1990 PLP 869 (MLD)

WAJIHUDDIN AHMED, J.--Petitioner, in this Constitution petition, alongwith his partner, Mohammad Usinan, in the firm name of Pir Mohammad Bhutto & Company, was, on or about 27-7-1981, auctioned a contract for the recovery of Octroi and Toll Tax by respondent No.3, Municipal Committee, Thatta, within the latter's local limits. Such contract was for the period July, 1981 to June, 1982. The auction in favour of the referred firm is said to have been confirmed on 29-7-1981. On performance and completion of the contract respondent No3, it is pleaded, allowed adjustment of 10% security deposit to the petitioner's firm. The petitioner avers that, as per the relevant schedule, 5% duty was provided on the time of Cigarettes but, under pressure of the traders, respondent No.3 Municipal Committee, compelled the petitioner's firm to, instead, accept 2% on such item of Cigarettes, resulting in huge corresponding losses. A grievance representation was, allegedly, made to the respondent No.3, which that respondent acknowledged and recommended for compensation, through a unanimous resolution passed by the Councillors. No compensation, however, was made. On or about 15-9-1985, respondent No.2 Mukhtarkar Thatta, served two notices, each dated 7-9-1985, on the petitioner, demanding recovery of Rs. 71,400, as Income Tax dues on Octroi and Toll Tax collection and Rs.15,359.72, as dues on the collection Contract of Octroi and Toll Tax. It is urged that no notice whatever was issued regarding the alleged dues by the respondent No.3, Municipal Committee nor was, at any time, any opportunity of being heard allowed to the petitioner or his firm. This Constitutional Petition, therefore, questions the recovery of such alleged dues as arrears of Land Revenue.

2. Alongwith the petition an application for stay of recovery was moved and interim orders were passed on 24-4-1986, pursuant to which, as a condition of stay, security in the sum of Rs. 86,759 was furnished.

3. Mushtaq Ahmed, Chief Officer of the Municipal Committee, Thatta, has submitted a counter-affidavit in which it is denied that any reduction, as alleged, was made in the rate of Octroi duty on Cigarettes from 5% to 2%. He also repudiates that the petitioner suffered any financial loss or, for the matter of that, any violation of stipulated terms, on the part of the Municipal Committee, is involved. As regards the alleged representation, it is maintained that one of the Councillors moved a resolution for remission of outstanding dues i.e. the sum of Rs.15,359.72, aforesaid, on which the Council decided to recommend the case for consideration of the Government but the then Chairman did not find it a justifiable case for remission and, therefore, did not make such recommendation. Such amount, therefore, remained outstanding. As to the alleged Income Tax dues of Rs. 71,400 it is urged that the Income Tax Officer, Thatta, had already recovered such amount from the Municipal Committee, directly, without the latter's consent and it was in this background that notice of recovery was issued to the petitioner. Earlier notices are also claimed to have been issued to the petitioner.

4. During the pendency of this petition the Commissioner of Income Tax was joined, as respondent No

4. A counter-affidavit has also been filed on his behalf in which the preliminary objection is that no prayer has been made against the respondent No.4 and, therefore, the petition is liable to be dismissed against such respondent. On facts, it is said that in section 50 of the Income Tax Ordinance, 1979, subsection (7-A) was added through the Finance Ordinance, 1981, effective from 1-7-1981 and Advance tax became the legal liability of the petitioner which, under law, has properly been discharged by the respondent No.3 Municipal Committee, in terms of the Income Tax Ordinance, 1979. It is, however, added that an Explanation was inserted in subsection (7-A) to section 50 in 1984 but the same is only declaratory in nature, as observed and held in 1985 P T D 787 (Karachi). On merits, it is pointed out that since the petitioner's bid of Rs.23,80,000 for the Recovery contract, 1-7-1981 to 30-6-1982, was accepted, as such, the petitioner was liable to pay Advance tax for the corresponding period. However, if petitioner's case was one of want of liability or of losses suffered, petitioner should have submitted a Return before the Income Tax Officer and if such contention(s) were upheld, refund could be granted. Not only that the petitioner failed to submit a Return but he did not even make appearance either before or after issuance of notice. Guilty of such conduct, the petitioner is said to be disentitled to any constitutional relief.

5. In an Affidavit in Rejoinder, exclusively pertaining to the respondent No.3, it is claimed that the Chairman of the Municipal Committee could not override the unanimous Resolution of the Councillors. It is denied that any prior notices, as alleged, were issued or served on the petitioner. The allegations of fact in the counter-affidavit of the Income Tax Department, however, stand admitted for want of a Rejoinder.

6. Taking up first the notice for the recovery of Rs. 15,359.72, issued by the Mukhtarkar Thatta, under section 81 of the Land Revenue Act, 1967, Mr. K.B. Bhutto urges that such notice is to be preceded by a prior notice, hearing and determination of the dues, before recovery as arrears of land revenue can be resorted to. Reliance is placed on Abdul Latif v. Government of West Pakistan P L D 1962 S C 384, Province of West Pakistan v. Mohammad Ayub Khuhro P L D 1967 Kar. 673, and Ark Ocean Lines Ltd. v. Director of Industries and Mineral Development P L D 1976 Kar.

610. In the first of these cases, the Supreme Court of Pakistan, interpreting the Public Accountants Default Act (XII of 1850), the Punjab Land Revenue Act (XVII of 1887), and the Revenue Recovery Act (I of 1890), opined that a deficiency, based on a certificate of the Treasury Officer, could not be recovered as arrears of land revenue unless the authority concerned, before putting on the machinery provisions for recovery into motion, had decided upon the question whether there were any arrears "due" or not. Besides, for such decision necessary hearing was to be accorded as, inter alia, opined in Chief Commissioner, Karachi v. Mrs. Dina Sohrab Katrak P L D 1959 S C (Pak)

45. Such dicta was applied by Qadeeruddin Ahmed, 7., as he then was, in Re: Mohammad Ayub Khuhro ibid. in the context of the West Pakistan Government. Dues Recovery Ordinance, (XXII of 1962) read with the Revenue Recovery Act. (I of 1890), and by a Division. Bench of this Court, the judgment being authored by Fakhruddin G. Ibrahim, J., in the context of a recovery under section 83 of the Sindh Land Revenue Act (XVII of 1967) in the above-cited case of ARC Ocean Lines Ltd.

7. It is, however, to be observed that whereas in relation to the first two referred cases the construction centred on the word "dues", occurring in the relevant provisions, the interpretation being that such can only be lawfully determined "dues", the Karachi Division Bench case, last referred, proceeded on section 83 of the Land Revenue Act, 1967, which is preceded by section 82 thereof wherein, as well, the word "due" finds mention. However, such word "dues" does not figure in section 81 of the Act of 1967 at all which section also postulates a 15-day show-cause notice before action under the ensuing provisions in sections 82 and 83 can be taken. It, therefore, can be argued that a notice under section 81 does not itself require a further notice preceding the same. It may or may not be that the notice contemplated in section 81 of the Land Revenue Act (XVII of 1967). is itself a show-cause notice but it is manifest that the word "dues" does not occur in that provision. However, it is equally clear that such notice is to be issued "on or after the day following that on which an arrear of land revenue accrues". It would follow that the demand under section 81 ibid. can be raised only in respect of an "arrear of land revenue" which expression itself involves a pre-determination of a sum as such "arrear" and then the following expression "accrues" makes it doubly clear that the land revenue must have become "due" for, in any other alternative, it would not "accrue". Section 82 of the Act, which envisages the actions to follow in the event of default pursuant to notice under section 81, aforesid, makes the situation clearer, as it refers to "arrears of land revenue" in section 81 as "due". Thus our conclusion is that demand for "arrears of land revenue" under section 81, aforesaid, can only be raised after such arrears, on being determined as "due", have "accured". The provisions of the Land Revenue Act, 1967, similar to the corresponding provisions in the cited case-law, consist of substantive provisions as well as machinery or procedural parts. It is only when the substantive provisions of the Act have been resorted to and satisfied, resulting upon determination of a sum or sums as arrears of land revenue that the recovery provisions can be had resort to and 411 this requires due notice, opportunity of being heard and incidental hearing. Unless this is done claim(s) of land revenue cannot be termed as arrears, much less as accrued or having become due.

8. Having found this, we come now to examine as to in what manner recovery is sought in the instant case. The demand here does not arise directly under the Land Revenue Act of 1967. Substantive provisions as to the determination of arrears of land revenue in such Act may thus be not directly applicable here. These provisions are to be found in the Sindh Local Government Ordinance (X11 of 1979), section 64(2) whereof provides that all arrears of taxes, rates, tolls and fees and other moneys claimable by a Council under that Ordinance shall be recoverable as arrears of land revenue etc. It would, therefore, seem that in order that a recovery can, lawfully, be made of an amount as arrears of Land Revenue, it is essential that such amount is in the nature of recoverable dues under the relevant provisions of the Sindh Local Government Ordinance, 1979. Before any such amount/money becomes recoverable as arrears of land revenue, the requirement; except where there is an in-built procedure, as for instance, on behalf of arrears of taxes, rates, tolls and fees, is that a notice or hearing is to precede the determination and it is only then that the claimed amount can be treated to be arrears, for the purposes of recovery as arrears of Land Revenue. On facts, there being word against word, it has not been established that any such notice was issued and served or that any hearing whatever took place. As a result, it cannot be said that the amount of Rs.15,359.72 became arrears of money, claimable as arrears of Land Revenue. Such claim and such demand, therefore, suffers from a serious infirmity and cannot be allowed.

9. It has also come on record that a Resolution was passed by the Council of respondent No.3 recommending remission of the said amount of Rs. 15,359.72 to the Govt., in regard to which, the defence is that Chairman of the Council, in his wisdom, did not consider such matter to be a fit one for reference to the Government. We have not been enlightened as to any provision whereby the Chairman could bypass the Resolution in such manner. On the contrary, section 50(8) of the Sindh Local Government Ordinance, 1979, specifically provides for reporting of all decisions of a Council to the Government and this has to be done, within ten days of every such decision. That a recommendation to remit was such a decision is obvious to us. This is another reason why we cannot sustain the demand in the impu4ned notice.

10. Turning, now, to the seizer of an amount of Rs. 71,400, towards Advance income Tax, by the Income Tax Department from the respondent No.3 Municipal Committee, Thatta, but in the Account of the petitioner, it would be 'advantageous to reproduce hereunder section 50 (7-A) of the Income Tax Ordinance, 1979. "(7-A) Any person making sale, by public auction, of any property belonging to the Government, a local authority, a public company, a foreign association declared to be a company under clause (16) of section 2, or a foreign contractor or consultant or consortium shall collect advance tax computed on the basis of sales price of such property and at the rate specified in the First Schedule, from any person to whom such property is sold, and credit for the tax so collected in any financial year shall, subject to the provisions of section 53, be given in computing the tax payable by the person purchasing such property for the assessment year commencing on the first day of July next following the said financial year, or in the case of an assessee to whom section 72 or section 81 applies, the assessment year, if any, in which the "said date" as referred to therein, falls, whichever is the later. Explanation.--For the purposes of this subsection, sale of any property includes the awarding of any lease to any person, including a lease of the right to collect octroi duties, tolls, fees or other levies, by whatever name called.

11. It may bear recalling here that subsection (7-A) was inserted in section 50 ibid in 1981 and the Explanation was added to such subsection through the Finance Ordinance, 1984. The contention, on reference to such legislative background, is that the Explanation in the subsection is the charging provision and since it was inserted not earlier than in the year 1984, retrospective effect is being given to it by making recoveries from a back date in relation to a contract which pertained to the period 1981-82. Now, object of an Explanation, generally, is to clarify and make manifest the position emerging in the main provision and not to introduce anything which, already, is not there. In the present context, as well, all that such Explanation does is to clarify and crystallise the obligation on the part of those concerned namely, every person making "sale", by public auction, of any property, belonging to Government, a local authority etc. to collect "advance tax" from any person to whom such property (other than a plot of land) is sold and credit of such collection is to be given to the purchaser in the manner provided. The Explanation barely clarifies that "sale of any property", as referred in section 50(7-A), includes awarding of a lease to collect Octroi, tolls, fees or other levies, by whatever name called. Thus the Explanation introduces nothing new and requisite provision, having necessary implications, sub-sisted, at all material times, on the statute book. The Explanation only made manifest, through a declaration, the intention of the legislature, which was always there. As such, we, respectfully, agree with similar views of Naimuddin, J., as he then was, in the Division Bench case of this Court, reported as Rehman Corporation v. I.T.O. 1985 P T D

787. Such being the position in 1981, when the petitioner acquired rights in auction, no retroactivity is invoked.

12. It has rightly been urged by Mr. Shaikh Haider, for the Commissioner of Income Tax that the petitioner could, if any grievance genuinely arose, have -submitted a Return and either denied liability on account of losses having -been suffered, as alleged, or on any other count. None of this was done. It is, also, aptly contended that no relief, even in this petition, has been sought against the Income Tax Department. The question therefore, that arises is, whether, in relation to such amount of Rs. 71,400 as well, the notice under. section 81 of the Land Revenue Act is bad? We have said earlier that, except in cases where an element of lawful determination of sums recoverable as arrears of land revenue is in-built in a legislation, necessary determination, on hearing, of such sums had to be made and where that requirement is found wanting the demand is bad. As to the sum last referred the position involved seems to fall within the exception. Here the Municipal Committee, in making payment, acted in discharge of a legal obligation owed by the petitioner. The sum paid was a pre-determined one due under statute, namely, the Income Tax Ordinance, 1979. No hearing was necessary or could have served any purpose. Accordingly, we can find no fault with the issuance of notice for recovery in the sum of Rs. 71,400 which the F respondent Municipal Committee has undeniably paid and which, on the very basis of such recovery, constitutes ascertained public dues and can be lawfully recovered. The notice in this connection is therefore, proper and its validity is not open to doubt.

13. Resultantly, this petition only partly succeeds and whereas notice for recovery of Rs. 15,359.72 is quashed, having been found to be without lawful authority, proceedings relative to recovery of Rs. 71,400 are found to be valid and sustained. The respondents would be free to follow due and lawful procedure in relation to the recovery of Rs. 15,359.72 and if such amount is ascertained to be due from the petitioner or his firm necessary consequences shall follow according to law. Petition allowed, partly, as aforesaid. M.BA./P-131/K?????????????????????????????????????????????????????????????????????? Petition partly allowed.