1994 PLP 2366 (MLD)

KHALIL-UR-REHMAN KHAN, J.

This judgment will dispose of Constitution petitions (W.P.3087-84, 3088-84, 3089-84, 3082-84 and 3521-84) as the question of law involved in all these petitions is one and the same. The petitioners are engaged in manufacture of their respective commodities in their respective factories situate within the limits of Gujrat and Sialkot Municipalities. The material used for manufacture of their respective commodities so imported by them from outside on which apart from customs duty and sales tax/the import tax levied by the Municipal Committees concerned is also statedly being paid. In view of letter No.SO.VI(LG)1(237)/78(PI) dated 5th September, 1983, issued by the Government of Punjab, Local Government and Rural Development Department, Lahore, the Zila Council of Gujrat in its meeting held on 25th January, 1984, considered the imposition of export tax on various goods exported from Gujrat. The Zila Council also invited objections to the said proposal. The petitioner-Company in W.P.3087-84 statedly filed objections before the Chairman, ZiIa Council, Gujrat, urging inter alia that urban and cantonment area having been excluded from the definition of ' Zila' in the panjab Local Government Ordinance, 1979, Zila Council has no jurisdiction to levy any tax on the goods manufactured in and exported from the municipal limits of Gujrat. The Zila Council vide their Resolution No.5 dated 20th January, 1984, resolved .to impose export'tax and leather which is manufactured and exported by the petitioner-Company was mentioned at item No.18 of the schedule attached to the said resolution. Likewise the goods manufactured by the petitioner-Company in W.P.3088-84, namely, Shoes, Leather, Canvas, Rubber, Nylon, Cycle Tyre and Tubes, were mentioned at Nos.13 and 14 of the schedule attached to the abovesaid resolution. Similarly the goods manufactured by the company in W.P. 3089-84, namely Garments., were mentioned at Item No.19-A of the Schedule. The Zila Council, Gujrat, thereafter constructed barriers in the rural area to collect the impugned tax on the goods in transit. The Zila Council, Sialkot, also in view of the aforenoted letter of the Government of the Punjab levied tax on the export of number of items inclusive of locks, the item manufactured by the petitioners in W.P.3282-84, and ceramic goods manufactured by the petitioner in W.P. 3521-84. The Zila Council, Sialkot, before imposing the tax did not invite any objections. The petitioner in all these petitions averred that feeling aggrieved of the imposition of export tax they addressed representations to Governor, and Minister for Revenue, Industry and Local Government, Punjab, objecting to the imposition of export tax but these representations remained unattended. They thus filed these Constitution petitions challenging the legality of imposition of export tax on the goods exported by them from the limits of their respective municipalities.

2. Learned counsel for the petitioners in support of the petitions argued that Zila, Town, Municipality have been separately demarcated as separate entities and the territories of Zila do not extend to these areas and as such the jurisdiction, of the Zila Council extends and prevails only in the area which is neither municipality, nor town or city. It was contended that .section 137 of the Local Government Ordinance, 1979, authorises a Local Council to levy tax enumerated in the Second Schedule to the Ordinance and that according to entry No.7 in Part II of the said Schedule, a Zila Council is competent to impose tax on export of goods and animals from the Zila. It was argued that the goods manufactured within and exported from the limits of Municipal Conunittee which according to the Ordinance have teen excluded from the territories of a Zila and which in its own right as urban local council is competent to impose tax enumerated in Part III of the Second Schedule to the Ordinance, cannot be subjected to export tax by the Zila Council. According to the learned counsel the scheme of the Ordinance and particularly the words from the Zila' in item No.7 of Part II of Second Schedule clearly indicated that the first movement of the goods of export has to be from a place situate within the area of the Zila Council as defined in the Ordinance. It was added that the Municipal Committee being an urban local council stands specifically excluded by the phraseology adopted and the jurisdiction of Zila Council does not extend to it. Learned counsel emphasised that the goods iq transit by rail or road passing through the territories of Zila do not become amenable to- the imposition of export tax by the Zila Council because the goods having left the place of their origin and process of export having already commenced by rail or road, such a movement cannot be considered to he export from the Zila. According to him no tax on transit of such goods is contemplated by law and if transit be interpreted as export then Zila Council, one after the other, falling on the way of the carrier may claim to impose the impugned tax. Learned counsel relied on the following observations from the case of Pakistan Tabacco Co. Ltd. 'v. Karachi Municipal Corporation (PLD 1967 SC 241):- : "Rule 5-B also appears to us to suffer from another defect in so far it also purports to give power to levy a terminal tax at a'concessional rate even on goods purely in transit. The rule as worded empowers the Municipal Corporation to levy a terminal tax on goods 'passing the limits of Karachi Municipal Corporation on their way to and from such factories' situated in the area comprised within the Sindh Industrial Trading Estate, if such goods leave the terminal tax barriers within two hours without changing bulk.," The aforenoted observations, it may be pointed out at this very stage, cannot be cited in support of the proposition canvassed by the learned counsel for the petitioners for the reason that the finding returned was that the terminal tax for the relevant years was imposed illegally and without legal authority. The learned Judges also noted in this case that the respondent-Corporation had before the High Court stated that no terminal tax was in fact levied on any goods which were purely on transit and similar assurance was repeated even before the Supreme Court. The learned Judges, therefore, observed that such a levy would, if made, be illegal even if rule 5-B were to be considered to be still in force. The aforenoted precedent as well as the cases of Pakistan Textile Mill-Owners' Association v. Administrator of Karachi (PLD 1963 SC 137) and The Central India Spinning and Weaving and Manufacturing Co. Ltd. v. The Municipal Committee, Wardha (AIR 1958 SC 341) pertain to imposition of terminal tax. The Indian Supreme Court held that the terminal tax is not leviable on goods which are in transit and are only carried across the limits of municipality because the word 'terminal' must be construed as having reference to ` terminus' and has to he read to connote the idea of something connected with motion and not of an intermediary stage of a journey. In the Indian case there was no loading or unloading done at any point within those limits. In the case of Pakistan Textile Mill-Owners' Association (supra) the goods brought in even by rail were unloaded at railway station or yards within the municipal limits, then re-loaded into other transport vehicles and carried to the mills at Landhi or Mangh0Prr. The learned Judges of the Supreme Court of Pakistan observed that they see no reason to give any artificial meaning to the word 'import' as sought to contended by the learned counsel. They observed that 'import' and `export' in their ordinary and natural sense mean, "to bring into or to take out of or away from a particular place". The introduction of the notion (referred to in the Indian supreme Court judgment) that there must also necessarily be a mixing up in mass with other goods within those limits was considered to impose an unjustifiable restriction upon the meaning of the word 'import'. It was held that in a taxing statute, as in any other statute we see no reason to depart from the 'general rule that words used in a statute must first be given their ordinary and natural meaning and it is only when such an ordinary meaning does not make sense that resort can be made to discovering other appropriate meaning. The learned Judges ultimately held that the word 'terminal' must also have reference to a terminus a quo or ad quern. 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. It was further held in this case that in the case of the goods of the appellants, on the other hand, there is clearly such a terminal point, namely, the rail head, and the tax is levied at such terminal point. Levy of terminal tax brought in by rail was, therefore, not held illegal or ultra vires. The Schedule was, however, held to be invalid and inoperative so far as goods imported by sea and air were concerned but its validity was upheld in respect of goods imported by road and rail.

3. Reference may be made now to the cases noted in the order admitting the petitions. These are Ravi Rayon Ltd. v. Commissioner and Zilla Council (PLD 1978 Lah. 387), Pakistan Tobacco Co. Ltd. v. Karachi Municipal Committee (PLD 1964 Kar. 468) and Kotri Association of Trade and Commerce v. Government of Sindh 1982 CLC 1252. The Kotri Association case is not relevant in the instant case as the pleas raised in this case were neither raised nor determined in the said case. The export tax or Rwangi Mahsool levied under the amended item 6 vide Sindh Ordinance XV of 1981 was held to be not violative of Article 151 of the Constitution for the reason that Article 151 does not restrict a Provincial Legislature to impose restrictions on taxe , on movement of goods within the Province. The case of Pakistan Tabacco Co. (supra) ultimately came before the Supreme Court and decision thereon has already been noticed in one of the paras above. The Lahore case of Ravi Rayon Ltd. (supra) may now be noticed. In this case the contention of the petitioner-Company was that the company being situate within the limits of Sheikhupura Municipality is exempt from paying export tax on its products to the Zila Council by virtue of letter dated 24th May, 1962, from Secretary to the Government of West Pakistan to all Deputy Commissioners etc. forbidding the Zila Councils to levy or collect any tax within the limits of Municipal or Town Committees. This argument was repelled as fallacious with the following observations: "The "The tax in question has been levied not, on the manufacture or use of the petitioner's product within the limits of the Municipality but on the export thereof out of the boundaries of the district. In case the Municipal boundary touches the district boundary at some point, the moment the product crosses the boundary of the district at that point., it is also out of the limits of the Municipality. Otherwise it will already be out of the Municipal limits before it is exported out of the district limits. Therefore, the export tax cannot be said to have been levied within the Municipal limits regardless of whether it is collected at the source or at the district boundary. In my opinion, therefore, the said letter even if assumed to have any legal effect, has no bearing whatsoever on the validity of the export tax in question." It is apparent that the vires of the imposition of export tax was neither urged nor determined in the precedent case in the context of the pleas urged before us in these petitions. We, therefore, do not think that the Ravi Rayon case can be cited as a precedent controverting the pleas raised before us. The pleas as such require to be examined independently and more particularly in the very context in which they have been urged and emphasised.

4. Another development to be noticed is that during the pendency of these .petitions, the Government of Punjab vide Notification No.SOV-5-26/89 dated 24th April, 1990, enforced the Punjab Zila Council (Goods Exit) Tax Rules, 1990. These Rules were promulgated and enforced in exercise of powers conferred upon the Governor under sections 144, 167 and section 137 read with item No.7 of Part II of the Second Schedule of the Punjab Local Government Ordinance, 1979. Said item No.7 reads as under:

"

7. Tax for the export of goods and animals from the Zila. " According to rule 5 of these Rules the Zila Council shall levy and collect Zila Councils (Goods Exit) Tax on export of goods produced within its limits or which during their transit through tae limits of the Zila Council remain therein beyond the time allowed for the purpose under these Rules. Sub-rule (5) of this rule provides that the goods in transit shall be exported from the limits of a Zila Council within 24 hours from their entry into such limits, but the time limit may be extended by the Taxation Officer for such reasonable period as he may deem fit on an application for this purpose being made by the person exporting the goods not later than two hours of the expiry of the time limit for retaining them within the limits of the Zila Council. These Rules were then amended to provide that with effect from first day of July, 1992, a Zila Council shall levy and collect the goods exit tax only on the export of goods produced within its limits, and that for the words 'export tax wherever occurring, the words 'Zila Councils (Goods Exit) Tax' shall be substituted.

5. Since the promulgation of these Rules the matter stands crystallised and apparently the 'export' means export from the Zila Council limits and if the export of commodities or animals does not originate from the limits of the Zila Council, goods exit tax cannot be levied on it. With the enforcement of these Rules the levy and charging of export tax in any case was rendered unauthorised, as the goods exit tax can only be levied on the export of goods produced within the limits of Zila Council. The goods are manufactured by the petitioners in their factories which are admittedly situate within the municipal limits which limits fall outside the limits of the Zila as defined in clause (lx) of subsection (1) of section 3 of the Punjab Local Government Ordinance, 1979, read with definition of 'unban area' given in clause (lii). The position prior to the enforcement of aforesaid Rules in 1990 or the amendment of the Rules in 1992, would not be different. In fact in our view item No.7 of Second Schedule (tax for the export of goods and animals from the Zila) stands interpreted and clarified by the aforenoted Rules themselves. "Export of goods and animals from the Zila' necessarily connotes taking out of or away from the Zila. This taking out of the goods thus must originate from a place situate within the limits of the Zila. It is obvious if the journey has commenced from a territory outside the limits of the Zila then the goods arriving within the limits of the Zila would imply import into the limits of the Zila for use or consumption or if these are not to remain within the limits and still have to carryon its journey outside the said limits the said goods would be merely in transit. Item 7 of Second Schedule of the Ordinance does not contemplate a tax on goods in transit. The power to collect a tax on the goods which are being transported by road or rail for the reason that some of the territories of the Zila happen to fall in the way of the carrier cannot be spelled out from item No.7 of the Second Schedule. The words ' from the Zila' do not mean and imply passing through the Zila. The word 'from' as defined in the Black's Law Dictionary, means starting point of a place, time or condition; a starting point of motion, noting the point. of departure, origin, etc. The starting point for the export of goods being admittedly from a place within the limits of the respective municipalities export of these commodities originates there from and by no stretch of imagination such an export can be considered to be an export from the Zila.

6. For all these reasons we are of the considered view that export of goods from the factories of the petitioners situate within the limits of the municipalities cannot be legally subjected to the so-called export tax void by the respondent Zila Councils. The imposition of the export tax impugned resolutions is, therefore, declared to be illegal and without lawful authority. The amount of export tax recovered, if any, shall be refunded to the petitioners. It may be added that while ' admitting these petitions a direction was passed to the effect that the amount of export tax may be recovered but security shall be furnished by the Zila Councils to return the same in case the objection succeeds and that the Zila Councils shall also invest the amount in some Government Security. The securities shall be encashed and the amount thereof refunded, alongwith profit, if any, to the petitioners. As the amount already paid is to be received with profit, there will be no order as to cost. M.B.A./H-136/L Petition accepted.