without adhering to the procedural requirements of previous publication and public notice mandated by the Ordinance and the Rules. The High Court had previously held that such procedural compliance was unnecessary as the action did not constitute a 'new' taxation proposal. The Supreme Court, finding a question of law of public importance regarding the scope of the government's power to modify existing tax rates without following statutory procedures, granted leave to appeal to examine the validity of the notification and the applicability of the procedural safeguards prescribed in the relevant legislation.
- Whether the government is legally competent to revise an Octroi Schedule without complying with the procedural requirements of section 135 of the N.-W.F.P. Local Government Ordinance 1979?
- Does the enhancement of an existing tax rate require adherence to the procedures laid down in rules 3, 4, and 5 of the N.-W.F.P. Local Councils (Imposition of Taxes) Rules 1980?
- Section 135, N.-W.F.P. Local Government Ordinance 1979
- Section 134, N.-W.F.P. Local Government Ordinance 1979
- Section 172, N.-W.F.P. Local Government Ordinance 1979
- Article 199, Constitution of Pakistan 1973
- Rule 3, N.-W.F.P. Local Councils (Imposition of Taxes) Rules 1980
- Rule 4, N.-W.F.P. Local Councils (Imposition of Taxes) Rules 1980
- Rule 5, N.-W.F.P. Local Councils (Imposition of Taxes) Rules 1980
- Rule 8, N.-W.F.P. Local Councils (Imposition of Taxes) Rules 1980
ORDER
' MUHAMMAD BASHIR KHAN JEHANGIRI, J.---Leave to appeal has been sought from the order dated 22-3-1995 of the Peshawar High Court, whereby the Constitutional Petition to challenge the revision of octroi tax on grains by the Government of N.-W.F.P., was dismissed.
2. In exercise of powers conferred under section 135 of the N.-W.F.P. Local Government Ordinance (IV of 1979) (hereinafter called as the Ordinance), the Provincial Government authorised the Municipal Corporation, Peshawar and all the Municipal Committees in the Province to collect with effect from 1-7-1992 octroi tax, inter alia, on 'grains' of all kinds including `bajra' and gram black at Re.0.50 per quintal as per Schedule which was to remain enforced for a period of three years. On 30-7-1992, however, the Provincial Government in partial modification of the aforesaid notification enhanced with immediate effect the rate of octroi tax on 'grains' etc. From Re.0.50 per quintal to Rs,2 per quintal. Feeling aggrieved, the petitioners in a joint petition under Article 199 of the Constitution challenged the notification enhancing the octroi tax on 'grains' as per the modified Schedule.
3. The power of levying new taxes or to revise taxes is contained in section 135 of the Ordinance which reads as under:-- "Notification and enforcement of taxes.--(1) All taxes levied by a Local Council shall be notified and shall, unless otherwise directed by Government , be subject to previous publication.
(2) Where a tax is levied or modified, the Local Council shall specify the date for the enforcement thereof, and such tax or the modification shall come into force on such date."
' Again exercising powers conferred under sections 134 and 172 of the Ordinance, the Government of N.-W.F.P. Had framed the N.-W.F.P. Local Councils (Imposition of Taxes) Rules, 1980 (hereinafter referred to as the Rules). Under rule 3 of the Rules, if in its opinion the financial position calls for any change in the tax structure, the Local Council shall formulate taxation proposals and incorporate them in an appendix with the budget. In pursuance of rule 4 of the Rules the Local Council shall issue a public notice in respect of each taxation proposal and shall specify in such notice the prescribed details. After hearing objections under rule 5 of the Rules, the Local Council after considering the report of the sub-Committee shall approve it with or without modification. Then the proposal so sanctioned under the above Rules, shall be notified. Under Rule 8, the Rules shall be, mutatis mutandis, applicable for increasing or reducing the rate of any existing tax."
4. It was contended before the High Court and reiterated before us that the enhancement of the octroi tax on grains was ultra vires section 135 read with the Rules. The learned Division Bench of the High Court, however, repelled the contention holding that as "there was no new taxation proposal, therefore, the process as laid down in section 135 of the Ordinance and rules 3, 4 and 5 of the Rules, was not to be undertaken".
5. Leave to appeal is, therefore, granted to examine the following question of law of public importance:-- "Whether the respondents were legally competent to revise through the impugned notification the Octroi Schedule without complying with the provisions of section 135 of the Ordinance and Rules 3, 4 ad 5 of the Rules"?