P L D 1958 (W (PLP)

Date of hearing: 11th March 1958. RAHMAN, C. J.‑The petitioner in this case is the Murree Brewery Company Limited, Rawalpindi, which has moved this Court through its Chairman, Mr. P. D. Bhandara, for a writ against the Islamic Republic of Pakistan, the Secretary, Board of Revenue, Government of Pakistan, and the Income‑tax and Sales‑tax Officer, Companies Ward No. 2, Lahore, directing the respondents to refrain from levying or collecting any sale tax on the Provincial excise duty, chargeable on goods manufactured by the petitioner. The relevant facts are as follows. The peti tioners are producers and manufacturers of liquor which is subject to a tax on its sale price under section 3 of the Sales‑tax Act, 1951. The petitioners were being assessed and paid the aforesaid tax on an amount composed of (1) the price charged by the petitioners on sales of liquor and (2) the Provincial excise duty leviable under the Provincial Excise Act. In the year 1955, the petitioners allege, they discovered that other producers and manufacturers in the country were not being assessed on a similar basis and, that they were paying the sales tax purely on the price charged by them. They were thus in a favourable position as compared with the petitioners and could undercut them in the matter of prices. The petitioners, therefore, made a representa tion to the Central Board of Revenue, Government of Pakistan, by letter dated the 1st of June 1955, and prayed that appropriate instructions be issued on the law point involved. On the 29th of November 1956, the reply was received by the petitioners that the sale tax was payable on the sale price of liquor plus the Provincial excise duty, whether or not the letter was paid by the manufacturer. This decision was challenged as incorrect in law, as under section 3 (1) (a) of the Sales‑tax Act 1951, the tax is to be levied and collected on "the value" of the goods produced or manufactured and by subsection (3) of that section, the value of the goods in the case of goods falling under clause (a) of subsection (1), would be the sale price and nothing else. "Sale price" is defined in section 2 (16) of the Act as meaning the price, before any amount payable in respect of tax is added and includes any charges for advertising, financing, servicing or any other charges of a similar nature, contracted for at the time of sale whether charged separately or not. It was, therefore, contended that there was no warrant in law for treating the Provincial excise duty as within the ambit of "the value" of the goods, for the purpose of levying the sale tax.

2. The position, however, has changed by subsequent legislation. By section 14 of, Finance Act I of 1'956, in clause (i) of subsection (3) section 3 of the Sales‑tax Act 1951, after the words "sale price", the following words were inserted, namely:‑ "or, where the goods are chargeable with the duty of excise under the Central Excises and Salt Act, 1944 (1 of 1944), the value determined for the levy of the said duty plus the said duty". This would have made no difference to the petitioners who were not concerned with the duty under the Central Excises and Salt Act, 1944; but another amendment was effected by section 15 (2) of Finance Act I of 1957 and for subsection (2) of section 1 of the Sales‑tax Act, 1951, another subsection was substituted which, inter alia, defines "sale price" as meaning, as respects goods chargeable with the duty of excise under the Central Excises and Salt Act, 1944 (I of 1944), the value determined under section 4 of the said Act plus the said duty, and, where the provisions of the said section 4 do not apply, the value which would have been determined if the said section 4 had applied plus the said duty; and in other cases, the price before any amount payable in respect of tax is added and includes any duty of Provincial excise whether or not paid by the assessee, and any charges for advertising, financing or any other charges of a similar nature contracted for at the time of sale, whether charged separately or not. For the first time, therefore, by this amendment, legal sanction was provided for the charging of sale tax on the value composed of the sale price and the Provincial excise duty. Retrospective effect was given to this amendment from the 16th of March 1956. The period covered by the present petition would fall after that date and, consequently, if the amendment was validly made, the petition should obviously fail.

3. Mr. Manzoor Qadir, who appeared for the petitioners, however, attempted to argue that this amendment was ultra vires the Legislature. He pointed out that the original Sales‑tax Act of 1951 was passed with reference to Entry 54 (b) in the Federal List of the Seventh Schedule to the Government of India Act, 1935. The corresponding Item in the Federal List appended to the new Constitution, is Item 26 which mentions, among other things, "taxes on sales and purchases". The ingenious argument is advanced that in the present case, the Legislature has adopted an artificial definition of "sale", inasmuch as it has proceeded to levy sales tax on the sale price proper plus the Provincial excise duty. A "sale" is defined in the Sales‑tax Act, 1951, in section 1 (15) as meaning, with all its grammatical variations and cognate expressions, every transfer of the property in goods from one person to another in the course of a trade or business, for cash or for deferred payment or other valuable consideration. It is contended that the Provincial excise duty is no part of the "Consideration" in this context. The question, therefore, that falls for determination is whether the excise duty could be said legitimately to form part of the sale price of liquor, manufactured by the petitioners, or not.

4. Mr. Manzur Qadir invited our attention to section 31 of the Punjab Excise Act I of 1914, which authorises the levy of a outy at such rate or rates as the Local Government shall direct either generally or for any specified local area, on any excisable article‑ (a) imported, exported or transported in accordance with the provisions of section 16; or (b) manufactured or cultivated under any license granted under section 20; or (c) manufactured in any distillery established, or any distillery or brewery licensed under section

21. Learned counsel also referred to Rule 9.118 of the Punjab Distillery Rules, as printed in the Punjab Excise Manual, Volume III, which provides that if the applicant tenders cash in payment of still‑head duty, the inspector shall, after ascertaining that the licensee's price had been paid, fill up the challan, for presentation with the cash, at the treasury or sub‑treasury of the district in which the distillery is situated. The subsequent rules make provision for facilities in payment of this duty in certain respects and it appears that the still‑head duty or the excise duty may be paid either by the distillery owner or by the person who is buying the excisable article from the owner. These provi sions, in our opinion, relate to the machinery for the collection of the excise duty. It is the nature of the excise duty which has to be looked at, in order to decide whether it can legitimately form part of the value of the goods, sold by the manufacturer. Now, a duty of excise is one imposed on a manufactured article and we do not see any strong reason why it should not be held that it is in the nature of an expense incidental to the manufacture of liquor and so may be legitimately included in the sale price. As such there would be nothing wrong in assessing the sale tax on the basis of the value composed of the named price for the liquor and the excise duty. The items in the legislative lists included in the fifth Schedule to the Constitution must not receive a narrow and pedantic interpretation. They ought to be construed in a free and liberal spirit so as to carry out the intention behind the Constitution and so as to make it a working instrument. We are unable to agree with learned counsel that excise duty cannot be described as part of the seller's recom pense in a sale transaction so to be included legitimately in the consideration for the sale.

5. The conclusion we have, therefore, reached is that it was within the competence of the Legislature to make the amendment; that they did in the sales tax law. The legislative competence. being thus established, the proposition admits of no doubt that such legislation could be passed with retrospective effect.

6. Whatever, therefore, may have been the position when the writ petition was presented in this Court, the pitch has been queered for the petitioners by legislation passed during the pendency of the petition. We are, therefore, constrained to dismiss the petition, but in the circumstances make no order as to costs. A. H. Petition dismissed.