P L D 1988 Karachi 38 (PLP)

AJMAL MIAN, J.‑‑ By this petition the petitioners have prayed for the following reliefs: "It is therefore, prayed that this Hon'ble Court may be pleased to pass orders as under:‑ (i) Declare that the orders of Respondent No.1 No. SO‑IV/2 (24)/84‑UC (SARI) dated 3‑9‑1986 and dated 13‑9‑1986 being in excess of their powers, bad in law, incompetent, without lawful authority, illegal, mala fidely motivated, inoperative, against the principles of natural justice and have no binding force. (ii) Restrain the Respondents Nos.1 and 2 from acting upon these orders and/or interfering with and disturbing of the vested rights of the petitioner otherwise than terms of executed agreement; and (iii) Grant costs of this petition and pass any other orders as deemed fit in the circumstances."

2. The brief facts leading to the filing of the above petition are that Respondent No.2 i.e.. Union Council Sari, in exercise of power under section 60 of the Sind Local Government Ordinance, 1979, hereinafter referred to as the Ordinance (as amended under Sind Ordinance No. VII of 1982) had sanctioned the Schedule of octroi tax after following the procedure as provided for under the Sind Local Councils (Imposition of Tax) Rules, 1979, hereinafter referred to as the Rules, which was published in the Sind Government Gazette dated 17‑7~1986. The Respondent No.2 resolved to lease out the rights of recovery of octroi tax by public auction. The petitioners gave the highest bid for a sum of Rs.20,10,000 for a period of eleven months and six days effective from 26‑7‑1986. It is the case of the petitioners that in persuance of the above they deposited a sum of Rs.2,01,000 being 10% of the bid money. Respondent No.2 after executing an agreement in favour of the petitioners issued a letter authorising the petitioners to recover octroi with effect from 26‑7‑1986. It appears that Respondent No.3 i.e.. Nooriabad Industries Association approached Respondent No.1 i.e.. Provincial Government which issued impugned order dated 3‑9‑1986 allowing Respondent No.3 to pay a lump sum amount of Rs.20,50,000 for the whole year. The petitioner being aggrieved by. the above order have filed the present petition and have prayed for the above‑quoted reliefs.

3. The above petition has been resisted by Respondents 1 and 3, inasmuch as it has been averred that the above levy of octroi by the aforesaid Sind Government Gazette dated 17‑7‑1986 was illegal in view of the Notification dated 12‑3‑1985 and that Respondent No.2 had no authority to grant the right to recover octroi to the petitioner under the agreement without the approval of Respondent No. l. Whereas respondent No.2 has supported the above petition at the time of the arguments.

4. Mr. Rasool Bux Unar learned counsel for the petitioners in support of the above petition has urged as follows: (i) That after the amendment of Section 60 of the Ordinance by Sind Ordinance No. VII of 1982, Respondent No.2 'was competent to levy the octroi through the aforesaid Gazette dated 17‑7'‑1986 without the approval of Respondent No. l. (ii) That in view of the proviso in Rule 3 of the Rules the Respondent No. I's Notification dated 12‑3‑1985 could not have prevented the petitioner to levy octroi after the expiry of six months. (iii) That the action of the Respondent No.1 to quash the resolution of granting the contract for the right to collect octroi and to grant the same to respondent No.3 is illegal and without jurisdiction. On the other hand Mr. Abdul Rahim Kazi, learned Additional Advocate‑General. Sind and Mr. H. A. Rehmani appearing for respondents 1 and 3 respectively have contended as under: (i) That in view of Rule 7 of the Rules, the petitioners were not competent to levy the octroi without the sanction of the Respondent No. l. (ii) That since Respondent No.1's Notification dated 12‑3‑1985 was operative till further orders. the petitioners could not have imposed the octroi without the withdrawal of the above Notification by Respondent No.1. (iii) That under Rule 225 of the West Pakistan Municipal Committees Octroi Rules, 1964 (hereinafter referred to as the Octroi Rules), prior approval of the Government is required for leasing out the right to recover octroi by Respondent No.2 and the subsequent approval of the controlling authorities required within 30 days, and since this was not done, the contract awarded to the petitioner by respondent No.2 was in violation of the Rules and' was illegal. (iv) That since under section 53 of the Ordinance the Provincial Government has supervisory power and control over the working of Respondent No.2, the impugned order is legal. Mr. H.A. Rehmani in addition to the above submissions has also submitted that under Rule 105 of the Octroi Rules, the Respondent No.1 could have compounded the octroi with Respondent No.3 in the form of charging a lump sum of Rs.20,50,000 instead of charging octroi on each consignment of the goods imported within the octroi limits for consumption, use or sale and, therefore, the impugned order was legal.

5. Adverting to the first submission of the learned council for the parties, it may be observed that by the Sind Local Government (Amendment) Ordinance 1982, Ordinance No.V1I of 1982, inter alia Section 60 of the Ordinance was amended and the words "with the previous sanction of the Government" appearing in subsection (1) of the above section were emitted. In view of the above amendment, subsection (4) of Section 60 was also substituted in the following words: "(4) Where a council levies a tax, rate, toll or fees, it shall specify the date on which such tax, rate, toll or fees shall come into force." There seems to be no doubt that prior to the above amendment in Section 60 of the Ordinance, previous sanction of the Government, for levying any of the taxes, rates, tolls and fees mentioned in', Schedule V to the Ordinance was required but after the above!, amendment the fact is that a council is competent to levy in the prescribed manner all or any of the taxes, rates, tolls and fees, mentioned in the said Schedule V to the Ordinance. However, it was urged by Mr. Abdul Rahim Kazi, learned Additional Advocate‑ General and. Mr. H.A. Rehmani, learned counsel for Respondent No. 3 that since Rule 7 of the Rules has not been omitted or amended, the sanction of the Government was necessary for the levy of octroi in question by in Respondent No.2. It may be observed that Rule 7 provides that where Government has sanctioned the taxation proposal the order of Government shall be notified in the official Gazette and such order shall come into force on and from such date as may be specified in the Notification. On the other hand Mr. Unar has urged that after the amendment of Section 60 of the Ordinance cue above Rule 7 has become redundant To enforce his submission, he has referred to the case of Khawaja Abdul Waheed and another v. Government of the Punjab and another (PLD 1978 Lahore 811, wherein a learned Single Judge of the Lahore High Court which construing Section 138 of ‑ the Punjab Local Government Act (XXXIV of 1975) and Rule 7 of the Pakistan Municipal Committees (Imposition of Taxes) Rules, 1960 which corresponded to Section 60 and the present Rule 7 held that since under above section 138 a Local Council has been authorised to levy all or any of the taxes enumerated in the second Schedule to the said Act, the above rule requiring the sanction of the Government has become redundant. We are inclined to hold that since the legislature has deliberately omitted the words "with the previous sanction of the Government" for subsection (1) of section 60 of the Ordinance and also amended subsection (4) of the said section for empowering a council to specify B the date on which such tax, rate, toll or fee shall come into force, a local council has become competent to levy all or any of the taxes, rates, toll and fees mentioned in Schedule to the Ordinance without the previous sanction of the Government. In this view of the matter, the above Rule 7 being inconsistent with the above‑amended Section 60 of the Ordinance has become redundant and inoperative.

6. It may be advantageous to take up the contention of the learned Additional Advocate‑General Sind Mr. Abdul Rahim Kazi and Mr. H.A. Rehmani learned counsel for respondent No.3 that in view of Respondent No.1's Notification dated 12‑3‑1985 abolishing the octroi in respect of Respondent No.2 Union Council, Respondent No.2 was not competent to levy the octroi in question through the aforesaid Sind Government Gazette dated 17‑7 _ 1986, it may be observed that it may be advantageous to reproduce herein below the above Notification which reads as follows:‑ "No. SOIV‑2 (24) / 84‑U C-(Sari)-- In exercise of powers conferred by clause (c) of subsection (1) of Section 62 of the Sind Local Government Ordinance, 1979, the Government of Sind are pleased to direct that Union Council, Sari, Taluka/ Thano Bula Khan, District Dadu shall abolish, until further orders, the Octroi Tax levied by it vide Notification No. UC/ 204/82 dated 4th February, 1982 on the goods imported within the limits of the Union Council with immediate effect. MANZOORUL HASAN, Secretary, Local Government." It may be noticed that the above Notification was issued under clause (c) of subsection (1) of Section 62 of the Ordinance. It may be pertinent to reproduce the above section 62 which reads as follows: "62. (1) Government may direct any council‑ (a) to levy, any tax, rate, toll or fee which the council is competent to levy under this Ordinance; (b) to increase or reduce any. rate, tax, toll or fee to such extent as may be specified; (c) to suspend or abolish the levy of any tax, rate, toll or fee. (2) If the direction is issued under subsection (1), the Chief Executive of the Council shall, notwithstanding anything contained in this Ordinance, give effect to it by issuing a notification in terms of the direction not later than the date if any, specified by Government in this behalf." A persual of the above‑quoted section indicates that under subsection (1) the Government has been empowered, (a) to levy any tax, rate, toll or fee which the council is competent to levy under the Ordinance; (b) to increase or reduce any rate, tax, toll or fee to such extent as may be specified; (c) to suspend or abolish the levy of any tax, rate, toll or fee. It may also be noticed that under subsection (2) it has been provided that if the direction is issued under the above!( subsection (1), the Chief Executive of the council shall, notwithstanding anything contained in this Ordinance, give effect to it by issuing a Notification in terms of the direction not later than the date, if any, specified by the Government in this behalf. It is, therefore, evident that under clause (c) of subsection (1) of Section 60 the Government was competent to issue the direction of the nature contained in the above‑quoted Notification dated 12‑3‑1985. The question which requires consideration is, as to whether the above direction was to remain in force till the time the Government was to withdraw the above direction or only for a period of six months in terms of Rule 3 of the Rules relied upon by Mr. Unar. In this behalf it may be advantageous to reproduce hereinbelow rule 3 of the rules which reads as follows:‑

113. A council may at any time review its financial position and if in its opinion any change in the tax structure is called for it shall formulate or cause to be formulated a taxation proposal: Provided that no taxation proposal shall be formulated in respect of a tax before the expiry of six months since its imposition, reduction, suspension or abolition." A plain reading of the above‑quoted rule indicates that a council has been authorised at any time to review its financial position and if in its opinion any change in the tax structure is called for it shall formulate or cause to be formulated' a taxation proposal. The proviso of the above rule provides that no taxation proposal shall be formulated in respect of any tax before the expiry of six months since its imposition, reduction, suspension or abolition. It may be pointed out that there is no indication in the above‑quoted Section 60 of the Ordinance as to the period for which the Government direction inter alia as to the abolition is to continue, whereas the above‑quoted rule 3 indicates that a council may formulate a proposal for levy of any tax at any time but in case any tax was abolished the proposal cannot be formulated before the expiry of six months from the date of . abolition. It is, therefore, evident that according to the above rule 3 the order of abolition is to remain operative for six months. We may observe that though Section 60 of the Ordinance has been materially amended by the Sind Ordinance No. VII of 1982 empowering a Court to levy any tax, rate, toll or fee mentioned in Schedule even without the previous sanction of the Government the rules have not been amended. We are inclined to hold that the reasonable interpretation of Section 60 read with Section 62 and rule 3 will be that a council can levy any tax, toll or fee upon the expiry of six months from the publication of a notification under subsection (2) of Section 62 in pursuance of a direction given under clause (c) of subsection (1) of the aforesaid Section 62 for abolition of a tax, rate, toll or fee. In this view of the matter, we are of the view that since more than six months has passed from the' date of issuance of above Notification dated 12‑3‑1985 under clause (c) of subsection (1) of Section 62 of the Ordinance. Respondent No.2 could have imposed the octroi in question through the aforesaid Sind Government Gazette dated 17‑7‑1986 and hence the imposition was legal.

7. This leads us to the question whether Respondent No.2 could grant the contract or lease to the petitioners for the right to recover octroi without previous sanction of the Government in terms of Rule 225 of the Octroi Rules. In order to appreciate the above Rule 225, it may be advantageous to reproduce the above rule which reads as follows: 225. (1) Notwithstanding anything contained in these rules, Municipal Committee may, with the prior approval of Government, lease out by public auction for a period not exceeding one year, the collection of Octroi on such terms and conditions, not inconsistent with the provisions of this Chapter, as may be specified by Government. (2) The acceptance of any bid at an auction conducted under the provisions of sub‑rule (1) shall be subject to confirmation by the Controlling Authority, (3) The Municipal Committee shall, within seven days of the date of auction, submit the bid, accepted at the auction to the Controlling Authority for its confirmation. (4) The Controlling Authority shall, within thirty days after the bid has been submitted to it by the Municipal Committee for confirmation, either confirm the bid or declare that it withholds its confirmation to the bid, provided that if within the aforesaid period of thirty days the Controlling Authority fails to do either of these things, it shall be deemed to have confirmed the bid. (5) Where the Controlling Authority within the period specified in sub‑rule (4), declares that it withholds its confirmation to the bid, the lease of the collection or Octroi shall subject to any direction that may be given by the Government in this behalf under sub‑rule (1) be again put to auction and the provisions of sub‑rules (2), (3) and (4) shall apply to such reduction. (6) The person whose bid has been accepted at the auction shall forthwith deposit with the officer conducting the auction a sum equal to one percentum of the amount of his bid, as security for the performance of his obligations in regard to the Collection of octroi and payment of lease money to the Municipal Committee. The security deposit shall be forthwith refunded to the person making it if the Controlling Authority does not confirm his bid, and where it confirms the bid, the deposit shall be refunded to him after the period for which the collection of Octroi, was leased to him is over and he has paid up all the dues on the Municipal Committee and has duly performed all his obligations in regard to the collection of Octroi. (7) In addition to the securiy deposit referred to in sub‑rule (6), the person whose bid has been accepted and confirmed by the Controlling Authority (hereinafter referred to as the lessee) shall, within seven days of such confirmation deposit with the Municipal Committee, one‑tenth of the amount of his bid, and the balance of the amount of his bid shall be paid by him tc the Municipal Committee in equal monthly instalments (at the close of every month) for 'which the instalment is due. (8) If the lessee fails to pay the ten percentum deposit or any instalment within the time specified in sub‑rule (7), or charges Octroi at a higher rate than that prescribed in the Octroi Schedule for the Municipal Committee, or commits any breach of the provisions of these rule or any term or condition of the agreement which may be entered into by him with the Municipal Committee in regard to the lease of Octroi, the Municipal Committee may, without prejudice to any other action which it may be entitled to take against the lessee under the law or these rules forfeit his security deposit and forthwith cancel his lease." It may be mentioned that the above rule is given in Chapter XXX of t‑he Octroi Rules alongwith Rule 226 which provides for the matters after the grant of lease for recovering octroi. Reverting to the above‑quoted Rule 225, it may be pointed out that sub‑rule (1) of the above rule provides that Municipal Committee may, with the prior approval of Government, lease out by public auction for a period not exceeding one year, the collection of octroi on such terms and conditions, not inconsistent with the provisions of the above Chapter as may be specified by the Government. Whereas sub‑rules (2) to (5) provide submission of bid within 7 days of the date of auction by the Municipal Committee to the Controlling Authority and the approval of the Controlling Authority within 30 days after the bid has been submitted to it by the Municipal Committee for confirmation and failing of the confirmation within the above period of 30 days by the Controlling Authority, it is to be deemed that the bid has been confirmed. Mr. Unar has vehemently urged that after the amendment of Section 60 of the Ordinance which confers the power on a council to levy inter alia octroi without the approval of the Government, the above‑quoted rule 225 has become redundant. His further submission was that the levy includes the manner of recovery. In furtherence of his above submission he has referred to the case of Syed Said Muhammad and another v. The Quetta Municipal Committee and 2 others P L D 1970 Quetta 1, in which a Division Bench of the erstwhile High Court of West Pakistan held that the word 'levy' means both imposition and realisation of tax or fee. On the other hand Mr. H.A. Rehmani has urged that Section 60 of the Ordinance relates to imposition whereas section 64 of the Ordinance pertains to the collection of taxes, and therefore, the former section is not relevant for the purpose of determining the validity of above‑ quotd rule 225 of the octroi rules. We may point out that the octroi rules have been saved under the various Local Government Ordinance which were enforced from time to time including under the present Ordinance in terms of Section

120. It was not even urged by any of the counsel that the above Octroi rules are not ‑saved.

8. The only point for consideration is, as to whether in view of the above amendment in section 60 of the Ordinance, the requirements contained in the above‑quoted rule 225 are dispensed with. In this behalf reference may be made to the case of Arsalla Khan v. Bashir Ahmad Blour and 3 others P L D 1976 Supreme Court 581, in which the facts were that the Peshawar Municipality had been leasing out the collection of octroi by public auction in accordance with rule 225 since 1968. The public auction for collection of octroi for a period of 300 days from 5‑9‑1975 to 30‑6‑1976 was held in the Municipal Hall, Peshawar on 21‑7‑1975. The highest bidder was the appellant's brother, who according to the respondents, was also the appellant's partner. It seems that the above auction was cancelled and the right for the collection of octroi for the above period was re‑auctioned on 30‑8‑1975 and one of the condition of the auction was that the highest bid was subject to the approval of the Commissioner, Peshawar Division. The first respondent's bid of Rs.85,05,000 was the highest but it was not accepted by the Commissioner because the appellant had directly approached the Provincial Minister for Local Self‑ Government with an offer of Rs.88,05,000 and the Minister had directed by his order of 1‑9‑1975 that the said offer should be accepted in the public interest. Respondent No.1 challenged the above order of the Provincial Government in the Peshawar High Court which held that the above order was illegal and mala fide. The matter went before the Hon'ble Supreme Court, wherein the octroi rules were referred to, particularly the above‑quoted rule

225. Their Lordships after quoting the above rule 225 observed as follows: It is clear from this rule that Municipalities are expected to collect Octroi themselves, therefore, they can lease the right to collect it by public auction only with the prior approval of the Provincial Government to which I will refer as the Government. Secondly whilst granting its approval, the Government can impose terms and conditions about the collection of octroi, and it can give similar directions if the lease for the collection of octroi is re‑auctioned under sub‑rule (5), Thirdly, in my humble opinion an implied condition of the Government's approval for auctioning the right to collect octroi is that the auction should be held in a fair and reasonable manner. Lastly, as the rule does not envisage any other method for the collection of octroi, a Municipality has to collect octroi itself or to lease out the right to do so by public auction. No other method of collecting octroi is permissible and that is made very clear by section 56 of the said Ordinance which I will presently examine." Their Lordships also observed as follows: I now turn to the direction in the impugned order that the octroi rights should be leased to the appellant. According to the first respondent, this direction was mala fide whilst according to Mr. Zafar it was in the public interest within the meaning of section 62 because it would have increased Municipal Revenues. There cannot be any doubt that the direction would have increased municipal revenues if it had been implemented. But the question of the bona fides of this direction would be relevant only if the appellant had established that the direction was not ultra vires and the burden of establishing that it was not ultra vires is on the appellant, because as I explained when I examined rule 225, a Municipal Committee has either to collect octroi itself or to lease out the right to collect octroi by a public auction. As a Municipality cannot lease out the right to collect octroi by a private treaty, the burden of proving that the Government could give the direction which it did is on the appellant Mr. Zafar of course relied on the wide powers of the Government under sections 61, 62 and 63 of the said Ordinance, but these powers relate to the administrative control to be exercised by the Government over Municipal Committees, whilst the Government's powers in the matter of the levy and collection of taxes by Municipal Committees falls under sections 54, 56 and 59 of the said Ordinance. Now, it is a trite observation that a statute has to be read as a whole, and the Government cannot, by resorting to. its powers under sections 61, 62 and 63, defeat the express limitations placed on its powers under sections 54, 56 and 59 because these sections are the special provisions enacted by the Legislature for defining and limiting its control in the matter of the levy and collection of taxes by Municipal Committees. The direction for the lease of the octroi rights to the appellant was, therefore, without lawful authority as held by the High Court.

9. From the above first quoted observation of the Hon'ble Supreme' Court, it is evident that a Municipal Committee or a Council is supposed to collect the octroi itself and the leasing out of a right to octroi in favour of a private contractor is a departure from the above normal course contemplated by the Ordinance and the Octroi, rules and, therefore, previous sanction of the Government is required. We are inclined to hold that the right of a ‑ Local Council to impose inter alia octroi without the previous sanction of the Government is different from the right to lease out the right to collect octroi in favour of a private party instead of collecting itself. The restriction imposed by above rule 225 of the above Octroi rules in our view have not been negatived by the above‑said amendment in Section 60 of the Ordinance. The object of the above rule 225 is to see that a Local Council does not act in a manner prejudicial to the interest o~ the public. There seems to be no inconsistency between the amended, section 60 and the above rule 225 of the Octroi Rules.

10. Since the compliance of the above rule was not done the acceptance of the petitioners' bid even before the expiry of 30 days period (i.e.. the auction was held on 21‑7‑1986 whereas the petitioners' bid was accepted on 27‑9‑1986), was illegal and, therefore, the petitioners cannot enforce the above bid or the agreement executed by respondent No.2 in furtherance of the above bid. However, at the same time Respondent No.1 could not have accepted Rs.20,50,000 from Respondent No.3 directly without asking them to participate in the public auction. The above‑quoted second observations of the Hon'ble Supreme Court are on all fours applicable to Respondent No.31s case. We, therefore, declare that the above action of Respondent No.1 is illegal and contrary to the above‑quoted rule 225 and the other Octroi rules. We are not impressed by the submission of‑Mr H.A. Rehmani that Respondent No.1 could have compounded the octroi in terms of Rule 105 of the Octroi Rules. The above Rule provides as follows:

105. The Municipal Committee may, subject to such terms and conditions as may be specified with the approval of the Controlling Authority, compound Octroi with any business concern or institution hereinafter referred to as a party." A perusal of the above‑quoted rule indicates that it is only the Municipal Committee with the approval of the Controlling Authority who can compound octroi with any business concern or institution and not the Provincial Government directly. In view of the above discussions, we are of the view that Respondent No.31s members are liable to pay octroi to Respondent No.2 for the various schedule items in terms of aforesaid Gazette dated 17‑7‑1986.

11. The petition is, therefore, disposed of in the above terms H declaring that awarding of octroi in favour of the petitioner by Respondent No.2 being in violation of rule 225' is illegal and without lawful authority and so also the order of respondent No.1, in accepting Rs.20,50,000 from Respondent No.3 in lieu of the payment of the octroi in the terms of the above schedule gazetted on 17‑7‑1986 is; without lawful authority and of no legal effect. The above petition stands disposed of in the above terms, with no order as to costs. A. A. /M-295/K Order Accordingly.