P L D 1970 Supreme Court 439 (PLP)

MUHAMMAD YAQUB ALI, J.‑This appeal by the Collector of Central Excise and Land Customs, East Zone, Chittagong and others arises out of an order of a Division Bench of the High Court of East Pakistan dated the 14th December 1965, making the rule absolute in a writ under Article 98 of the Constitution and declaring that all acts performed by the appellants which are in conflict with the exemption contained in the Notification No. S. R. O. 35(R)/61, dated the 30th June 1961, and/or the No tification No. S. R. O. 363(K)/63, dated the 17th May 1963, including in particular the demand, realization and collection of excise duty on the cigarettes manufactured by the respondent at its factory in P. S. Lama in the Chittagong Hill Tracts from the 1st July 1961 to the 30th June 1965, are without lawful authority and of no legal effect. The appellant No. 1 was further directed to refund to the respondent the sum of Rs. 31,27,C00 which had been paid by the respondent under protest as excise duty during the said period. Leave to appeal was granted on the 21st April 1966, to consider whether the operation of an exemption from the excise duty for a period of four years granted by the Central Board of Revenue by the Notification dated the 30th June 1961, was curtailed by the amendment to the Constitution carried out in 1964 by which the Chittagong Hill Tracts was removed from the category of Tribal Areas. The facts relevant to this order are that the respondent on the 5th January 1961, was granted permission to set up a cigarette factory at Chittagong. On the 30th June 1961, an exemption was granted under rule 8 of the Central Excise Rules, 1944, from the payment of the whole excise duty leviable thereon in respect of all excisable goods produced or manufac tured in specified Special and Excluded areas in the Schedule of a Notification. which included Chittagong Hill Tracts, exclud ing Chandraghona P. S. The period of exemption was four years from the 1st July, 1961. In response to this incentive extended to economically backward areas, the respondent on the 8th August 1961, applied for shifting of tile site of its proposed cigarette factory from Chittagong to Chittagong Hill Tracts. On the 9th September 1961, the original permission to set up a cigarette factory was amended to enable the respondent to install the factory in P. S. Lama outside the area of Chandraghona P. S. On the 26th December 1961, by Notification No. S. R. O. 122(K)/6l of even date, the exemption granted by the Notification dated the 30th June 1961, was restricted to the extent that it would not extend to un-manufactured products removed from the exempted areas to any other area in Pakistan. On the 17th May 1963, a fresh Notification No. S. R. O. 363(K)/63 was issued under section 12‑A of the Central Excises and Salt Act, I of 1944 substantially in the same terms as the earlier Notification of the 30th June 1961, with the exception that in conformity with the 1962‑Constitution which had, in the meantime, come into force the words: "Special and Excluded areas" in the Schedule to the earlier Notification were substituted by "Tribal Areas" as defined in Article

242. The respondent thus continued to enjoy the exemption from excise duty leviable on the cigarettes manufactured by it until the Constitution (First Amendment) Act, 1964, was passed on 10th January 1964, which excluded the Chittagong Hill Tracts from the definition of Tribal Areas. The Central Board of Revenue, accordingly, on 28th February 1964, wrote a letter to the Inspector of Central Excise posted at the factory of the respondent to the effect: "As the Constitution (First Amendment) Act, 1964 (sic) has removed Chittagong Hill Tracts from the category of `Tribal Areas' Ministry of Finance Notification No. S. R. O. 363(K)/63, dated the 15th May 1963 (sic) granting exemption in respect of 'Excisable goods produced or manufactured in the tribal areas' has become infructuous so far as Chittagong Hill Tracts is concerned even though Chittagong Hill Tracts is expressly mentioned in that Notification. Accordingly, with effect from the date on which the Constitution (First Amend ment, 1964) all excisable goods produced in Chittagong Hill Tracts are subject to Excise duty and Excise Control in the normal way." The respondent thereupon made representations against the levy of duty by the Central Government on the ground that the amendment of the Constitution had no effect on the exemption granted by the Notifications dated the 30th June 1961, and the 17th May 1963, on the goods produced and manufactured in Chittagong Hill Tracts. The representations were rejected and the Government received from the respondent Rs. 31,27,000 as excise duty on the cigarettes manufactured by it up to 30th June 1965. Having paid the amount under protest the respondent filed Writ Petition No. 644 of 1964 in the High Court of East Pakistan calling in question the levy of excise duty on the goods. In support of the petition it was urged that the amendment of the Constitution in 1964 whereby the Chittagong Hill Tracts was excluded from the definition of Tribal Areas had no effect on the exemption granted by the Central Government for develop ment of the economically backward areas. It was argued that by whatever name the Chittagong Hill Tracts was called it continued to be an under‑developed region and the basis on which exemption was granted was, therefore, not altered by the changed definition of the "Tribal Areas". In the affidavit‑in‑opposition filed by the Government, it was armed by Mr. I. M. Chisty, Deputy Superintendent, Central Excise and Land Customs, that the Chittagong Hill Tracts District was removed from the category of Tribal Areas by the Con stitution (First Amendment) Act, 1964, with effect from the 10th January 1964, and that in pursuance to this amendment, the Central Board of Revenue had in its letter dated the 21st February 1964, addressed to the Collector, Central Excise and Land Customs, East Zone, Chittagong, intimated that exemption in respect of excisable goods produced and manufactured in tribal areas had become infructuous so far as the Chittagong Hill Tracts were concerned. The respondent, therefore, ceased, in the opinion of the Department, to be entitled to the exemption granted by the earlier Notification dated the 17th May 1963. It was further contended that the Government was entitled to withdraw the exemption and modify the Notification under section 21 of the General Clauses Act. The learned Judges upheld the respondents' claim that exclusion of the Chittagong Hill Tracts from the definition of Tribal Areas in Article 242 by the First Constitutional Amendment Act, 1964, had no effect on the exemption of excise duty in an under‑developed Tract and that the right of exemption vested in the respondent for a period of four years could not be taken away during the currency of that period. The Rule nisi was, accordingly, made absolute and the Government was directed to refund to the respon dent toe sum of Rs. 31,27,000 which it had paid as excise duty under protest. Both the conclusions reached by the learned Judges are, with due respect, erroneous one on facts and the other in law. It was not a case of an inferential repeal of the Notification dated the 17th May 1963, by virtue of the Constitution (First Amend ment) Act, 1964, as postulated by the learned Judges. In fact, another Notification No. S. R. O. 31(R)/64 was issued by the Central Government on the 28th February 1964, which provided as under :‑ "Provided further that the exemption herein granted shall not apply to any excisable goods manufactured in the tribal areas which bear brand or trade names or trade marks under which similar goods manufactured in any area of Pakistan other than the said tribal areas are also marketed, if such goods are removed from tribal area to any other area in Pakistan." The exemption from excise duty on the goods produced and manufactured in Chittagong Hill Tracts District was. therefore, withdrawn expressly with effect from that date. The whole argument that the raison d'etre of the exemption was to provide an incentive for setting up of industry in undeveloped areas which bore no relation to the Constitution (First Amendment) Act. 1964, was, therefore, out of place. It is true that in the letter the Central Board of Revenue had made no reference to this Notification, but that is because on the 11th February 1964, when the letter was issued the Notification had not been published in the official Gazette. It was argued by Mr. Brohi that the Notification dated the 28th February 1964, was without lawful authority, as the reasons on which it was based, namely, the exclusion of the District of Chittagong Hill Tracts was not relatable to the grant of exemption. The exercise of power under section 12‑A to grant exemption as well as the power to withdraw the exemption under section 21 of the General Clauses Act is unconditional. It is, therefore, not open to Courts to go behind the Notification of the 28th February 1964, on the ground that the exercise of power by the Central Government was improper. However, if the grant of exemption was subject to the existence of certain conditions and the withdrawal of exemption was also made conditional on the happening of certain eventuality, then the Government could not withdraw the exemption unless the requirement of law was fulfilled. As no such conditions are provided in section 12‑A in the instant case, the High Court had no authority to make its own surmises as to the propriety of reasons which had motivated the issue of the Notification dated the 28th February 1964. The next question which arises in this case is whether the Notification of the 28th February 1964, which purported to destroy completely the rights vested in the respondent by the Notifications dated the 30th June 1961, and the 17th May 1963, is valid in law. It is a settled rule that an executive authority cannot in exercise of the rule‑making power or the power to amend, vary or rescind an earlier order, take away the rights vested in the citizens by law. This very question fell for decision before the Court in Civil Appeal No. 3‑P of 1965 (Government of Pakistan v. Messrs Mardan Industries Limited). Dealing with the validity of the latter Notification dated the 19th May 1964, it was observed: "It is well settled that no statute shall be construed so as to have a retrospective operation unless its language is such as plainly to require such construction. We understand that 17 lacs cigarettes which had been seized before issue of the impugned notification, have been released and the Excise Department do not claim any excise duty in respect of the said cigarettes." The respondent had acquired a vested right of exemption from the levy of excise duty on all the goods produced or manufactured by it for a period of four years under the Notifications of the Central Government referred to above. That vested right could not, therefore, be taken away by an executive action. The `' Notification dated the 28th February 1964, being completely destructive of the right vested in the respondent‑company was in this view without lawful authority and of no legal effect. As a result of this declaration the District of Chittagong Hill Tracts continued to be included in the Schedule to the Notification of the 17th May 1963, granting exemption from payment of excise duty leviable on the goods produced and manufactured by the respondent in that District up to 30th June 1969. The Notification No. S. R. O. 31(R)/64, dated the 19th May 1964, provided as under: "In exercise of the power conferred by subsection 12‑A of the Central Excise and Salt Act 1944 (I of 1944) the Central Government is pleased to direct that the following further amendment shall be made in the Ministry of Finance Notification No. S. R. O. 363(E)/63, dated the 17th May 1963, namely: In the aforesaid Notification, for the full‑stop at the end of the second proviso a colon shall be substituted and thereafter the following new proviso shall be added, namely :‑ Provided further that the exemption herein granted shall not apply to any excisable goods manufactured in the tribal areas which bear‑ brand or trade name, or trade marks under which similar goods manufactured in any area of Pakistan other than the said tribal areas are also marketed if such goods are removed from the tribal areas to any other area in Pakistan." It was admitted that the respondent has another cigarette factory at Bogra where "Ramna" and "Express" brands of cigaret tes were manufactured during the relevant period. The respondent had, therefore, to pay duty on these two brands of cigarettes exported by it to places outside the Chittagong Hill Tracts District. Mr. Brohi conceded that the reason which compelled the Government to bring out this Notification was an abuse of the exemption granted by the earlier Notifications. The persons to whom exemption from payment of duty was granted set up industrial concerns in the Tribal Areas and manufacturing goods of well‑known brands and exported them to other areas in Pakistan. This created a situation which was not in the contem plation of the Central Government. Mr. Brohi himself called it a fraud on the statute and considered the Government justified in imposing these conditions. The learned counsel, however, excluded the application of the Notification of 19th May 1964, to his case on the ground that it was not relied upon by the Government in the High Court. An appeal being a continuation of the original cause he maintained vehemently that the respondent's case could not be displaced by a circumstance which was not even in the contem plation of the parties when the cause was decided in the Court of first instance. He relied in this behalf on the rules of pleadings by which parties are bound in civil matters. The learned counsel was, however, not properly instructed in this respect. The following passage appears in the judgment of the High Court: "Mr. Brohi on behalf of the petitioner has argued that the conditions imposed by the notification dated the 19th May 1944, were without jurisdiction as section 12‑A does not authorise imposition of such conditions. It is not necessary for us to go into this question in this case as it will be presently seen that the conditions imposed cannot have any application in the case of the petitioner‑company." Then follow the discussion by the learned Judges to the following effect: "It has then been claimed that as the petitioner‑company on the assurance given in the notification issued in 1961 made commitments and established its factory in Chittagong Hill Tracts, it had acquired a vested right to claim exemption for that period and the Central Government was not entitled to either withdraw or modify the said notification to the disadvant age of the petitioner‑company. We feel that there is con siderable force in the argument of the learned Advocate and we further find that this argument receives support from a decision of the West Pakistan High Court (Peshawar Bench) in Writ Petition No. 186 of 1964. We may in this connection point out that the contention of Mr. Brohi receives consider able support also from the decision of the Supreme Court in the case of Pakistan and another v. S. Hussain Ali Shah A. Fazlani P L D 1960 S C

310. The provisions of section 21 of the General Clauses Act do not alter the position in any way, while the power to add to, amend, vary or rescind a notification is available, such power does not include the authority to take away a validly acquired right." Thus the notification of the 19th May 1964, was not only put in issue, but the conditions laid down in it were expressly declared to be inapplicable to the respondent's case. The contention raised by the learned counsel for exclusion of the Notification No. S. R. O. 31(R)/64, dated 19th May 1964, has, therefore, little force. The reasoning by the High Court that the notification dated the 19th May 1964, could not take away the rights vested in the respondent to claim exemption from excise duty on the cigarettes manufactured by it up to 30th June 1965, stand disposed of in the aforementioned case Pakistan v. Mardan Industries Limited. Dealing with the validity of this Notification this Court remarked: "No doubt the power to take advantage of a notification can be termed as right. But the only right which it appears to us can be said to have been conferred by the said Notifica tion was that the new industrial undertaking should enjoy exemption from excise duty in respect of goods manufactured in tribal areas the power of the Government to issue such notification cannot be challenged." The learned counsel for the respondent did not dispute the above dictum of the Court, but as seen above tried to exclude his case from its application. Another question argued from the bar was whether the High Court could direct the Government to refund the sum of Rs. 31,27,000 which the respondent paid under protest in respect of the goods exported from the Chittagong Hill Tracts to other areas of Pakistan bearing the brands "RAMNA" and "EXPRESS". Mr. Asrarul Hossain contested the correctness of the direction given by the High Court for refund of the excise duty and referred to cases in which it was held that a writ cannot be issued to the Government for the payment of remunerations of a Government servant. The decision in these cases is based upon the bounty theory which is not applicable to the present case. Nevertheless the High Court was not right in ordering the refund of the duty recovered from the respondent by the Government without taking an account as to how much amount had in fact been realised as excise duty up to 30th June 1965. In order to fix the correct amount it was necessary to take evidence and to exhibit the accounts of the respondent regarding export of the RAMNA and EXPRESS brand cigarettes to places outside the hill tracts of Chittagong District between 28th February 1964 and 30th June 1965. In the circumstances, it would have been proper for the High Court to confine the relief given by it to a declaration that the levy of excise duty on the cigarettes manufactured by the respondent between the aforesaid period was illegal, and directing the Government to refund the amount recovered by it from the respondent. Such an eventuality, however does not arise now in view of our decision that the Notification No. S. R. O. 31(R)/64, dated the 19th May 1964, is valid in law and under that Notification the respondent was liable to pay excise duty on the RAMNA and EXPRESS brand cigarettes exported by it to places outside the district of Chittagong Hill Tracts. In the result the appeal is allowed; the writ issued by the High Court is recalled and in its place a declaration is given that the Notification dated the 28th February 1964, is void and of no legal effect; the excise duty recovered from the respondent under this Notification up to 19th May 1964, is liable to be refunded and for the remaining period ending the 30th June 1965, the respondent is liable to pay excise duty on the RAMNA and EXPRESS brand cigarettes exported to places outside the district of Chittagong Hill Tracts in Pakistan. In view of the divided success of the parties, they shall bear their own costs. K. B. A. Appeal partly accepted.