P L D 2013 Lahore 282 (PLP)

UMAR ATA BANDIAL, J.

This order shall dispose of Writ Petitions Nos. 23394-2009, 27165-2010, 27166-2010, 136- 2011, 3662-2011, 11988-2011, 15224-2011 and 98-2012 involving common question of law and facts.

2. This petition is filed to restrict the quantum of contributions that are to be made by industrial establishments to the Workers' Welfare Fund ("Fund") under the provisions of Section 4 of the Workers' Welfare Fund Ordinance, 1971 ("Ordinance"). It is challenged that a Finance Bill or Finance Act, having scope that is prescribed in Article 73 of the Constitution of Pakistan, 1973, cannot lawfully amend provisions of the Ordinance which falls beyond the scope of Federal Finance Legislation. Before the impugned amendments in the Ordinance were made by Finance Act, 2006 and Finance Act, 2008, Section 4(1) of the Ordinance charged industrial establishments having an income of not less than Rs.1,00,000/- with the obligation to contribute to the Fund a sum equal to two percent of their "total income assessable under the Income Tax Ordinance, 2001". Subsequently, the subject matter of the contribution, namely, "total income" has been amended by the aforenoted Finance Acts. By the said amendments the meaning of "total income" in Section 2(i) of the Ordinance has been extended to mean 'profit (before taxation or provision for taxation)". As a result of the said amendment, carry-forward losses of an employer industrial establishment cannot be debited from its profits to calculate total income. Consequently, the quantum of contributions to be made by an employer industrial establishment to the Fund has increased dramatically. Hence, the aforenoted question regarding vires of the amending legislation is raised in this petition in order to avoid the increased liability in the amount of contribution.

3. The question posed above has already been addressed by this Court in East Pakistan Chrome Tannery (Pvt.) Ltd. v. Federation of Pakistan (2011 PTD 2643). After discussing the case-law on the meaning of a tax and about the distinction between a tax and a fee, the learned Single Judge has concluded that contributions under the Ordinance constitute a 'fee' wherefor he has held as follows: "Article 73(3) of the Constitution provides that Money Bill shall not be deemed to be a Money Bill if it provides for fee or charge for any service rendered. This constitutional exclusion fully applies in the present case. Fund being a Fee, it could not be amended, altered or modified through a money bill but required regular legislative procedure under Article 70 of the Constitution".

4. Before this Court all the learned counsel for the petitioners have strenuously adopted the view taken in the abovementioned case in order to press the point that the Finance Acts of 2006 and 2008 could not validly amend the Ordinance. Learned DAG for the respondent Federation and the learned counsel for the respondent revenue authorities have opposed the said argument and pressed that the subject contributions have the character of tax rather than a fee.

5. Whether contributions made under the Ordinance can be readily classified as a fee depends on which distinctive features of the respective levies, tax or fee, are present in the said levy. These features have been the subject of considerable judicial opinion. Generally speaking a tax is a compulsory exaction of money by a public authority for public purposes. On the other hand a fee is a quid pro quo, a recompense for services rendered: Refer Collector of Customs and others v. Sheikh Spinning Mills (1999 SCMR 1402). In the present case whilst the subject contributions to the Fund are made by employer-industrial undertakings, however, the beneficiaries of disbursements from the Fund are the workers of such undertakings. Therefore, arguably the subject contributions lack a direct quid pro quo which is considered one classic feature of a fee; but these do contain a collateral recompense in which the contributor-employer's workers are the beneficiaries of disbursements from the Fund. Nevertheless, more pertinently to the respondents claim that the subject contributions are a tax, it is relevant to identify whether these possess any characteristic features that may bring such contributions within the fold of a tax. Accordingly, the essential features of a tax as enumerated by the superior courts of the country have been considered by the Court.

6. An instructive judgment on the subject is Sheikh Muhammad Ismail & Co. Ltd. v. The Chief Cotton Inspector, Multan (PLD 1966 SC 388 at page 400). By reliance on Mathews v. Chicory Marketing Board (60 CLR 263) the said precedent observes that "a tax is a compulsory exaction of money by public authority for public purposes enforceable by law and is not payment for services rendered". More importantly it is thereafter elucidated "that the distinction between a tax and the fee lies primarily in the fact that a tax is levied as a part of common burden while a fee is a payment for a special benefit or privilege". (emphasis supplied).

7. The meaning of the expression "common burden" noticed in the abovementioned ruling was explained with clarity by a learned Division Bench of the Peshawar High Court in M/s. Saif Textile Mills Limited v. Pakistan through Secretary (PLD 1998 Peshawar 15 at page 20). After referring to the aforenoted observations made by the Hon'ble Supreme Court in Sh. Muhammad Ismail's case (supra), the learned Division Bench of the Peshawar High Court concluded as follows: "Thus, a tax is levied to raise funds to augment the State Revenue to meet the necessary expenses whereas fee is a payment to public or private body in lieu of special services rendered or privileges extended to the payee. Similar view was taken by Honourable Judge in Sindh Glass Industries Ltd. v. Chief Controller of Import and Export, Islamabad and others 1990 CLC 638 relied upon by the standing counsel for the Federation." It is apparent from the foregoing statement of law that a tax is levied to raise funds for meeting the "necessary expenses" of the State. Therefore, a tax is not co-related to services rendered or special benefit or privilege conferred on the tax payer. Accordingly, the tax payer is simply sharing/discharging his obligation under the common burden without being a beneficiary of a corresponding benefit. In contrast, a fee is not part of the common burden but is a payment made in lieu of a benefit, service or privilege received by the payer.

8. The contributions made to the Fund have a specified and restricted purpose. The Fund cannot be applied for the general requirements of the State. As such the Fund is not part of the common burden and thus lacks an essential attribute of a tax. The contributions made by employer-establishments are deposited in a special fund called the 'Workers' Welfare Fund' having a special object for the application of its monies which is specified in Section 6 of the Ordinance. By restricting the use of the Fund's monies, the Ordinance ensures that these cannot be utilized for the general requirements of the State. As such, the contributions lack a significant attribute that characterizes a tax.

9. Also the contributions by employer-establishments are made to the Fund which is a body corporate in terms of Section 11(B) of the Ordinance. The money contributed to the Fund does not form part of the general revenues of the Federal Government as envisaged in Article 78(1) of the Constitution because the Fund is autonomous and not a part of the Federal Consolidated Fund. Article 78 of the Constitution explains that point in the following terms: "(1) All revenues received by the Federal Government, all loans raised by that Government, and all moneys received by it in repayment of any loan, shall form part of a consolidated fund, to be known as the Federal Consolidated Fund. (2) All other moneys- (a) received by or on behalf of the Federal Government: or (b) received by or deposited with the Supreme Court or any other court established under the authority of the Federation; shall be credited to the Public Account of the Federation".

10. The Federal Consolidated Fund is the principal resource pool of revenue receipts under the Constitution for meeting the financial requirements of the Federal Government. It is common ground that the Workers' Welfare Fund constituted by the Ordinance has independent statutory/legal existence and does not form part of the Federal Consolidated Fund. For the same reason of independent statutory existence, the `Workers' Welfare Fund' does not get credited to the Public Account of the Federation.

11. Accordingly, a financial charge that neither falls within the ambit of the Federal Consolidated Fund or the Public Account of the Federation cannot fall within the scope of a Money Bill as envisaged in Article 73(2) of the Constitution as reproduced below: "For the purpose of this Chapter, a Bill or amendment shall be deemed to be a Money Bill, if it contains provisions dealing with all or any of the following matters, namely:- (a) the imposition, abolition, remission, alteration or regulation of any tax; (b) the borrowing of money, or the giving of any guarantee, by the Federal Government, or the amendment of the law relating to the Financial Obligations of that Government; (c) the custody of the Federal Consolidated Fund, the payment of moneys into, or the issue of moneys from, that Fund; (d) the imposition of a charge upon the Federal Consolidated Fund, or the abolition or alteration of any such charge; (e) the receipt of moneys on account of the Public Account of the Federation, the custody or issue of such moneys; (f) the audit of the accounts of the Federal Government or a Provincial Government; and (g) any matter incidental to any of the matters specified in the preceding paragraphs."

12. To summarize, the dedicated purpose of the Fund and any contributions made thereto is outlined in Section 6 of the Ordinance. The Fund cannot be used for the general requirements of the State; it is not part of the common burden and hence lacks the attributes of a tax. Moreover, the Fund has statutory persona and existence which make it distinct and separate from the Federal Consolidated Fund and the Public Account of the Federation. Therefore, even if the employers' contributions made to the Fund lack a direct quid pro quo or a direct special privilege for the employer-contributors, there are other features of the Fund that exclude it from the ambit of a Money Bill and hence the Finance Acts, 2006 and 2008.

13. Learned counsel for the respondent department disputed the above analysis by reliance on The Secretary, Government of Madras Home Department and another v. Zenith Lamps and Electrical Ltd. (AIR 1973 Supreme Court 724) to elaborate his stand that the subject matter employers contributions to the Fund bear the characteristics of a tax and the provisions of the Ordinance have therefore been rightly amended through a Money Bill in the shape of Finance Acts, 2006 and 2008. The ratio decidendi of that judgment pertaining to the rate of court fees does not favour the proposition advanced by learned counsel.

14. Accordingly, neither the 'Workers' Welfare Fund' nor contributions made thereto bear the attributes of a tax nor fall within the ambit of Article 73 of the Constitution in order to be levied, modified or enhanced by a Money Bill as has happened in the present case. Consequently, the impugned amendments in the Ordinance are ultra vires the Constitution and competence of Parliament.

15. In view of the foregoing, all the petitions are allowed. KMZ/A-40/L Petition allowed.