2004 PLP 192 (YLR)

12. This provision was challenged on the ground of amounting to excessive or impermissible delegation of the legislative power because neither the guiding principles for determination of capacity nor the rate of duty was spelt out by the Legislature itself and both these functions were delegated to an outside agency i.e. the Central Board of Revenue. In his usual lucid style (Zafar Hussain Mirza, J.) noticed the developing trend or delegation of a multitude of powers in the area of taxation being delegated by Legislatures to outside agencies and arrived at the conclusion that the rule against excessive delegation would be attracted only when the Legislature had effaced itself and abdicated its power in favour of an outside agency, thereby creating a parallel Legislature. It was held that as long as the Legislature retained the power to amend the newly‑added provision, the mere fact that a discretion was conferred upon the C.B.R. either to charge duty on the basis of actual production under section 3(1) or on the basis of production capacity under section 3(4) did not render the legislation invalid on grounds of excessive delegation. The Court also declined to follow the rule laid down in some Indian precedents to the effect that the guidelines must be provided by the Legislature itself.

13. The above pronouncement being the latest declaration of law on the subject by the Honourable Supreme Court we must express our inability to subscribe to the proposition canvassed by Mr. Muhammad Ali Saeed. Learned Attorney‑Genera argued that in any event since the levy in question could only be imposed for the purposes off' the Sindh Local Government Ordinance, which were clearly specified in the statute sufficient guidelines did exist so as to forestall any challenge on the ground of excessive delegation we may add that since the levy is only in the nature of fee for municipal services rendered clear guidelines exist to indicate that the rates should have a reasonable nexus with the value of services rendered. We therefore, entirely agree with the learned Attorney -General on this aspects of the matter.

14. The next contention advanced on behalf of the petitioner was that conservancy tax was essentially in the nature of a fee for services rendered and the extent of the levy must bear a reasonable nexus with the cost of the service. It was argued that a sudden revision of rates having an impact of 10 to 20 times from what was payable earlier ex facie established that such revision was arbitrary and liable to be struck down on this ground alone. It may be explained at the outset that though the Sindh Local Government Ordinance used the generic expression "tax" to cover any tax, fee or cess the basic distinction between a tax and a fee is recognized by several pronouncements of the Honourable Supreme Court i.e. Muhammad Ismail v. Chief Cotton Inspector PLD 1966 SC 388; Government of N.‑W.F.P. v. Rahimullah 1992 SCMR 750 and Collector of Customs v. Shaikh Spinning Mills 1999 SCMR 1402 need to be kept in view. The consistent view of the Honourable Supreme Court appears to be that while both tax and fee are compulsory exactions the essential difference lies in the fact that while a tax is levied for the purposes of the general revenues of the State a fee is imposed for the purposes of rendering specific services and its burden falls upon persons to whom such services are provided. It has therefore, been held that while it may not be possible to charge fee only on the basis of the actual value of such services collected with mathematical precession some co‑relations between the value of services and the quantum of fee must exist.

15. With respect to the impugned levy it may be observed that the respondent No.2 was charged with the responsibility of providing conservancy services for rendition of which it collects the levy in question. No doubt Item 3 of Part I of the Vth Schedule to the Sindh Local Government Ordinance 1979 enabled a Metropolitan Corporation to levy "conservancy tax" but such description could not conclusively establish that the levy was only a tax and not fee. Evidently under section 2(70) the expression "tax" was meant to include any toll, fee or other impost leviable under the Ordinance and therefore, the use of the expression "tax" in the Ordinance would include a fee. Such description for the limited purpose of the Ordinance would not make the fee to be treated as tax for all purposes. At the same time it needs to be noted that the above power became available to a Metropolitan Corporation only through the Sindh Local Government (Amendment) Act, 1996 and prior thereto the function of solid vast management was to be performed by Zonal Municipal Corporation which were authorized to levy "conservancy rates" in terms of Item 13 of Part II to the Vth Schedule. Obviously the transfer of function from one local body to another followed by transfer of collecting an amount of power to levy a charge for services rendered could not convert a fee into a tax for all purposes. Mr. Saeed therefore, appears to be right in contending that for all intents and purposes the conservancy tax is merely a fee and therefore, some reasonable nexus between the value of the services and the amount demanded must be shown. He also seems to be right in contending that prima facie the impact of enhancing to the extent of 10 to 20 times appear to be arbitrary and unreasonable. Learned Attorney‑General attempted to argue that in taxing statutes a levy could only be struck down if it was found to be confiscatory in nature. We agree with him to the extent that this principle would apply when an impost in the nature of the tax is questioned. Nevertheless, we find ourselves unable to subscribe to the proposition even in respect of fee where the well‑settled rule must be shown that some co‑relations between the quantum of the levy and the value of services rendered exists.

16. Nevertheless, the detailed counter -affidavits alongwith the data placed on record by the respondent No.3 appears to show that conservancy services were being provided at a very heavy subsidy and the old rates hardly 10% of the total cost was recovered under the old rates charged. Even after the introduction of the impugned system of assessment only about 50% of the costs could be recovered while the remainder had to be subsidised. No affidavit in rejoinder to rebut these contentions was filed. We, therefore, find force in the alternate contention of the learned Attorney‑General that it could not be stated on the basis of material available before the Court that no reasonable nexus between the amount of tax and the value of services existed. The contention of the learned counsel for the petitioner on this ground as well must be repelled.

17. However, the last contention of Mr. Muhammad Ali Sayeed that no direction of the Government to levy the impost in question existed appears to be crucial. It was expressly alleged in paras.5 to 7 of the memo. of petition in Civil Petition No.730 of 1991 that the petitioners repeatedly asked fur a copy of the Sindh Government Notification No. SO(IV)6- 15/90/KWSB, dated 17‑7‑1990, alleged to contain the direction of the Government to levy conservancy tax at the rate of 15% of water charges but the same was never made available to them. It was further stated that the petitioners themselves made efforts to obtain it but to no avail. Accordingly it was categorically asserted in ground (e) "That, the alleged Government Notification relied upon by the Municipal Commissioner for the purpose of giving effect to a so‑called decision of the Government is, in fact, a non-existent instrument". Copies of letters of the Secretary of the petitioner addressed to the Secretary to the Government Department purportedly issuing the Notification and the Managing Director of respondent No.3 requesting for a copy have been placed on record as Annexures D and E to the petition. In response to the same, in the counter‑affidavit filed on behalf of the respondents Nos.2 and 3 by a Deputy Director (Taxes) of the respondent No.3 a rather a ridiculous plea was taken in para. 10 to the effect that "the letter of the Government was a secret/privileged document and could not be made public.

18. The matter however, does not end here. The order sheet shows that when this petition was taken up for hearing on 16‑9‑1991 after pre‑admission notice to the respondents, the Court expressly directed the learned A.A.‑G. to place on record the decision of the Government to increase conservancy tax and hearing was adjourned to 26‑9‑1991 to enable him to do so. On the adjourned date of hearing he was unable to do so and another adjournment was granted. Even at the third opportunity on 1‑10‑1991 no such decision could be produced and thereupon the petition was admitted to regular hearing and the ad interim order passed earlier, was confirmed.

19. Nevertheless, stretching the presumption of regularity to official acts to the maximum extent after the final hearing we once again requested the learned Additional Advocate‑General and learned counsel for respondent No.3, to place a copy of the alleged decision dated 17‑7‑1990 on record. Mr. Abdul Karim Khan, learned counsel for the respondent No.3 placed on record a Notification dated 5‑8‑1992 (whose effect will be considered hereinafter) but filed a statement that despite diligent efforts he could not obtain the desired Notification. Mr. Suleman Habibullah learned Additional Advocate General could only lay his hands on the impugned Notification issued by the Municipal Commissioner. On 8‑5‑2003 both learned counsel stated at the bar that they were unable to obtain copies of the alleged directions of the Provincial Government dated 17‑7‑1990.

20. Mr. Makhdoom Ali Khan, learned Attorney‑General of Pakistan, with his usual candour, straightaway acknowledged that the plea of privilege was entirely untenable in view of the pronouncement of the Honourable Supreme Court in Benazir Bhutto v. The President of Pakistan PLD 1992 SC

492. In any event even prior to the above landmark decision of the apex Court the well‑settled rule was, as held in Abdul Baqi Baloch v. State PLD 1968 SC 313 that whenever privilege is claimed in respect of any document, the same should be placed before the Court which would decide whether the claim is genuine or otherwise. In the instant case it is evident from the record that after filing a counter -affidavit wherein privilege was claimed, the Court expressly directed the respondents to lace the document on record and despite t1ree directions, the order was not complied with. From the above we have no option but to reach the irresistible conclusion that the plea of privilege was raised only to suppress facts and no direction of the Provincial Government under section 62(1) of the Sindh Local Government Ordinance appeared to exist. The only other permissible mode was to levy the tax under section 60 by the respondent No.2 itself but in that case the requirement of Imposition of Taxes Rules were to be followed which was not done. Therefore, we are constrained to hold that the Notification dated 29‑11‑1990 issued by the Municipal Commissioner under the purported exercise of powers under section 62(2) of the Ordinance was without lawful authority.

21. Mr. Abdul Karim Khan however, brought to our notice a subsequent direction from the Provincial Government dated 4th August, 1992 which reads as under:‑‑ Government of Sindh Local Government Public Health Engineering & Rural Development Department. Ref. No. SOI(LG)KWSB‑5(19)/92, Dated 4th August 1992 Notification The Municipal Commissioner, Karachi Metropolitan Corporation, Karachi. SUBJECT: ISSUANCE OF NOTI FICATION REGARD‑ING NEW WATER TARIFF SCHEDULE WITH 50% AVERAGE INCREASE AND CONSE QUENTIAL CON‑SERVANCY (SEWERAGE) RAIF SCHEDULE BEING LINKED TO WATER RATES. In exercise of the powers vested under subsection (1) of section 62 of Sindh Local Government Ordinance 1979, the Government of Sindh are pleased to direct the Municipal Commissioner Karachi Metropolitan Corporation to notify new water tariff with 50% average increase on differential slap basis and consequential conservancy (sewerage) rate schedule being linked to water rates to be effective from the date of notification, as per enclosed draft schedule. (Sd.) (Ahmed Maqsood Hameedi), Additional Chief Secretary (LG), Government of Sindh. "

22. It seems that through this Notification the Government directed the respondent No.2 to notify new water tariff and conservancy rate being linked to such tariff to be effected from the date of the Notification. It seems that pursuant to the aforesaid directions a Notification dated 6th August, 1992 was issued by the Municipal Commissioner of respondent No.2 containing a revised schedule of water rates and conservancy charges for industrial consumers at the rate of 50% of the water rates. In our humble opinion such levy is unexceptionable. For the foregoing reasons we would allow these petitions to the extent that the conservancy rates claimed by the respondents w.e.f. 1st July, 1990 up to 5th August, 1992 are declared to be unlawful but the rates effected from 6th August, 1992 at the rate of 50% of water charges' are held to be valid. The respondents would be entitled to collect conservancy tax accordingly from the amount deposited in Court and the remainder alongwith profits earned would be refunded to the petitioners. H.B.T./A‑504/K Order accordingly.