P L D 1967 Supreme Court 241 (PLP)

HAMOODUR RAHMAN, J.‑This appeal, by special leave, arises out of the judgment and order of a Division Bench of the High Court of West Pakistan, Karachi, dismissing a petition under Article 98 of the Constitution filed to challenge the validity of the terminal tax imposed by the Karachi Municipal Corporation during the years 1962 and 1963 (1‑1‑62 to 31‑8‑63) on goods imported into and used in the factory of the appellant company situated within the Sind Industrial Trading Estate at Mauripur Karachi. This Estate is outside the territorial limits of the Karachi Municipal Corporation but the impugned tax was imposed in 19th of .March Rules contained in Chapter V of Schedule VIII Rule Book, 1947, as rule 5‑B. This rule is in these terms:‑ "Raw materials and finished products thereof belonging to factories situated in the area comprised within the Sind Industrial Trading Estate, and passing the limit of Karachi Municipal Corporation on their way to or from such factories shall be taxed each time at half the schedule relates: Provided that such factories maintain current accounts with the Corporation in accordance with rule 24 of the Terminal Tax Rules and such goods are transported from the barrier of entry to the barrier of exit within two hours, without change of bulk and further that the officer incharge of exit barrier certifies the goods to have passed through." The terminal tax was originally imposed in Karachi by virtue of the provisions of section 96 of the Karachi Municipal Act, 1933, which was as follows:‑ "96(1) For the purposes of this Act the Corporation shall impose taxes on property. (2) In addition to the taxes mentioned in subsection (1), the Corporation may, for the purposes of this Act, impose any of the following taxes, namely: (a) a tax at rates not exceeding those specified in Schedule II on all vehicles and animals used for riding, draught or burden kept for habitual use within the City; (b) a terminal tax at rates prescribed by the Corporation with the approval of the Provincial Government on goods imported into or exported from the terminal tax limits; (c) a tax on dogs kept within the City; (d) any other tax which the Provincial Legislature has power under the Government of India Act, 1935, to impose in the Province. (3) Nothing in this section shall authorise 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, if the Corporation was immediately before the commencement of Part III of the said Act lawfully levying any such tax under this section as then in force, it may continue to levy that tax until provision to the contrary is made by the Central Legislature." For the imposition of this terminal tax rules were framed under section 286 of the above‑mentioned Act with the sanction of the Provincial Government in 1939. Under these rules "terminal tax" was defined as "a tax levied on the import of goods liable to terminal tax within the terminal tax limits, such tax not being liable to be levied on the export of such goods from these limits" and "import" was defined as meaning "the bringing in of goods into the terminal tax limits from outside these limits." The "terminal tax limits" were by rule 2 of the said rules to be the area shown in Schedule X of the Act itself "as may be in force from time to time." This latter rule, however, also contained a note to the following effect:‑ "Any goods liable to terminal tax unloaded in stream for transhipment by sea direct or for consumption in the stream, are not liable to terminal tax, but it shall be the duty of the . importer to forthwith produce customs and or Port Trust Transhipment entries at the Municipal Sea Dues Office." It will be observed from the above that although section 96 empowered the Corporation to impose a terminal tax on goods imported into or exported from the terminal tax limits, the rules only provided for the levy of terminal tax on the import of goods within the terminal tax limits. Terminal tax was not sought to be imposed on the export of goods. The validity of this tax came up for consideration in the case of Pakistan Textile Mill Owners' Association and others v. The Administrator of Karachi and others (P L D 1963 S C 137) and this Court held that though the tax could not be levied in respect of goods imported by sea or air it could be validly levied on goods imported by rail or road even after the coming into force of the late Constitution. Furthermore, that the tax could not be levied on goods merely in transit. Where, however, the goods were unloaded at a rail head or terminal point within the municipal limits for transportation outside, the tax could be levied on such goods as there, would then be a terminal point within the terminal tax limit. A terminal tax, it was also pointed out, was by its very nature a tax chargeable at a terminal point or one which could be referable to some service, whether of carriage or otherwise, rendered or to be rendered at a terminal point. In that case the question of the validity of the tax after the coming into force of the Municipal Administration Ordinance X of 1960 did not come up for consideration but it arises in the present case, for, the main ground upon which the appellant sought to challenge the terminal tax imposed, in respect of its goods during the calendar year 1962 and part of calendar year 1963, is that after the repeal of the Karachi Municipal Act, 1933, by the above‑mentioned Ordinance of 1960 the respondent Corporation was no longer competent to levy any terminal tax at all. This argument did not find favour with the High Court which held that the tax was protected by the provisions of section 4(2) of the Ordinance being covered by items 4 and 26 of its Third Schedule and dismissed the writ petition. Leave was granted in this case to consider this new question of law as the ,t same was not covered by the decision of this Court in the case of) Pakistan Textile Mill Owners' Association. Now section 4 of the above Ordinance, which repealed all the then existing Municipal Acts, including the City of Karachi Municipal Act, 1933, provides as follows:‑ "

4. Repeals and Savings.‑(1) On the coming into force of this Ordinance in any area, the enactments mentioned in the First Schedule shall, if and in so far as applicable to that area, stand repealed. (2) Where an enactment stands repealed under subsection (1) any appointment, rule, regulation, or bye‑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 Ordinance and the rules, be deemed to have been respectively made, issued, imposed or assessed, entered into, instituted or taken under this Ordinance." Under the Ordinance the power of taxation given to the Municipal Committee is as given under section 33 thereof: "

33. Municipal Taxation.‑A Municipal Committee with the previous sanction of the Government may levy, in the prescribed manner, all or any of the taxes, rates, tolls and fees mentioned in the Third Schedule." The Third Schedule referred to therein contains an enumeration of some 26 items, none of which, however, deals directly with terminal tax, but items 4, 5 and 26 of this Schedule, which have been referred to by the High Court, read as follows: "(4) Tax on the import of goods for consumption, use or sale in a municipality. (5) Tax on the export of goods from a municipality. (26) Any other tax which the Government is empowered to levy by law." The contention of the appellant is that neither of the first two items is referable to a terminal law, for, the taxes contemplated under items 4 and 5 are taxes of an entirely different nature and can by no means be extended to embrace a terminal tax. For a terminal tax there must be, it is urged, as pointed out by this Court in the case of the Pakistan Textile Mill Owners' Association "a terminus a quo", for, it must necessarily "connote the idea of the end of something connected with a motion" which is inherent in the word "terminal" itself. Items 4 and 5 of the Third Schedule to the Ordinance refer to what can more appropriately be described as a cess or an Octroi on the entry of goods into, or exit from, the limits of a local area. Item 26 of this Schedule, it is next contended, indicates that the tax to be levied under this item must be a tax which the Provincial Government is itself empowered by some existing law to levy and it does not mean that it is sufficient if the Provincial Government is merely competent to legislate under some constitutional provision with respect to that tax. Such a widening of the scope of item 26, it is urged, would be wholly unreasonable, for, it would then amount to giving to a local authority, such as a Municipal Corporation, a power to do something which the Provincial Government itself could not do, for, neither under Article 93 of the late Constitution, nor under Article 90 of the present Constitution, which are in identical terms, can the Provincial Government levy a tax, without the authority of an Act of the Provincial Legislature. The clear mandate of these Articles is that "no tax shall be levied for the purposes of a Provincial Government. except by or under the authority of an Act of the Provincial Legislature" (the underlin ing is ours). It appears to us from the above provisions that item 26 of the Third Schedule to the Ordinance of 1960, which is worded in the present tense, clearly contemplates a tax which is leviable under the authority of some existing law of a competent Provincial Legislature or a law in force. The City of Karachi Municipal Act of 1933 was not such a law, because, it was one of the statutes repealed by section 4 of Ordinance itself with effect from the coming into force of the said Ordinance in any area to which the Ordinance became operative. Karachi was certainly such an area and therefore, the Municipal Act of 1933 could not be considered to be a law in force after the coming into force of the Ordinance in Karachi and, therefore, not a law, within the meaning of item 26, under which the Provincial Government "is empowered" to levy the terminal tax. The next question that arises for consideration is as to whether, notwithstanding this, any terminal tax imposed under the Karachi Municipal Act of 1933 was saved by the provisions of subsection (2) of section 4 of the Ordinance. This sub section, inter alia, provides that notwithstanding the repeal of the enactments mentioned in the First Schedule to the Ordinance any tax imposed or assessed under the said Act shall "so far as it is not inconsistent with the provisions of this Ordinance and the rules, be deemed to have been respectively made, issued, imposed or assessed, entered into, instituted or taken under this Ordinance." It is contended that the continuance of anything done under the previous Act, under these provisions is subject to two important conditions, namely; (i) that it should not be inconsistent with the provisions of the Ordinance and (ii) that it should be such that it can be deemed to have been made under the Ordinance. In the present case in so far as section 33 and the Third Schedule to the Ordinance consciously omit the provisions for the imposition of the terminal tax, which were to be found in section 96 of the Act of 1933, the legitimate inference that can be drawn is that the Ordinance does not at all contemplate the imposition of such a tax and, therefore, the Terminal Tax Rules are not only inconsistent with the legislative intent of the Ordinance but can also not, by any means, be deemed to have been made under the provisions of the Ordinance. The deeming provision could have applied only if there was some provision in the Ordinance enabling the local authorities to impose a terminal tax. A thing cannot be deemed to have been done under a statute if there is no power given by the said statute to do such a thing at all. [Here in italics] We are of the view that there is a great deal of force in these contentions. The conscious detetion of the provisions contained in section 96 of the Act of 1933, relating to the imposition of terminal tax, and its deliberate exclusion from the Third Schedule, appended to the Ordinance, clearly manifest an intention on the part of the law‑giver to exclude the terminal tax from the category of taxes which can be levied by a municipal authority functioning under the Ordinance. A Legislature is deemed to be aware of the previous state of the law and if knowing this it makes a change when repealing it and re enacting some of its provisions the intention is clearly to effect a change. It follows, therefore, that the previous provisions relating to the imposition of a terminal tax were deliberately removed to denude the Municipal Authorities of this power. The possibility of deeming the previous provisions as .having been made under the subsequently enacted law can hardly be visualised. We are unable, therefore, to agree with the High Court that the terminal tax, levied by the Municipal Corporation for the years 1962 and 1963 under the purported exercise of powers given by rule 5‑B of the Terminal Tax Rules, introduced in 1957, was continued in operation, by reason of the provisions of subsection (2) of section 4 of the Ordinance. Nor are we in a position to accept that this tax was referable to any of the items mentioned in the Third Schedule to the Ordinance. The tax for the relevant years was, therefore, in our opinion, imposed illegally and without any lawful authority. Rule 5‑B also appears to us to suffer from another defect in so far as it also purports to give power to levy a terminal tax at a concessional rate even on goods purely in transit. The rules as worded empowers the Municipal Corporation to levy a terminal tax on goods "passing the limits of Karachi Municipal Corporation on their way to and from such factories" situated in the area comprised within the Sind Industrial Trading Estate, if such goods leave the terminal tax barriers within two hours without changing bulk. It has, however, to be pointed out that the respondent Corporation had before the High Court stated that no terminal tax was in fact levied on any goods which were purely in transit and a similar assurance has also been given before us. We do not wish to say anything further on this question except to point out that such a levy would, if made be illegal even if rule 5‑B were to be considered to be still in force. We have, however, come to a different c3nclusion as, in our opinion, the rule cannot be considered to be validly in force after the coming into force of the Ordinance of 1960. It remains now to mention that during the pendency of the proceedings in the High Court the municipal limits of the Karachi Municipal Corporation were extended, by Notification No. SO‑IV(LG)KMC/93‑61, dated the 20th of June 1964, so as to incorporate within it even the Sind industrial Trading Estate where the factories of the appellant are situated. This notification, we are given to understand, has taken effect from 3‑7‑

64. As from this date the position has, therefore, radically changed, for, the Sind Industrial Trading Estate having become an area within the municipal limits the Municipal Corporation became fully empowered to impose a tax on the import of goods' for consumption, use or sale within the Municipality as also to levy a tax on the export of goods from the Municipality under items 4 and 5 of the Third Schedule to the Ordinance. The tax, even though described as a terminal tax, may be upheld asp taxes under the said items 4 and 5; either as an octroi on goods, brought into the municipal limits of the Corporation or as a cess on goods exported outside these limits. The Municipal Corporation will, however, have to frame rules in that behalf) under section 41 of the Ordinance, to provide for the levy of such taxes and to notify the same as required under section 34 of the Ordinance. It can also do so if the Provincial Government under section 36 directs it to levy such a tax. But this cannot be done under the existing Terminal Tax Rules, framed under the Municipal Act of 1933. Fresh action will have to be taken if provision has not already been made in that behalf under the powers given by the Ordinance of 1960. For these reasons, we allow this appeal and declare that the terminal tax levied for the years 1962 and 1963 and for the period from 1st January 1964, to 3rd July 1964, if any levied, was without lawful authority and illegal, and direct the Municipal Corporation to refrain from imposing or recovering such tax for the said period, as also to refund any portion of such tax, if already recovered, to the appellant. But, in view of the fact that the question of interpretation of the provisions of the Ordinance involved was not entirely free from difficulty, we make no order as to costs. A. H. Appeal allowed.