P L D 1967 Lahore 510 (PLP)

MUHAMMAD AFZAL CHEEMA, J.‑This judgment shall dispose of Writ Petitions Nos. 291 and 788 of 1958, involving similar questions of fact and law. Writ Petition No. 291 of 1958 filed by Saddar Din, a shop keeper of village Bhaun, tehsil Chakwal, district Jhelum, under Article 170 of the 1956 Constitution, calls in question the legality and constitutionality of Government Notification No. 6549 C. S. T‑57, issued by the Government of West Pakistan in pursu ance of the provisions of section 69 (1) of the Village Panchayats Act, 1939, imposing cess on the entry of goods in the Panchayat area for the consumption, use or sale therein at the rates detailed in column No. 3 of the Schedule (Annexure A ).

2. The facts of the case giving rise to the petition are, that a Panchayat was established in village Bhaun, tehsil Chakwal, district Jhelum, under the Punjab Village Panchayat Act, 1939, since repealed. The following new section 19 (A) was inserted in this Act by the Punjab Village Panchayat Act, 1952. "The Government may by notification extend to any Panchayat area the provisions of any section of the Punjab Municipal Act, 1911 subject to such limitations and modifica tions, if any, as the Government may think fit. On the 15th of January 1958, in exercise of the powers conferred by section 19 (A), the Government of West Pakistan was pleased to extend to the Panchayat area of village Bhaun in the Chakwal, tehsil the Jhelum District, the provisions of sections 78, 82 and 83 of the Punjab Municipal Act, 1911, subject to the following Notification: "(1) For the word 'Municipality' wherever it occurs the words 'Panchayat Area' shall be substituted. (2) For the word 'Committee' wherever it occurs the word 'Panchayat' shall be substituted. (3) In the proviso to section 82, for the word 'President' the word 'Sarpanch' and for the word 'Vice‑President' the word 'Naib Surpanch' shall be substituted." The relevant notification is Annexure 'B'. It may be mentioned in this context that sections 78, 82 and 83 of the Punjab Municipal Act whose provisions were extended to the Punchayat area of village Bhaun, relate respectively to the powers of a Municipal Committee to levy Octroi or terminal tax within its limits, seizure of any article, vehicle or animal on which Octroi or toll is chargeable, as the case may be and the power to lease, collection of octroi or tolls. Two days later, i.e., on 17th of January 1958, the Panchayat of Bhaun with the previous sanction of the Governor of West Pakistan imposed the levy in question on the entry of goods in the Panchayat area vide the impugned notification Annexure A .

3. Feeling aggrieved by the imposition of cess, the petitioner, who is a retail dealer of village Bhaun, filed this writ petition in a representative capacity impleading the Panchayat of the village, the Government of West Pakistan, and the Director of Panchayats, as respondents 1 to 3, respectively.

4. It would be pertinent to point out that since Article 4 of the Basic Democracies Order, 1959, bad the effect of repealing several enactments mentioned in the first schedule of the order, including the Punjab Village Panchayat Act of 1939, and as such the writ should have become infructuous, but the following deeming cause (2) of the Article permitted the continuance of the imposition of case, whereby the petitioner even now feels aggrieved "(2) Where an enactment stands repealed under clause (1), any appointment, rule, regulation or by‑law made, notification, order or notice issued, tax imposed or assessed. contract entered into, suit instituted or action taken under such enactment shall, so far as it is not inconsistent with the provisions of this Order and the rules, be deemed to have been respectively made, issued, imposed or assessed, entered into, instituted or taken under this Order." An objection was, however, raised by the learned Advocate General that with the repeal of the Punjab Panchayat Act, the Panchayat of village Bhaun and the Director of Panchayats, West Pakistan respondents 1 and 3, had ceased to exist and as such at least to this extent the petition had become infructuous inasmuch as, no direction could be issued to them. This position could not be controverted, but since one of the respondents, namely, the Government of West Pakistan was still in the field to resist the petition, the arguments were allowed to proceed.

5. Although in the petition, the imposition and collection of cess was attacked on several grounds of discrimination, excessive delegations of authority and unjustness, the learned counsel for the petitioner concentrated only on one contention which though not specifically taken in the grounds was nevertheless allowed to be raised being of a legal character. The vires of the imposition of cess was questioned on the ground that subsection (1) of section 69 of the Punjab Village Panchayat Act, 1939, which according to the impugned notification formed the basis of the levy in question "empowered a Panchayat to levy tax and not cess." The argument was that under the aforesaid provision, a Panchayat could, with the previous sanction of the Government, levy any tax included in the provincial sphere of legislation under the Government of India Act, 1935, and since the relevant entry was contained in item No. 49 of List II of Schedule VII of the Government of India Act, which used the word cess in contra distinction to the word `tax', used in other items, the imposition of cess was not covered by the word `tax' as used in sub section (1) of section 69 of the Panchayats Act. For a proper appreciation of the argument, it would be necessary to reproduce section 69 of the Act as well as item 49 of List II of Schedule VII of the Government of India Act, 1935. "69. (1) A Panchayat may, with the previous sanction of Government levy any tax which the provincial Legislature has power to impose in the province under the Government of India Act, 1935." Item No. 49 of List II of Schedule VII of the Government of India Act, 1935: "49.‑Cesses on the entry of goods into a local area for consumption, use or sale therein." It was vehemently argued by the learned counsel for the petitioner that since in the Government of India Act, different expressions, namely, tax , cess , rate , fee , have been used in the same context, but in contra‑distinction to one another, the only reasonable inference that could be drawn from this was that they were not synonymously used as one being interchangeable with the o other, and that the British Parliament must have precisely and purposely used these different expressions. Efforts were ‑made to show that tax and cess were two different n expressions connoting different kinds of levies with different objects in view. It was also argued that even otherwise, such an imposition of cess had no reasonable basis or justification on the element of quid pro quo. Reliance was placed in this regard on Ratilal Panachand Gandhi v. State of Bombay (A I R 1953 Bom. 242). In this case the constitutionality of certain provisions of an Act known as Bombay Public Trust Act passed with a view to regulating and providing for the better administration of public religious and charitable trusts in the State of Bombay was challenged. The learned counsel for the petitioner pressed into service the following observation of Shah, J. contained in paragraph 48 of the judgment:‑ "A fee is not a payment in the nature of price paid for buying an article or remuneration for services rendered pursuant to a contract. The fee levied is the distributive share of the liability under a scheme for distribution of liability which falls on any person who either claims the service or who obtains the benefit of the service provided by a State, whether or not that person obtains his share of service which he regards in value as equivalent to the amount that he is called upon to pay. There is a distinction and a well‑recognized distinction between what tray be regarded as price for service which may be obtained and the levy of a fee. If a compulsory service is provided by the State, all persons who became eligible for the service have to pay for the same, according to the rule at which the liability is imposed. Provided the total cost of supplying the service bears a just and true relation to the total levy, it is immaterial that burden of the levy on some persons is not commensurate with the value of the service actually rendered to them." The argument, in our view, is besides the point, inasmuch as, the above quotation seeks to maintain a distinction between a price for services and the levy of a fee. The word fee from the own showing of the learned counsel, cannot be synonymously used for cess or tax , and it is the strict connotation of these two expressions and the distinction between them, if any, which is under consideration before us.

6. The next authority on which reliance was placed by the learned counsel for the petitioner is Gwalior Sugar Co. Ltd. and others v. State of Madhya Bharat (AIR 1954 MB196). In this case an application under section 226 of the Constitution of India was made for issuance of writ of mandamus, directing the State of Madhya Bharat not to levy any cess on sugar‑cane purchased by the petitioner company. The learned Judges maintained a distinction between cess and a license fee . A 'cess' was defined as a tax levied for a specific purpose often with a prefixed word defining the object. A licence, on the other hand, involved a permission to trade subject to the compliance of certain conditions. Reference was made to the following observation in Muhammad Yasin v. Town Area Committee, Jalalabad (A I R 1952 S C 115 (E)). "A licence fee on a business not only takes away the property of the licence but also operates as a restriction on his right to carry on his business, for without the payment of such fee, the business cannot be carried on at all." The argument that a cess puts a restriction to carry on business as the cess is not allowed to be added to the cost of production was repelled. The following observation differentiated a cess from tax: "The moment the collection went to the consolidated fund without being specified or earmarked for the purpose with which the cess was levied, the cess lost its character of being a cess and became virtually a tax, and the quid pro quo element on which the reasonable classification was sought to be based, ceased to exist. I am far from suggesting that classification in taxation is not permissible. It is permissible but as the essence of a tax is the absence of quid pro quo, the classification cannot obviously be based on the element of quid pro quo. It may for example rest on the capacity to pay.

7. As already stated, the impugned notification imposing the cess in question is based on section 69 of the Panchayats Act under which a Panchayat was empowered to levy any tax within the competence of the Provisional Legislature under the Government of India Act, 1935. Items 41, 42, 44, 46, 47, 48 and 50 of List 11 of Schedule VII of the Act which enumerates the subjects of the Provincial Legislature deal with taxes on incomes, lands professions, animals, boats. base of goods, luxuries, etc, The terms 'duty', 'rate', 'dues' and 'tolls' have also been mentioned in items 43, 51, 52 and 53, respectively. Then again, items 49 and 54 respectively speak of 'cess' and 'fees', and are reproduced below: Item 49.‑ Cesses on the entry of goods into a local area for consumption, use or sale therein. Item 54.‑ Fees in respect of any of the matters in this list, but not including fees taken in any Court." In the authorities discussed earlier, the connotations and scope of the term 'fee' has already been dealt with. The language of item 54 would clearly indicate that fees could be levied in respect of all matters contained in the list including items relating to tax.

8. The last authority pressed into service was Abdul Majid and another v. Province of East Pakistan and others (P L D 1960 Dacca 502). In this case, the petitioners who were operators of hotels applied for issue of a writ of mandamus directing the Province of East Pakistan and others to cancel certain notices served on them whereby they were required to pay penalty for non‑payment of Registration Fee under section 5 of the East Pakistan Companies Act, whose validity was challenged on the ground that the Registration Fees were in fact a tax which the Provincial Government was not competent to levy. On the other hand, it was contended by the Advocate‑General that the Registration Fees were chargeable on the respective income of the hotels and that the Provincial Government was competent to legislate upon this point, the legislation being covered by entries 59 and 93 of the Provincial List of Schedule VII of the Constitution. In order to determine the question whether levy was a tax or fee , their Lordships relying upon The Commissioner, Hindu Religious Endow ments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt (A I R 1954 SC2) quoted the following observation: "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 concern a special capacity, although the special advantage as for example in the case of registration fees for documents or marriage licences, is secondary to the primary motive of regulation in the public interest, vide Findlay Shirras on Science of Public Finance', Vol. I, page

202. Public interest seems to be at the basis of all impositions, but in a fee it is some special benefit which the individual receives. As Seligman says, 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, vide Seligman's 'Essays on Taxation', page 408." It would be advantageous to reproduce in extenso, the following three paragraphs from the short judgment: "If, as we hold, a fee is regarded as a sort of return or consideration for services rendered, it is absolutely necessary that the levy of fees should, on the face of the legislative provision, be correlated to the expenses incurred by Govern ment in rendering the services. As indicated in Article 110 of the Constitution, ordinarily there are two classes of cases where Government imposes 'fees' upon persons. In the first class of cases, Government simply grants a permission or privilege to a person to do something, which otherwise that person would not be competent to do, and extracts fees, either heavy or moderate, from that person in return for the privilege that is conferred. A most common illustration of this type of cases is furnished by the licence fees for motor vehicles. Here the costs incurred by the Government in maintaining an office or bureau for the granting of licences may be very small, and the amount of imposition that is levied is based really not upon the costs incurred by the Government, but upon the benefit that the individual receives. In such cases, according to all the writers on public finance, the tax element is predominant, vide Selig man's 'Essays on Taxation', page 409, and if the money paid by the licence‑holders goes for the upkeep of roads and other matters of general public utility, the licence fee cannot but by regarded as a tax. In the other class of cases, the Government does some positive work for the benefit of persons, and the money is taken as the return for the work done or services rendered, if the money thus paid is set apart and appropriated specifically for the performance of such work, and is not merged in the public revenues for the benefit of the general public, it could be counted as fees and not a tax." In other words, "fees" could also be levied on taxable items in addition to taxes. We, in this country, are quite fimiliar with what is known as Cotton Fee imposed under the Cotton Control Act, 1949, whose purpose, scope and validity were examined by their Lordships of the Supreme Court in a recent judgment, cited as Shaikh Muhammad Ismail & Co. Ltd., Lahore v. The Chief Cotton Inspector, Multan Division, Multan and others (P L D 1966 S C 388). Their Lordships disposed of twenty‑nine appeals by Special Leave, and five writ petitions, by this judgment S. A. Rehman, J. who delivered the judgment considered the various Indian authorities relied upon by Mr. A. K. Brohi, "as containing reasoning in similar situation, and of persuasive efficacy". His Lordship made a reference to the following definition of the term tax , given by Latham, C. J. of the High Court of Australia in Mathews v. Chicory Marketing Board (60 C L R 263), adopted by the learned Judges in the Indian authorities :‑ "A tax is a compulsory exaction of money by public authority for public purposes enforceable by law and is not payment for services rendered." A fee was defined as a charge for a special service rendered to individuals, by some Governmental agency 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." After considering the various relevant authorities, S. A. Rahman, J. came to the following conclusion: "I gather that in the cases cited, no hard and fast rule was laid down, which could serve to distinguish a tax from a fee. It would appear that the question has to be decided on the basis of the special facts and circumstances of each case. This appears to me to be the correct approach in a case of this kind." This dictim of their Lordships can be of some assistance from which guidance can be sought in the determination of the issue before us. It may be observed in passing that the validity of the Cotton Fee under section 30 of the Cotton Control Act was also challenged in the case before their Lordships of the Supreme Court on the ground of excessive delegation which did not find favour with their Lordships. We need hardly go into this question as the argument raised in the first instance was not seriously pressed before us.

9. All the above authorities were cited by the learned counsel in order to canvass the distinction between the terms tax , fee and cess as employed in different context with a view to support the argument that the word 'tax' was not wide enough to cover the impugned 'cess' on the entry of goods into the Panchayat area. It was also stressed that all fiscal statutes imposing financial burden should be strictly construed.

10. In reply to the argument of the learned counsel for the petitioner, the learned Advocate‑General argued that since the only form of tax relatable to the impugned notification as mentioned in item 49 of the List II of Schedule VII of the Government of India Act, was the levy of 'cess' on the entry of goods into the local area for consumption use and sale therein, the word `tax' was used in subsection (1) of section 69 of the Panchayat Act in a wider sense and also covered cesses. In support of this argument reliance was placed on subsection (2) of section 311 of the Government of India Act, 1935. which defines the various expressions including "taxation". It reads as follows: "311.‑(1) . (2) In this Act, unless the context otherwise requires, the following expressions have the meanings hereby respectively assigned to them, that is to say:‑ .. .. "taxation" includes the imposition of any tax or impost whether general or local or special, and 'tax' shall be construed accordingly." The argument was that the term `tax' was relatively used in the Government of India Act, having different connotations in different situations, and that when used with reference to a local tax, as in the instant case would also cover 'cesses'. This argument was contained in Daulat Ram v. Municipal Committee, Lahore (A I R 1941 Lah. 40), a similar case on which reliance was also placed for the definition of the word 'tax' and 'cess'. In this case the competency of the Municipal Committee, Lahore to levy tax on salt was under examination by Din Muhammad, J. one of our illustrious predecessors, who delivered the judgment. The facts of this case were to a great extent similar to the instant case, and there is even a striking community of arguments. By the Government of India (Adaptation of Indian Laws Order) 1937, the following new provision was added to section 61 of the Municipal Act. It again bears resemblance to subsection 69 of the Panchayat Act :‑ "Nothing in this section shall authorize the imposition of any tax which the Provincial Legislature has no power to impose in the Province under the Government of India Act, 1935; Provided that a Committee which immediately before the commencement of Part III of the said Act was lawfully levying any such tax under this section as then in force, may continue to levy that tax until provision to the contrary is made by the Central Legislature." Item No. 49 of the Provincial Legislative List was examined by iris Lordship to consider the same argument which was advanced before us, that 'cess' was something different from `tax' or `duty'. The following observations of his Lordship are very pertinent and helpful in the determination of the issue under examination, and are quoted in extenso: "It is argued that `cess' is something different from `tax' or `duty' and consequently, in spite of what is contained in subsection (1) of section 100 and item No. 47 of the Federal Legislative List, the Administrator could impose what was being levied from the importer ; but, in my view, this argument is equally unsound. `Cess' as defined in Murray's Oxford Dictionary means specially in relation to India "a tax levied for a specific object." It is no doubt said that sometimes it meant a rate levied by local authority and for local purposes; but, as explained there, it is now superseded in general English use by the word `rate'. Similarly, the word `duty' is defined in the same Dictionary as "a payment to the public revenue levied upon the import, export, manufacture, or sale of certain commodities." `Tax' in legal parlance also means nothing more than money which individuals are compelled to pay for public purposes. It is impossible, therefore, to distinguish `tax' from `cess' or `duty'. No doubt, the draftsman has used three different terms in different parts of the Government of India Act, but I consider that by using these different terms he did not intend to convey different ideas thereby; otherwise it might support a highly improbable suggestion that three different levies could be made on articles like salt in the form of `cess', `duty' and `tax' respectively. It is noteworthy that even in the notification issued by the Provincial Government, the word `tax' is used and not `cess'. Reference in this connection may also be made to the definition of the words `taxation' and `tax' as given in section 311, Government of India Act. `Taxation' includes the imposition of any tax or impost whether general or local or special and `tax' is to be construed accordingly. Statutes which impose pecuniary burdens, as stated in Maxwell's Interpretation of Statutes at page 250, are always construed strictly and a construction which would have the effect of making a person liable to pay the same tax twice in respect of the same subject matter would not be adopted unless the words were very clear and precise to that effect. In a case of reasonable doubt the construction most beneficial to the subject will be adopted. I am of the opinion, therefore, that in imposing a tax on salt, the Administrator did transgress the bounds of law and I answer the reference accordingly .."

11. The next authority relied upon by the learned Advocate General was N. Balaraju and others v. The Hyderabad Municipal Corporation (A I R 1961 Andhra Pradesh 254). In this Division Bench authority a similar question in which distinction was sought to be maintained between `tax' and 'cess', was examined by the learned Judges. It was observed: "That apart, entry 52 itself empowers the imposition of a tax on the entry of goods into the local area for consumption, use or sale therein. This can have reference to taxes or cesses of the same nature as octroi duty. The meaning of `cess' as given in the Chambers Twentieth Century Dictionary is a tax, a local rate. Thus, cess is a tax confined to local area for a particular purpose. Cess and tax are interchangeable words so far as taxing power is concerned."

12. The word `tax' has been defined in Webster's New International Dictionary (Second Edition) as "A charge, especially as a pecuniary burden imposed by authority, specifically a charge or burden, usually pecuniary, laid upon persons or property for public purposes; a forced contribution of wealth to meet the public steeds of a Government. For various forms of taxes, see Direct Tax,, Income‑tax, Progressive Tax, Death duty, Inheritance tax, Single tax, import unique, custom, excise and octroi, etc." Taxation has been referred to as follows: "Valuation, Assessment, Act of laying a tax, or of imposing taxes, as on the subjects of a State, by Government, or on the members of a corporation or company, by the proper authority, the raising of revenue by the imposition of compulsory contribution; also, a system of so raising revenue. The term taxation covers every conceivable exaction which it is possible for a government to make, whether under the name of a tax, or under such names as rates, assessment, duties, imposts, excise, licences, fees, tolls, etc." The word `cess' according to the Webster's New International Dictionary, means: "An assessment, tax, levy, specifically a rate or local tax." Even in Gwalior Sugar Co. Ltd. and others v. State of Madhya Bharat relied upon by the learned counsel for the petitioner, a cess has been defined as a tax levied for a specific purpose.

13. The clear definition of the words `taxation' and the relativity of the use of the word tax with reference to different situations lends considerable support to the view that the word `tax' used in regard to a Panchayat also covers 'cess' as mentioned in item 49 of the Provincial Legislative List of the Government of India Act, 1935, and the argument advanced by the learned counsel for the petitioner which appeared to be so attractive at first sight, loses much of its charm. The two authorities, namely, Daulat Ram v. Municipal Committee, Lahore and N. Balaraju and others v. The Hyderabad Municipal Corporation are precisely to the point and directly applicable to the case before us. We are thus left in no manner of doubt that a Panchayat is not only competent to levy taxes mentioned in items 41, 42, 46, 47, 48, 49 and 50 of the Provincial Legislative List of the Government of India Act, wherein the term `tax' has been specifically used, but is also competent to levy duties and cesses, tolls, and fees, as c mentioned respectively in items 43, 49, 53 and 54, and that the term `taxation' when used with reference to a local area, including a Panchayat also covers cesses on the entry of goods into a local area for consumption, use or sale therein. As such the Panchayat of village Bhaun was perfectly competent to levy the impugned cesses with the previous sanction of the Government of West Pakistan and the validity of the notification concerned Annexure `A' cannot be questioned.

14. For the foregoing reasons, we see no force in the petition which is dismissed. In view of the fact that question of some nicety relating to the interpretation of Constitutional Provisions was involved, the parties are left to bear their own costs. K. M. A. Petition dismissed.