2000 PLP 170 (CLC)

{a) Major Industrial Estates of Hub, Nooriabad, Chunnian, Hattar and ' Gadoon andareas upto 10 kilometres outside their limits. (b)(i) The Municipal limits of Karachi and 40 kilometers areas around these limits. (ii) The Municipal/Cantonment limits of Lahore and 30 kilometers around these limits. (iii) The existing limits of Municipal Corporations and their Cantonment Boards and 10 kilometres areas around these limits. (iv). Areas falling within the limits of all Municipal Committees and Cantonment Boards and Islamabad Capital Territory." 22: On the. 2nd of March, 1992 through another SRO i.e SRO. 154 (1)/92 a proviso was added in the licences and permits fee order of 1979. It is reproduced below in extenso:‑‑ "In the aforesaid Order, in paragraph 3, in sub‑paragraph (i), for the proviso the following shall be substituted, namely‑‑ Provided that the rate of fee of import. licence and Import permits required for import of machinery, nor locally manufactured in Pakistan for initial installation, expansion, balancing, modernization and replacement, intended to be Ministry of Industries' Circular No.6(12)/90 Policy dated, the 17th December, 1990, as amended from time to time, shall be 2 % ad valorem."

23. Another circular on 2nd May, 1992 was issued by the Government of Pakistan, Ministry of Industries while keeping in view the policy of the Government of enlarging the scope of Rural Industrialization. This brought about a change in the definition of the term "Rural Areas". According to the new definition the Rural Industrial Area of Hattar was included in the definition of Rural Area and there was not much change in the rest of the Circular and which had mostly repeated the text of the Circular of 1990.

24. Upon the issuance of the new Circular of 2nd May, 1992 and the inclusion of Hattar in the definition of the Rural Area, the present petitioners addressed a letter to the Secretary Commerce, Government of Pakistan, Islamabad and the Chief Controller of Import and Export, Government of Pakistan, Islamabad on May 22nd, 1992 inter alia stating:‑‑ (1) We are a manufacturing concern that has set up an industrial undertaking in Hattar Industrial Area under the incentive schemes of the Government of Pakistan. (2) We obtained import licence No.B 255419, dated 15‑9‑1991 and No.255423, dated 30‑9‑1991 for the import of machinery for the setting up of the said industrial undertaking. (3) The import licence fee at the time of the opening of the Import Licence was 6 % . As such we were required to and paid the requisite fee of 6 % . (4) Now, vide Government of Pakistan Notification, dated May 22, 1991, Hattar Industrial Area has been included in the definition of 'Rural Area', for which the reduced rate of 2 % is applicable for the Import Licence Fee. . (5) We have not yet imported the machinery for which the said import licence fee deposited by us for the import of machinery for setting up an industrial undertaking in Hattar, on the following grounds and conditions: (a) The Constitution of Pakistan promises to very person equality before law and the equal protection of law, enjoining equal treatment for those placed in a similar situation and prohibiting any form of arbitrary treatment. Denying us a concession being afforded to others simply on the ground that we had obtained, the import licence on a date prior to the Notification, dated May 22, 1992, especially in light of the fact that no machinery has yet been imported as may make it a past and closed transaction, would appear to be against the spirit it (sic) not the letter of the Constitutional provisions referred to above. (b) It is a time honoured principle that financial status and instruments imposing financial obligation on the subjects of the Government are to be interpreted in favour of the subject, and the latter not unduly denied an exemption being extended by the law. As such if the noted concession is also extended to Biafo, it would only be in consonance with the established legal practice. (c) The fact that the Hattar Industrial Area is not allowed to be included in the definition of a ' Rural Area' .must mean that even previously it was nevertheless a Rural Area. Hence, exemptions earmarked for rural areas must be applied retrospectively; lest the whole exercise appear capricious and arbitrary. (d) Even otherwise, granting the said concession to us would only highlight the good faith of the Government in extending all legitimate concessions to investors in the area and would further encourage investment therein. (e) Even otherwise, the Lahore High Court has now decided that Import License Fees at the rate of 6% is violative of the Constitution of the Islamic Republic of Pakistan, 1973, and could only have been charged at the rate of 2 % whether for areas falling within the definition of Rural Areas, or not."

25. According to them Hattar Industrial Area was always of Rural Area and its exclusion from the earlier circular was incorrect and if they were not to be granted exemption since the date they obtained their licences in 1991 the whole exercise of exemption was to look capricious and arbitrary.

26. The respondents in this connection submitted their parawise comments and stated that the licence fee at the rate of 6% was being charged for services rendered by ‑the Government and also for providing benefit in the form of foreign exchange allocation at official rate out of the Government foreign exchange resources. Except this reply nothing else was stated in elaboration.

27. Taxation is that inherent power of Government to raise fund with which it promotes general welfare and looks after the protection of citizens State v. Kromarek 52, N.W.2d 713,715,78 N.D.

769. In fact tax is a charge to pay the cost of Government without regard to special benefits conferred (In re Shurtz's will, 46 N.W.2d 559,562, 242 Iowa 448.

28. A fee on the other hand is distinguishable from a tax inasmuch as it is meant to defray the cost of particular services rendered to particular individuals. In an Australian case ‑60 CLC 263 and which has been recurringly quoted, Latham, CJ defines both tax and fee in the following words:‑‑ "A tax is a compulsory exaction of money by public authority for public purposes enforcible by law and is not payment for services rendered. A fee may be generally defined to be a charge for a special service rendered to individuals by some Governmental Agency. The amount of the fee levied is supposed to be based on the expenses incurred by the Government in rendering the service, though in many cases the costs are arbitrarily assessed. A fee may be compulsory levies as well as a tax and the distinction between them lies primarily in the fact that a tax is levied as a part of a common burden, while a fee is a payment for a special benefit or privilege. The special advantage may assume a secondary importance as compared with the primary motive of regulation in the public interest, as, for example, in the case of registration fee for documents or marriage licences."

29. Therefore, the distinction between a tax and fee lies primarily in the fact that tax is levied as a part of common burden or general revenue. while a fee is a payment for special benefit or privilege. This distinction between tax and fee was adopted in the case of Abdul Majid and others PLD 1960 Dacca 502 and in the case of Mahboob Yar Khan PLD 1975 Lah.

748. However, it should not be forgotten that there is no generic difference between a tax and fee. Both are compulsory exaction of money by public authorities. A tax is imposed for public purposes and is not supported by any consideration of service rendered in return. Whereas a fee is levied in view of services rendered. Consequently, there is an element of quid pro quo between the payer of the fee and the authority which imposes it. ,

30. In the Dacca case (Abdul Majid pd others PLD 1960 Dacca 502 section 5 of the East Pakistan Finance Act (10 of 457) which levied registration fee on hotels was challenged and the observation was: "The distinction between a tax and a fee lies primarily in the fact that a tax is levied as a part of a common burden, while a fee is a payment for special benefit or privilege. Fees confer a special capacity, although the special advantage, as for example in the case of registration fee for documents or marriage licences, is secondary to the primary motive of regulation in the public interest. Public interest seems to he at the basis of all impositions, but in a fee it is some special benefit which the individual receives. It is the special benefit accruing to the individual which is the reason for payment in the case of fees; in the case of a tax, the particular advantage, if it exists at all, is an incidental result of State action. The preamble of the East Pakistan Finance Act, 1957 clearly mentions that the purpose of Act is to raise funds for augmentation of the revenue of the province. There is nothing in the Act or in the Rules framed under it to show that the fee levied under section 5 of the Act was levied for some services to be rendered by the State to the hotels. restaurants, etc. The fact that no part of this fees is ear‑marked or specified for rendering service to the payee makes it a tax and not a fee. and consequently it was beyond the power of the Provincial Legislature to enact that provisions."

31. There are authorities both of India and Pakistan which do say that the benefit against payment of fee cannot be arithmetically co‑related. However, there should be some reasonableness attached to the quantum of a fee vis‑a‑vis the service rendered and this cannot be capricious or arbitrary. That in the matter of fee, the Government has always to offer an explanation vis‑a‑vis the lip reasonableness and as long as there is reasonableness the requirements of quid pro quo gets satisfied.

32. In the case of Sh. Muhammad Ismail PLD 1966 SC 388 it was laid that no hard and fast rule could be laid down to distinct a tax from fee and the question is really one determinable on the basis of special facts and circumstances of each case. Thus, a co‑relation between the service rendered and the amount of levy should exist but a levy is not to be regarded as a tax merely because of the absence of uniformity in its incidence nor because some of the contributors do not obtain the same degree of service as others. Reference in this connection may be made to the case AIR 1963 SC 966.

33. In its parawise comments the Government has stated that it renders a particular kind of service i.e through the provisions of the foreign exchange from the foreign exchange reserve of the Government and during the course of arguments the learned standing counsel for the State further, pointed out that additionally service involves scrutiny of the .goods and facilitation providing genuine goods to an importer which involves various phases of checking including the handling of goods in the port areas etc.

34. While sending its notice to the Government and asking for retrospective application of the 1992 circular, no ground was taken by the petitioner of "no service". Therefore, whatever service the Government was providing was not an issue. The issues really were with respect to the reasonableness attached to the definition of the term "Rural Area" and the capricious and arbitrary attitude of the Government, in this connection. Inasmuch as that it excluded Hattar from the definition of Rural Industrial Area in its earlier circular of 1990, but included it in the later circular. As well as regarding the period when the service was to be actually rendered and its cost/fee. 35, The case of the petitioners had not been rendered as past and closed transaction at the time of the issuance of the 1992 circular. Because as was stated by them in their letter to the Secretary Commerce, the Import licences were obtained by them in September. 1991. But the machinery in question had not yet been imported, Meaning thereby that whatever services were to be rendered by the Government had yet to be rendered, and thus the price for such services f should be the same as prescribed by the current circular of 1992 i.e 2 % ad valorem licence fee instead of 6% previously charged. There is weight in this argument.

36. It has also not been explained what extra service was to be rendered to the petitioner at the time of actual import of its machinery, which had to arrive after the later circular compared to the services which were to be rendered to case of any other importer for the same industrial estate after the subsequent Notification. Therefore, if the same sort of service is to be rendered at the time of the arrival of the goods merely because an import licence was obtained few months prior to the change should not be taken to the disadvantage of the citizen. In this connection, equality of citizen guaranteed by Article 25 of the Constitution, is to be kept in mind alongwith the principles of fairness which is taught to us by Islam. Reference in this connection may also be made to AIR 1971 SC 1182 wherein it was held: "The power of any Legislature to levy fee is conditioned by the fact that it must be by and large a quid pro quo for the service rendered. If a levy purporting to be a fee is found to be as exaction without doing any service or if it is found that the levy is wholly disproportionate to the services rendered then the levy becomes invalid." Reference may also be made to the Maxim Sequi debt potentia justitiam non praecedere (Power should follow justice, not precede it)

37. In the case of Ayaz Textile Mills Ltd. v. Federation of Pakistan PLD 1993 Lah. 194 it was observed: "Generally the fee should be relatable to the services rendered by the statutory functionaries. However, fee may be charged for conferment of a benefit or privilege as well. The import or export of certain items/goods may be allowed or banned by the Government in its discretion keeping in view a number of considerations including the interests of the indigenous industries If import of certain items is banned then bringing of those items in the country in violation of the law would amount to _ smuggling entailing penal consequences. Therefore, when the Government chooses to offer the benefit or privilege of import of the said i1pms/goods through the grant of import licence it can charge a reasonable fee for the benefit or privilege offered as well as for services rendered in the field of import and export. The tax holiday was admissible for the industries set up in rural area between 1st of December, 1990 to 30th of June, 1995. The licence fee for all such industries was reduced from 6 % to 2 % . Thus, practically the policy had to take effect from 1st of December, 1990. Lastly, the Government issued S.R.O.. No 1317(1)/90, dated 22‑12‑1990 which amended the licences and Permits Fee Order, 1979 by introducing the following proviso therein:‑ Provided that the rate of fee on import licences or import permits required for import of machinery not manufactured in Pakistan and intended to be installed in Rural Areas as defined in Ministry of Industries Circular No.6(12)/90‑Policy, dated 17‑12‑1990 shall be 2% ad. valorem. Thus, the earlier policy of allowing complete exemption from payment of licence fee was not given effect to by the Government. The argument that the Government was estopped from backing out of its earlier assurances/commitments of allowing complete exemption, has no force. It was the statutory authority of the Federal Government to impose the licence fee and it had levied licence fee which at the relevant time was 6% ad valorem. The principle of promissory estoppel cannot be invoked against the statute. Instead of allowing complete exemption, the Government allowed a number of other concessions to the industries established in the rural areas and also reduced the licence fee from 6% to 2 % ad valorem. The act does not lay down or indicate any rational basis for determining the quantum of licence fee. It. has been left in the absolute discretion of the Government. However, exercise of the discretion had to be subject to the rule of fairness and reasonableness. The Government cannot arbitrarily fix an exorbitant rate of licence fee which may have the effect of frustrating the coveted objective of Industrialization in rural areas. It was laid down in the case of Federation of Pakistan and others v. Ch. Muhammad Aslam and others 1986 SCMR 916 that the executive powers had to be exercised fairly and justly for advancing object of legislation. Mere wish or whim of the executive authorities cannot form a proper basis for exercise of discretionary powers as held in the case of Kh. Muhammad Sharif v. Federation of Pakistan through Secretary, Cabinet Division. Government of Pakistan, Islamabad and 18 others PLT) 1988 l.ah 725' There is no cavil with the proposition that generally the fee should be relatable to the services rendered by the statutory functionaries. However, fee may be charged for conferment of a benefit or privilege as well. The import or export of certain items/goods may be allowed or banned by the Government in its discretion keeping in view a number of considerations including the interests or the indigenous industries. If import of certain items is banned then bringing of those items in the country in violation of the law would amount to smuggling entailing penal consequences. Therefore, when the Government chooses to offer the benefit or privilege of import of the said items/goods through the grant of import licence, it can charge a reasonable fee for the benefit or privilege offered as well as for service rendered in the field of import and export. "

38. There is no cogent explanation why Hattar Rural Industrial Area was brought out and later brought in, in the definition of "Rural Area". And in the written statement filed by the Government a proper explanation has not been given. It leads to the presumption that the definition as such was not formulated without reasonableness or care nor on any scientific basis.

39. In the subsequent Notification the Government has allowed concession through charging 2% ad valorem import licence fee from the Industrial Hattar in the definition of the Rural Industrial Area, thus, extending its concessions meant for rural areas. In fact the Government has cured the error which it committed by issuing the earlier Notification when Hattar was taken out of the definition of Rural Industrial Unit. This court is therefore, right in thinking that the exclusion of Hattar. Industrial Area from the definition of "Rural Area" in the earlier Notification and without an explanation was, in fact an exercise of discretion without any reasonabless or basis.

40. The most sensible thing, therefore, will be to accept the Government's latest position with respect to the status of Hattar which is reflected in the subsequent Notification. The earlier Notification being erroneous and without any reasonable consideration is, therefore, of no value in this connection.

41. We have to keep in view the principle of quid pro quo and also the fact that the machinery had to be imported during the currency of the second Notification allowing concessional ad valorem import fee of 2 % to the Rural Industrial Area of Hattar and we have also to keep in view the principle of reasonableness, which dictates that the cost of the service has to correspond with the date it is actually rendered. The cost here is in the shape of a fee. When fee is reduced at a time when the actual service is to be rendered its prevalent rates should become applicable. The Government is, therefore, obliged to charge the licence fee in accordance With the time frame when it renders the service for which the fee is being taken. Which will be at the rate of 2 % after the coming into force of the Notification of 2nd May, 1992 issued by the Government of Pakistan, Ministry of Industries and this rate of fee should in all fairness apply to the petitioner under the circumstances of this case. The Government is, therefore, asked to charge the fee accordingly and whatever extra amount was charged be refunded after the calculation to the petitioner.

43. The writ petition is, therefore, accepted in these terms with no order as to costs. Q.M.H./M.A.K./B‑72/L Petitioner allowed: