1980 PLP 704 (CLC)

"

35. Model tax Schedules.-The Government may frame model tax schedules, and where such schedules have been framed, the Municipal Committees shall be guided by them in levying a tax, rate, toll or fee." In terms it will be noticed that the section neither imposes a maximum limit beyond which the Municipal Committee shall not go in levying a tax nor even does it state that until the Municipal Committee levies taxes upon some other rates the rates prescribed in the schedules are to be deemed to be inforce. The Municipal Committee is nevertheless required to be guided by these schedules. As a matter of fact, however, the Government purporting to exercise the powers conferred by sections 35, 37, 38, 39, 41 and- 121 of the Ordinance made rules which were called the West Pakistan Municipal Committee Octroi Rules, 1964 levying Octroi and prescribing a detailed procedure for its collection at rates which they specified in an appendix to the rules which is in fact a verbatim reproduction of the model octrot schedule. In this Schedule item No. 40 prescribed a rate of Rs. 1.26 per maund for liquors of all kinds and item 41 prescribed a rate of Rs. 5 per maund for wines of all kinds not specified elsewhere.

4. So far as the reference to the various sections of the Ordinance is concerned it will be recalled that sections 35 and 121 provide for Model Tax Schedules and the power to make rules. The other sections mentioned, relate to certain procedural matters in regard to the liability on account of tax and its collection but it does not seem that any of them expressly empower Government. It is, however, no body's case before us that the rules are ultra vires on the ground merely that they were made by Government. It is indeed the case of the petitioners that octroi on goods of the kind which are in question in these petitions cannot be levied at all. But that is based upon the argument that the Central Government alone can impose any such tax and to that argument I shall of course presently refer; it is not the petitioner's case that the rules are bad on account of their not having been made by the Karashi Municiple Corporation itself. Indeed the main case of the petitioners before us is (on the assumption that a larger argument which 1. have just mentioned fails) that the rates mentioned in this Appendix and certain of the provisions of these rules continue to apply it being argued that the amendment sought to be made by the notification of 1967 is ultra vires Substantially the attack of the petitioners, therefore, is upon the enhanced rate, caught to be annelid on and from 13th April, 1967.

5. The argument that octroi cannot be imposed at all in respect of Karachi is to the effect that ii is, what has been described as an interference with the freedom of trade and commerce in the country, and that therefore the only competent authority to legislate this imposition is the Central 'Government of Pakistan which has not levied the tax in question at all. This, if I may say so, is somewhat obscurely put but it transpired in argument that the contention really was that inasmuch as goods entering Karachi might well be entering from another Province or even from outside the country, the tax was a tax on inter-Provincial trade and trade with foreign coun tries which is a subject within the exclusive competence of the Centre. The Ordinance itself as I have already pointed out was promulgated at a time when the country was being governed in accordance with the Constitution of 1956. Item 5 in the 5th Schedule whereto which enumerates the subjects which are within the competence of the Central Legislature reads thus: "Trade and Commerce between Provinces, and with foreign countries; import and export across Customs Frontiers." The rules themselves, however, were made in 1964 but even then under the Constitution of 1962 item '5 in the Third. Schedule which enumerates the matters with respect to which the Central Legislature has the exclusive power to make laws reads: "Trade and Commerce between the Provinces and with other countries, including (a) impost and export across Customs Frontiers; and (b standards of quality of goods to be exported out of Pakistan." Clearly, therefore; whether recourse is bad to the 1956 Constitution or the 1962 Constitution the petitioners are perfectly correct in saying that into provincial trade and trade with foreign countries was a subject exclusive within the competence of the Centre. For two main reasons, however, I do not think that the argument is well-grounded. In the first place the argument assumes that the range of subjects .on which a municipality can levy a tax is necessarily confined to those upon which the Provincial Legislature can legislate. This is perhaps the result, of earlier enactments which define the power of Municipalities in those terms. The Ordinance which I am now considering does not limit the power in this fashion; in 24 separate items the Third Schedule to the Ordinance specifies particular taxes, rates, tolls and fees which may be charged and the 25th item is a general one authorising any other fee permitted under any of the provisions of the Ordi nance. It is noteworthy that the last item, item 26 then authorises: "Any other tax which the Government is empowered to levy by law." It is to be recalled that the word "government" means the Provincial Govern ment. If the Municipality in any event authorised to, levy taxes which the Provincial Government was authorised to impose and its authority was limited to that sphere item 26 would be wholly superfluous and it would not be right, I think to interpret a statute in such a fashion as to render any portion of if meaningless.

6. Assuming, however, for the sake of argument in favour of the petitioners that the 14unicipality cannot, under the Ordinance, impose a t in any field which belongs to the exclusive competence of the Central Legis lature I still do not think that Octroi is such a tax as come within the relevant item which 1 have quoted from the 1956 and the 1962 Constitutions. It is true of course that goods which enter the city of Karachi may be entering from a province other than the one in which Karachi is situate or even from outside the country altogether. The tax is never helpless a tax upon the import of goods for consumption, use or in a Municipality. The purpose of the tax, therefore, is to levy a charge upon goods which brought in not only within the city but for consumption, use or sale within the City. If goods are handed from abroad but are not intended for such consumption sale or use but are intended to be so used, let us say, in Lahore, then, octroi would not be leviable. The entire purpose of making the Ceatral Legislature, the authority who alone is competent to legislate upon inter-provincial trade and trade with foreign countries, is to allow it to have control over such: trade. Octroi on the other hand is a charge upon import within a city. The fact that in a given case the goods play happen to come from another province or from outside the country is incidental and besides the point. Even so if they are not intended for use in the city the tax would not be chargeable. The argument, therefore, I think is wholly fallacious octroi, is not a tax which is concerned with inter-provincial trade or trade with'' foreign countries and is, therefore, within the competence of the Provincial Legislature and therefore of the Municipality.

7. The validity of the enhancement of the rates its 1967 is questioned upon a number of grounds. The substantial one, 1 thin is based upon the need for the previous sanction of Government by reason of section 33 of the Ordinance. Before 1 deal with the attack on that ground it would be as well to dispose of the other minor attacks. It is first contended that the `model tax schedule' has been violated inasmuch as the rates now prescribed are in excess of those mentioned in that schedule. It will be recalled that the octroi rules themselves reproduce the rates in that schedule. That the Octroi Rules, 1964 themselves gave schedule of rates which is a verbatim reproduction of the 'model schedule'. Interim the model schedule has not been prescribed as laying down the rates chargeable but the rules themselves have adopted the rates mentioned .in the model schedule. Now earlier in this judgment I have reproduced section 35 of the Ordinance which provides for the model schedule. I can find nothing in the language of that section which states that the rates mentioned in a schedule which the Government may prescribe under that section are to be maximum beyond which the municipality shall not levy taxes. The fact that section 35 requires that the municipal committees shall be guided by them in levying a tax, rate, toll or fee amounts, I think, to no more than this that the Municipal Committee are being afforded guidance in the matter of the various kinds of goods and other matters upon which a tax, rate, toll or fee ought to be levied. So far as 'I can see ibis provision is an unusual provision. It may well be that when the Ordinance was being promulgated it was realised that the. adminis tration of municipal government was now being extended to various small places which had no earlier experience of such an administration. It might, therefore, have been thought necessary or at least wise to provide such a guidance. I cannot see that the guidance necessarily extended even to the rates. But, assuming it did, it would still remain guidance. If indeed it' was the intention behind the Ordinance to lay down a maximum rate in respect of any particular item or in respect of all the items one might expect that the statute itself would lay down these maximum rates, or at least that the statute would in clearer language lay down the authority of the Government to impose such maxima. Authority being given to the munici palities to raise taxes, I find it utterly impossible to infer any such restriction from a section worded in the fashion in which section 35 is; it is not even arguable that one of the possible interpretations of this section is to impose any maximum rates.

8. The next argument is that the same authority has prescribed two different rates of the levy of octroi duty and since both cannot prevail the lower should. In the petition numbered 536/1970 the argument is put thus "The petitioners submit that this levy of Octroi duty at the rate of Rs. 10 per maund and Rs. 20 per maund is obviously unreasonable and illegal. The same authority, i.e, the Governor of West Pakistan has prescribed two different rates which are quite inconsistent with each other at two different times under two different provisions of the same Ordinance, 1960. The rates in the Model Octroi Schedule prescribed by him under section 35 of the Ordinance are Rs. 1.20 per maund for "Beers of all kinds" and Rs. 5.00 per maund for "wines of all kinds not specified elsewhere" whereas the rates prescribed by him in the exercise of his powers under section 33 is Rs. 10 per maund for Liquor (Country) and Rs. 20 per maund for Liquors and wines of all kinds (foreign)." The fallacy again is that the Model Schedule prescribed no rates at all in the sense that it made the rates leviable. The rates became leviable by reason of the Octroi Rules, 1464. As in the case of any other power granted to the municipality power could be exercised repeatedly and if' rates were once pres cribed I see no reason to say that they could not then be amended. What has happened is that the rates having been prescribed in 1964 have been amended in 1967. that the amendment of 1967 may be for some other reasons ultra vires, is a different matter; it is wholly wrong and fallacious to say that the same authority has concurrently prescribed two different rates, that is .to say, in the Model Schedule and in the Notification of 1967 and since one is higher than the other lowers prevail. If indeed the same authority had had prescribed different rated then on the assumption that it was the authority which had the power so to prescribe, clearly the latter prescription would prevail as an amendment and even this would be a final, answer to this particular argument of learned counsel.

9. Now admittedly the power to levy tax is contained in section 33 of the Ordinance and tire reference to that indicates clearly that the authority which n empowered to levy the tax is the municipal committee but that it may be so only with the previous sanction of the Government and in the prescribed ,tanner. What admittedly happened in this case was that by Resolution No. 287 the municipality 18-3-1967 approved a schedule of Octroi and the Government of West Pakistan then approved the schedule and issued notification on 13-4-1967 by reason of which the tax is as from that date Jug charged. That such. a procedure was; not permissible under the municipal Committees (imposition of Taxes) Rules, 1960 as they were origin ally framed is admitted. These rules made fairly elaborate provision for the publication of preliminary taxation, proposals, the hearing of objections and their finalisation. After their finalisation they were to be submitted to Government who could either sanction them with or without modification or refuse sanction. It is only after this that the taxation proposed could be notified and would carne into effect upon such slate subsequent to the issue of the notification as were specified in the notification. However, upon the 18th of March, 1967 these rules 'were amended and rule 8 added; the amendment is in this language After rule 7, the following rule shall be added :- "

8. Notwithstanding anything contained in these rules, within a period of three months from the 15th day of March, 1967, the Karachi Municipal Corporation may, for the purposes of imposition and levy of octroi and export tax, follow the procedure hereinafter provided instead of the procedure prescribed in rules 3 to 7 and the octroi and export tax so imposed and levied shall be deemed to have been validly imposed and levied:-- (a) The Karachi Municipal Corporation may at a special meeting formulate a proposal for the imposition of octroi and export tax and forward the proposal to Government for sanction. (b) Government may sanction the taxation proposal submitted to it under clause (a) without modifications or with such modifications as it may deem fit. (c) The taxation proposal sanctioned by Government, undo; clause (b) shall be notified ill tile official Gazette and shall come Into force on and from such d rte as may be specified in the Notifica tion." Two things are noteworthy in this amendment. In the first place although: the amendment purports only to add a rule but in effect rule 8 is replacing rules 3 to 7 altogether. These were the rules which detailed the whole procedure which I have outlined already, rule 1 merely being the rule which gave the name and rule 2 being a definition clause The other thing which is worth noticing is that the resolution of the municipality which I have referred to is also dated 18-3-1967. I cannot believe that this was a mere coincidence.

10. On the basis of this amendment Mr. Abdul Hafeez Memolw the learned Advocate-General who appeared in this case with Mr. Ghous Muhammad the legal advise the Karachi Municipal Corporation, argued that since section 33 requires the levy of taxes to be ill the prescribe manner which in turn means prescribed by the rules a procedure which is in conformity with this newly assed rule 8 is a complete compliance of section 33.

11. The argument, I think, overlooks two matter or perhaps it would be more accurate to say two aspects of the same matter. Section" 33 requires previous sanction of the Government and this is a requirement over and above the other requirement, namely that the taxes are to be levied in the prescribed manner. If, therefore, they are levlled in the prescribed manner and yet without the previous sanction of Government they would be nonetheless invalid even though in full compliance of the prescribed manner. These are two separate condition, and one of them muse be complied with I cannot possibly read so try mean, as the learned Advocate-General would have us read that a manner may be prescribed and if it is prescribed then without mare the section must be deemed to be complied with. The learned Advocate-General is assuming that there is not in this case a previous sanction but would have us hold that because the procedure laid down in rule 8 has been compiled with the previous sanction is not therefore necessary. I can not agree.

12. It is, therefore, still necessary to see whether in his case there has been a previous sanction of the Government or not. The question, therefore that immediately arises is, when section 33. insists upon the previous sanction of the Government what is meant by the word previous ? Previous to what obviously to the levy. The question therefore really becomes one of the meanings of the levy . One view would be that not until there is an actual collection of the tax is there a levy and if that meaning be accepted, then of course since no tax has been attempted to be recovered before 13-4-1967, upon which date at least the sanction of the Government had been given. There has been a sanction previous to the levy. Now the word `levy' is noticed in Stroud's Judicial Dictionary and among the relevant meanings which are given there (i) "to collect or exact" and (ii) "to take all the necessary steps to enforce payment do not think either meaning is really helpful. Neither is distinguishing between the statutory enactments whereby the imposition is made and the actual collection. Using the term, however, as we are just now in the context of a tax levied by or under a statute I should be inclined to hold that the expression must cover the whole process which would include not merely the collection but also the imposition of the tax. No cases have been cited at the bar upon the meaning of the word `levy' nor have I been able to find any except one, namely, Abdur Rashid v. The Central Board of Revenue (P L D 1965 Pesh. 249) where at page 258 the learned Judges observed: Counsel tried to interpret the word `levied' bb reference to Chamber's Dictionary as meaning, to raise and collect by authority as a `tax', and not merely `imposed'. His argument is that tile word `levied' contained in Article 237, when it means `Imposed and Collected', then this Article would not be attracted to the present case, as in the Finance Bill of 1963 the rate of duty was enhanced to 50 paisas, but no recovery was made at that rate at all by virtue of the exception notified by the Central Government under section 12-A of Act, 1944, and therefore, this duty would be interpreted as having not been levied in the meaning of Article

237. The learned'- Attorney.-General did not agree with this interpretation of the word `levied' used in the said article. His interpretation with reference to Webster's Dictionary is that the word 'levied' means `imposed by authority He contended that there are three stases of the enforcement of a fiscal statute. According to him, the first stage is the fixative of rate of a duty or tax which is called imposition. that "the second stage assessment and third stage is collection. He, therefore contended that the word `levied' used in Articles 48 and 237 of the Constitution relates to the first stage namely, of fixation of a rate of duty or tax. In our view, the interpretation placid on the word levied' used in Articles 48 and 237 of the Constitution by the learned counsel for the respondents was in consonance with the normal meaning of the word `levied'. This is supported by judgment mentioned above, where the three stages, namely, levy, assessment, and collection had been specifically mentioned as being different acts of the relevant authorities in giving effect to a fiscal Art." I think it is therefore fairly clear that a sanction must be accorded before there is an imposition. By the word `imposition' in turn I think would be meant the completion of the entire process whereby the authority empowered to levy the tax has given formal expression to its decision to do so. In this ; connection I think it is useful to compare the procedure which was prevailing before rule 8 came into force. I have already outlined the procedure but would be useful to reproduce rule 7 : "

7. Power of Government in regard to final taxation proposal--(1) Government, after considering the taxation proposal of the Municipal Committee, and the comments if any, of the commissioner , and the Collector under sub-rules (7) and (8) of rule. 6, may

(a) sanction it without modifications or with such modification as it may deem fit; or (b) sanction it subject to the condition that the proceeds from the tax or increase in the tax shall be applied for a specific purpose; or (c) refuse to sanction the proposal giving reasons therefore to Govern ment. (2) The taxation proposal sanctioned under sub-rule (1) shall be notified in the official Gazette and shall come. into force on and with effect from such date subsequent to the issue of the notification as may be specified in the notification." Now even in that elaborate procedure the Government was to consider the proposals when they emerged as the final taxation proposals. 1Jndcr sub section (2) the taxation proposals as sanctioned were then to be notified in the official Gazette and conic into force on such dale subsequent to the issue of the notification as was therein specified. I think it would be impracticable for Government to consider it at any earlier stage. 'There would be little point in sanctioning the proposals while they were vet to be mere preliminary proposals subject to objections being heard and the proposals being finalised. Although therefore I think that word `levy' must include imposition, the latter expression in turn is descriptive of a process which is, not complete until the tax in question is in law capable of being recovered against the will of the persons from whom it is being recovered. Sanction of the Government, at that stage, therefore, would still be a previous sanction. What is the change then that rule 8 has made' It has certainly eliminated the elaborate and perhaps salutary procedure previously prescribed but as a matter of law it was permissible and the precise point of time at which the tax become= legally capable of collection remains the same, namely after the proposal in submitted to Government and receives the sanction. If, therefore there be no reason to hold in the case of the curlier procedure that the sanction at that stage is a previous sanction then I see no reason why a different criterion should be applied after the amendment whereby rule 8 came into force. I would, therefore hold that there has been a previous sanction in this case and that, therefore, the amendment and consequently the new schedule of rates which is a part of the notification dated 13-4-1967 is legally enforced.

13. In this view of the matter the main attack in these petitions must, in my opinion, fail. There is, however, in the case of .Petition No. 536; 70 a minor point which affects a comparatively small sum of money and which must be considered. In that case, some of the goods had arrived in Karachi before 12-4-1937 and had been stored in the M. I. Yard, which is, now admittedly situated within the Octroi limits of the Karachi Municipal Corpora tion. Learned counsel for the petitioner argues that the notification cannot be retrospective and this proposition is clearly right and not seriously disputed by the respondents, The respondents however, claim that this is a bounded warehouse and that although the goods came to Karachi and were brought in this warehouse before, 12-4-67 they were not cleared from there until after and that, therefore their import cannot be regarded as an import for sale, use or consumption in Karachi until after that date. They, therefore, claim that prospectively construed the notification still empowers the levy of Octroi upon these goods. I am unable to agree with the respondents on this contention.. Bounded warehouses are given no special status in the Octroi Rules though they have such under the Sea Customs Act. It is no body's case that the goods were ever intended for use outside Karachi and even, therefore, if the bounded warehouses had a special status it cannot be said that the goods by being removed from this "warehouse were then and only then imported into Karachi for use as is specified for the purposes of Octroi. That they were physically brought into the Octroi limit before the 12th of April, 1967 is, as I have said, admitted. I would, therefore, hold that the respondents are not entitled to charge Octroi on these goods.

14. In the result, I would dismiss Petition No. 488/70 with costs. But in regard to Petition No. 536/70 1 would hold that the petitioners are not liable to pay Octroi upon the goods which were imported before 12-4-1967 and stored in the M. I. Yard even though removed from there later but would dismiss the prayer for any other relief. So far as this petition is concerned since the petitioner has succeeded even though on a small part of the case I would ,not award costs in favour of the respondents. FAKHRUDDIN G. EBRAHIM, J.-I agree. M. Y. M. Petition dismissed.