2012 PLP 1471 (CLC)

KHALID MAHMOOD, J.

Johar Ali Raki and another petitioners seek the constitutional jurisdiction of this Court praying for:

"(a) that on acceptance of this writ petition, the imposition, collection and recovery of Kohistan Development Fee-Cess (KDF-Cess) by respondents Nos.1 to 8 is illegal, unlawful, ultra vires, arbitrary, discriminatory, colourful exercise of power, without lawful authority and disadvantageous to the importers/traders of Northern Area, as compare to other importers operating at different Air, Sea and Dry Ports of the Country, (b) that the impugned notifications: (1) No. Notification No.1040/1/2 Dek, dated 16-6-1996, (2) AO-II/LCB/12-24/96 dated 21-10-1996 and 16-2-1997, published in the Gazette dated 18-3-1996, (3) Letter No.SOII/LG/2-2/2009 SUST, dated 9-10-1999 and (4) Letter No.AO-KDF/8031/DCO Kh: dated 12-10-2010 be declared as illegal, unlawful, ultra vires, void ab initio, inoperative upon the petitioners and other importers and without lawful authority. (3) that illegally and unlawfully imposed "Kohistan Development Fee-Cess" amounts to double taxation, as the petitioners/ importers engaged in the business of import from China pay all kind of taxes, i.e. (1) Customs Duty, (2) Import Duty, (3) Sale Tax, (4) Additional Sales Tax, (5) Withholding tax, (6) Anti-Dumping Duties and (7) Income tax, (4) that due to extortion of Development tax/Cess by the Kohistan District Government or the KPK Government, the importers of the China goods have been placed at a highly disadvantageous position as against the other importers' operating at all the other Air, Sea an Dry-ports of the country. (5) that the petitioners are not under any mandatory or legal obligation to pay any tax/cess under the guise of "Kohistan Development Fee-Cess" (KDF-Cess) unlaitfully levied either by the above mentioned Provincial or District Government, (6) that the petitioners are being subjected to discriminatory treatment as there is no such tax payable by the Pakistani importers at any Air, Sea or Dry-port of Pakistan or at any adjoining or neighbouring district(s). (7) that the petitioners and other importers are entitled for refund of amount illegally recovered by the respondents Nos.1 to 4, under the guise of KDF-Cess. (8) that the respondents Nos.1 to 8 be perpetually restrained from collecting "Kohistcm Development Fee-Cess" (KDF-Cess) or any other tax illegally and unlawfully from the petitioners and other importers engaged in the business of import of China-goods through Dry-Port Sust, Gilgit".

2. As per contents of petition, petitioners are running their trading companies namely Messrs Ali and Raki International Traders and Messrs Five Star Trading Company respectively and are renowned importers/ exporters of the country and are also engaged in the business of importing China-goods through dry port Sust Gilgit. It has been averred in the petition that earlier Provincial or District Government has charged different taxes, however, which were abolished during Federal Minister's Budget Speech 1999-2000 delivered in National Assembly on 12-6-1999, which was communicated to all Administrators vide letter dated 2-7-1999. Respondents Nos.1 to 4 on their own off the record are charging 5% to 10% of the total cost, insurance and freight value (CIF-value) imported China goods and illegally imposed payment @ 1% of the CIF-value, as Kohistah Development Fee-Cess". The Chief Secretary, Northern Areas (Gilgit Baltistan) in his summary for Federal Minister/Chief Executive Northern Areas, dated 15-5-2006 termed the coercive recovery of Kohistan Development Fee-Cess as an extortion and an arbitrary act committed by respondents KPK Government. Hence, this writ petition.

3. Learned counsel for the petitioners contended that respondents have no right or authority to charge tax either on CIF value or on each truck basis rather this amounts to double taxation. It was argued that imposition and recovery "Kohistan Development Fee-Cess (KID-Cess)" is illegal, unlawful, void, arbitrary, discriminatory and colourful exercise of power and inoperative upon the petitioners. It was also argued that District or the Provincial Government cannot levy any such tax or Cess on the imported items duly cleared by the Customs authority at Sust dry port. It was further argued that no such tax has either been levied by any other District upon the imported goods. It was concluded that recovery of such tax in the name of "Kohistan Development Fee-Cess (KID-Cess)" being illegal, unlawful, void, arbitrary, discriminatory and colourful exercise of power an inoperative upon the petitioners is liable to be set aside.

4. On the other hand, learned A.A.-G. for the respondents opposed the contentions of petitioners and supported the impugned imposition of tax.

5. Arguments heard and record perused.

6. Admittedly, the petitioners are paying the Customs Duty, Import Duty, Sales Tax, Additional Sales Tax, Withholding Tax, Anti-Dumping Duties and Income tax at the Dry-Port Sust, Gilgit and where after the goods are cleared and allowed to be ex-bonded from the dry-port. Respondents Nos.1 to 4 charged the Provincial/District Development Tax, which vary from 5% to 10% of the total Cost, Insurance and Freight Value (hereinafter called "CIF-Value" of the imported China-goods from the petitioners and others. The staff so deputed by respondents Nos.1 to 4 for recovery of Kohistan Development Fee-Cess also compelled the importers to accept the following schedule of payment and also illegally imposed payment @ 1% of the CIF-Value. Specification of carriage Amount of tax (i) Heno Truck Rs.25,000 (ii) Bedford Truck Rs.20,000 (iii) Toyota/Datsun Pick up Rs.7000 (iv) Flying Coach Rs.5000 The Customs Authorities at Sust Dry Port, Gilgit used to deduct "Kohsitan Development Fee-Cess" @ 1% of the CIF-Value, which was challenged before Northern Areas Chief Court, Gilgit through Writ Petition No.33 of 2006 and honourable Chief Court vide its judgment dated 16-12-2008 also declared the collection of "Kohsitan Development Fee-Cess" without jurisdiction and void ab initio. The Court further directed the concerned authorities to refund the amount, which they had illegally collected on account of "Kohsitan Development Fee-Cess".

7. Facing such a hardship situation, the Federal Minister during his Budget Speech 1999-2000 delivered in the National Assembly on 12-6-1999 is of immense importance and is reproduced below:-- "

93. Tax payers have been agitating against multiplicity of taxes and levies. People, businessmen and industrialists have to pay multiple-federal, provincial and local taxes and levies and they are being harassed at every step. The zila tax, export tax and octroi have made the life of the people miserable. They are forced with over 570 institutions (including metropolitan corporations, municipal corporations, municipal committees, town committees and district councils) collecting zilla and export tax and octroi at thousands of places. Every one hears the stories of extortions and corruptions. The contractors are collecting much more taxes that what is being paid to Government. To relieve the public from this regressive tax it has been decided to withdraw all such taxes from July 1, 1999. In order to facilitate the normal working of these local bodies, the Federal and Provincial Governments will provide Rs.19.5 billion to them, in which the share of Federal Government will be over Rs.13 billion. Mr. Speaker:

94. This is a big concession for the business and industrial community. It is, therefore, logical to expect that they would meet their responsibility by paying the national taxes honestly so that the national needs are met more effectively:"

8. Previously, Tax Collector Check Post Waso, District Council Kohistan had been recovering from the trader the Provincial Development Tax at the rate of 5% to 10% of the total price of goods on the ground, which was challenged in Writ Petition No.1042 of 2005 and honourable Division Bench of this Court held as under:-- "We have considered the arguments of the learned counsel for the parties. The comments furnished by respondents indicate that the respondents have denied the recovery at the rate of 5% to 10% of the total price of goods which demonstrate that there is no legal tax at the rate of 5% to 10%. It has been clearly admitted in para 8 of the comments that the tax is being charged at the rate of I% on CIF value. We do not see any force in the explanation offered by Mr. Mir Baz Khan TMO. Such an explanation, can be used as coverage for the unjustified recovery of unwarranted taxes. In the minutes it has been made clear that each truck / carrier will carry a certificate. The goods contained therein were covered under specific bill of entry which shall duly bear the number and date of the bill of entry. It is also provided in the minutes that the goods on which the custom duty has not been paid will be charged as per schedule (Notification No.AO11/LCB/12-4/96 dated 21st October, 1996. It is also provided in the meeting that to check any evasion/avoidance of the tax the DCO Kohistan at his own or on a complaint from the contractor shall verify the genuineness of contents of the bail of entry and the goods carried from Custom Department at Sust. Any mischief in payment of due tax was to be visited in the light of notification dated 31st October, 1996. In view of the foregoing circumstances and clear cut admission given in comments we allow this Writ Petition and direct that respondents shall recover the tax at the rate of 1% on CIF value of goods as provided in clause (b) of the minutes dated 2nd August, 2004."

9. The Customs Authorities Sust Dry Port, Gilgit used to deduct "Kohsitan Development Fee-Cess" @ 1% of the CIF-Value which was challenged before Northern Areas Chief Court, Gilgit through Writ Petition No.33 of 2006 and honourable Chief Court vide its judgment dated 16-12-2008 also declared the collection of "Kohsitan Development Fee-Cess" without jurisdiction and void ab initio. The Court further directed the concerned authorities to refund the amount, which they had illegally collected on account of "Kohsitan Development Fee-Cess".

10. The respondents were asked that how, when and under what law the disputed tax has been levied, they sought time to consult the record. Several adjournments were granted to them but except production of letter dated 9-10-2009, minutes dated 23-5-2006; notification issued on 21-10-1996 and the judgment of this Court, they failed to produce any resolution passed by the District Government or any legal procedure adopted under the Local Government Ordinance, 1979 or under Local Government Ordinance, 2005 wherein the procedure for levying of tax has been laid down. Under section 127 of Local Government Ordinance, 2005 provides:-- "Relations of Government with the District Government

(1) The District Government shall carry out its decentralized functions in accordance with the provisions of this Ordinance and the rules made thereunder. (2) The District Government shall collect such provincial tax or taxes within its local area as the Government may direct excluding those being collected by the Government through its own agencies and the District Government shall after the collection of such tax or taxes, deposit the same in the relevant Government account. (3) The Government may provide guidelines and render advice to the District Government through the concerned Zilla Nazim for achieving the ends of Government policy and for promoting economic, social and environmental Security of the Province".

11. Section 116 of the Ordinance ibid reads as under:-- "Taxes to be levied.

(1) A council may levy taxes, cesses, fees, rates, rents, tolls, charge, surcharge and levies specified in the Second Schedule. Provided that Government shall vet the tax proposal prior to the approval by the concerned Council; Provided further that the proposal shall be vetted within thirty days from the date of receipt of the proposal failing which it would be deemed to have been vetted by the Government. (2) No tax shall be levied without previous publication of the tax proposal and after inviting and hearing public objections. (3) A Council may, subject to provisos of subsection (1), increase, reduce, suspend, abolish or exempt any tax".

12. Under section 127 of the Ordinance ibid collection of tax is meant for the Provincial tax levied by the Provincial Government. No publication before levying of tax has been produced vide which the objections from public were invited nor any legal procedure for the imposition of disputed tax has been brought on record. It is also pertinent to note that throughout the country Government had abolished the Octroi/Zilla tax on the transportation of articles so transported within the country from one district to another.

13. Consequently, this writ petition is allowed and impugned "Kohistan Development Fee-Cess (KID-Cess)" is declared illegal and void. No order as to costs. M.H./210/P Petition allowed.