P L D 1965 (W (PLP)

FAIZULLAH KHAN, J.‑By this writ petition the two peti tioners, namely, (1) Messrs Mardan Industries Ltd., Sakhakot, Malakand Agency and (2) Messrs Premier Tobacco Co. Ltd., 1‑Hamimsons Building, Bunder Road, Karachi, call into question the validity of Notification No. S. R. O. 31 (R)/64, dated 19‑5‑64, hereinafter to be referred to as the impugned notification, which was construed by the respondents to have the effect of revoking the exemption from levy of the whole of the excise duty for a period of four years with effect from 1st July 1961, "all excisable goods produced or manufactured in the Special and Excluded areas mentioned in the Schedule," as notified by the Central Government respondent No. 1 under notification No. S. R. O. 55 (R)/1961, hereinafter to be referred to as the first notification.

2. The writ petition raises an important constitutional question which may be formulated thus: "Whether the Central Government could validly rescind by the impugned notification the exemption from levy of the whole excise duty for a period of four years from January 1961 granted under the first notification, in particular when in the interval between the dates of first notification and impugned notification the cigarette factory installed by petitioner No. 1 in collaboration with petitioner No. 2 had gone into production?"

3. It will be convenient here to briefly state the facts giving rise to this petition, which are not in dispute. In 1961 the Central Government‑respondent No. 1 issued the first Notification under which in exercise of the powers conferred by sub‑rule (1) of rule 8 of the Central Excise Rules, 1944, it exempted for a period of four years with effect from 1st July 1961, "all excisable goods produced or manufactured in the special and excluded areas mentioned in the Schedule below from the whole of the excise duty leviable thereon." The Director of Industries, Planning and Investment Promotion Wing, West Pakistan, Lahore, by his letter No. PIP/583, dated 22nd February 1962, accorded permission for the establishment of a New Industrial Undertaking in West Pakistan, at Sakhakot, Malakand Agency, Dargai, under the name of Mardan Cigarette Industries, and also conveyed the sanction of a machinery licence of the value of Rs. 5 lacs for the import of machinery plant and equipments. Petitioner No. 2 subsequently applied to the West Pakistan Government for changing their names from Mardan Cigarette Industry to Messrs Mardan Industries Limited, which was duly granted. Petitioner No. 1 entered into an agreement with petitioner No. 2 for the manufacture and supply of "K‑2" cigarettes and petitioner No. 1 Messrs Mardan Industries went into production in April 1964, and in pursuance of the agreement with petitioner No. 2 the first consignment of one truck load of "K‑2" cigarettes containing about 20 lacs cigarettes in the first week of May 1964, was allowed to proceed to its destination without demand of any excise duty. On 7th May 1964, petitioner No. 1 despatched a second consignment of one truck of same brand of cigarettes containing 17 lacs of cigarettes but when the consignment reached the settled District at Shergarh it was apprehended by the Central Excise and Land Custom Department, District Mardan, for payment of excise duty. On the following day, i.e., 8th May 1964, the Superintendent Central Excise and Land Custom Department Mardan, in his letter Annexure `C' intimated to petitioner No. 1 that "according to the latest Government instructions, you cannot avail of the concession of exemption from duty in respect of "K‑2" cigarettes or any other identical brand already being produced in the settled areas. Hence such identical brand will not be permitted to enter the settled areas without payment of duty involved or prior approval of the Collector of Central Excise and Land Customs, Lahore."

4. The petitioners filed Writ Petition No. 186 on 12th May 1964, against the respondents, namely, (1) Government of Pakistan through Chairman, Central Board of Revenue, Islamabad, and (2) Superintendent, Central Excise and Land Customs, Mardan. The writ petition came up for hearing before a Bench of this Court on 13th May 1964. The writ was admitted on that date and ad interim stay was granted to the petitioners directing the Superintendent Central Excise and Land Customs (1) to release the truck load of cigarettes numbering 17 lacs on furnishing security bond and (2) also allow the petitioners to import further consignment of cigarettes on further furnishing security bond to the extent of the excise duty leviable on each consignment.

5. The Central Government by Notification S. R. O. 363 (K)/ 63, dated 17th May 1963, in supersession of the first notification, added the following two provisos:‑ "Provided that the exemption herein granted shall not apply to unmanufactured products removed from the said Tribal Areas to any other area in Pakistan. Provided further that the exemption herein granted shall not apply to any excisable goods manu factured with the assistance of any plant or machinery which was previously installed in any area of Pakistan other than the said Tribal Areas, if such goods are removed from the Tribal Areas to any other area in Pakistan." On 19th May 1964, after the admission of the writ petition, the Central Government issued the impugned notification under which further amendment was made in the Ministry of Finance Notification No. S.R.O. 363 (K)/63, dated the 17th May 1963, by adding the following proviso:‑ "Provided further that the exemption herein granted shall not apply to any excisable goods manufactured in the Tribal Area which bear brand, or trade name, or trade marks under which similar goods manufactured in any area of Pakistan other than the said tribal areas are also marketed if such goods are removed from the Tribal Areas to any other area in Pakistan." After the impugned notification the petitioners filed the amended writ petition in which they asked for additional prayer that the impugned notification, is "unjust and of no legal effect".

6. The gravamen of the petitioners' claim is that they had after obtaining the express permission of the West Pakistan Government through its Director set up the Cigarettes Factory in pursuance of the incentive offered by the first gazette notification by investing ". . . a capital of Rs. 35 lakhs at the cost of great local risks and financial difficulties purely with a view to manufacture goods which are completely exempted from excise duty till June 30th 1965, and that the action of respondent No. 1 in issuing the impugned notification is arbitrary, unjust and of no legal effect because "it purports to divest the vested rights of the petitioners."

7. The respondents filed a joint written statement contesting the writ petition mainly on the ground stated in para. (G), which reads thus: "The Notification No. S. R. O. 31 (R)/64, dated 19‑5‑64, was not issued to divest the petitioners in particular of any vested rights, as stated by him but was of a general nature applicable to all goods manufactured in the Tribal Areas, and Government was perfectly within its rights to issue the same to safeguard itself against the loss of revenue as a result of Industries set up in the Tribal Areas forming combinations with old established Industries in the Settled Area."

8. We had the benefit of a full and able argument from Mr. Zahoor‑ul‑Haq, learned counsel for the petitioners, who has given a commendable labour and time to the study of the brief. The learned counsel challenged the impugned notification on two‑fold ground. One, that the exemption given by the Govern ment from the levy of the excise duty under the first notification became irrevocable from the time when on the faith of the notification petitioner No. 1 was accorded sanction by the West Pakistan Government through its Director to set up a Cigarette Factory at Sakhakot, and that, at any rate, it was too late in the day for the Central Government to rescind the notification' by imposing a new condition under the impugned notification, when the industrial undertaking had gone into operation. It was argued that the Government could not invoke the rule of locus poenitentiae of rescinding the exemption in cases where a "decisive step" had been taken and the exemption had been "given effect to." Two, that the powers derived under section 21 of the General Clauses Act to amend, vary or rescind the first notification by the impugned notification could not have a retrospective effect in that the Central Government was under constitutional disability while exercising delegated legislative powers to make notification having retrospective effect. In other words, the impugned notification introducing the new proviso that the total exemption from levy of the said duty could not be claimed in regard to "similar goods manufactured in any area of Pakistan other than the said Tribal Area", would not operate retrospectively so as to affect the vested rights of the petitioners.

9. Mr. Sher Bahadur Khan, Additional Advocate‑General, on the other hand, who had no case to argue, tried to defend the validity of the impugned notification by invoking the aid of section 21 of the General Clauses Act, that the power to amend or rescind is included in the power to issue notification.

10. There is a considerable case‑law including the high authorities of the Federal Court in Shahbaz v. The Crown (P L D 1956 F C 46), and of the Supreme Court in Lt: Col. G. L. Battacharya v. The State and others (P L D 1964 S C 503), in which it has been held that the power to rescind or revoked cannot be exercised when the order "becomes effective". In Yenkatesh Yesheant Deshnand v. Emperor (A I R 1938 Nag. 513), for the first time the point arose before the Full Bench whether the Government having granted unconditional order of remission and com municated it to the Superintendent of Jail could recall that order under section 21 of the General Clauses Act. The Full Bench had no difficulty in answering the question against the Government, holding that the Government could not rescind the remission as the same has become effective, having been communicated to the Superintendent of the Central Jail, who had made the entry in the ticket of the convict. At page 518 the learned Judges (Stone, C. J. and Cruer, J.) with whom Bose, J. had also agreed, though he wrote a separate judgment, observed:‑ "An order of this kind which has been acted upon to the extent of altering the history ticket, to the extent of informing the Legislature of the remission, cannot be amended or cancelled or suspended by the Assistant Legal Remembrancer writing to the Superintendent of the Central Jail a memorandum telling the Superintendent to keep a prisoner in custody until he is told to let him go. That is not the way that orders are amended and it is not the way that this order was amended because the amending order is dated the 28th May whereas the above memorandum is dated 14th April. The trouble about the amending order, even assuming a power in Government to rescind such an order, is that it was passed eight days after this application had been launched and one month and 12 days after the prisoner was entitled to be released under the order of 24th February 1938. Any possible locus poenitentiae was clearly at an end when the amending order was passed. In the circumstances we have no doubt at all that the application must succeed." In Shahbaz v. Crown the same question, namely, the true interpretation of section 21 of the General Clauses Act was considered. Shahabuddin, J., delivering the judgment for the Federal Court while approving the rule enunciated in Venkatesh Yesheant beshnand v. Emperor, at page 49 summed up the discussion thus:‑ "locus poenitentiae in law refers to the power of receding (sic) till a decisive step is taken. If a decisive step is taken other considerations would arise, but if that step is yet to be taken, we see no reason to restrict the power to modify or cancel."

11. In Mahboob Rabbani v. The Government of West Pakistan (P L D 1963 Lah. 53), a Division Bench of the Lahore High Court had to consider whether under section 21 of the General Clauses Act the Government could cancel the leave granted to the petitioner by previous notification dated the 17th September 1957. Sardar Muhammad Iqbal, J., delivering the judgment for the D. B., in para. 4, summed up the discussion thus: "We have made it clear to the learned counsel for the respondent that there is no force in his contention that the Government could, in the exercise of the powers contained in section 21 of the General Clauses Act, cancel the order which it had passed and had been notified in the Gazette of the 27th of September 1957. The order, in our opinion, had already come into operation and as laid down in Shahbaz v. The Crown the power under section 21 could be exercised only if the order, which is said to be cancelled, had not been carried into effect. Since the order became operative with effect from the 13th of September 1957, the order could not be withdrawn or cancelled subsequently on the 1st of June 1959, in the exercise of the powers under section 21 of the General Clauses Act."

12. Col. G. L. Battacharya's case is the latest decision of the Supreme Court on the point. Their Lordships after noting the decisions in Deshband v. King‑Emperor and Shahbaz v. The Crown went a step further by holding that the order of remission became effective and irrevocable as soon as it was communicated to the Superintendent of Jail. I may profitably reproduce the following observations of the learned Chief Justice, at page 509:‑ "But it is clear that as from the date of the order of the Governor, which was expressed in proper form with the reference to the sentence awarded to the prisoner, and to the power under section 401, Cr. P. C. which was being exercised and which bore a valid official signature, the Jail Superintendent upon receipt of that order was obliged, as part of his duty under the Prisoners Act, immediately to give effect to it, so that the unexpired portion of the original sentence was immediately to be reduced by a period of four years."

13. It follows from the above authorities that as soon as an order becomes "effective" it becomes irrevocable and the rule of locus poenitentiae cannot be exercised. In the instant case the impugned notification was passed when the industrial undertaking had gone into operation, and as such the exemption given under the first notification had become "effective" and it was too late for the Government to retract its step and rescind the exemption.

14. By parity of reasoning we reach the same conclusion, namely, that the impugned notification having been issued by the Government in its capacity as delegated Legislature could be prospective in operation and not retrospective, and could not affect the rights which accrued to the petitioners. The learned counsel for the petitioners while arguing the competency of the delegated Legislature invited our attention to the impugned notification and contended, and we think very rightly, that the notification did not at all pretend to be retrospective in operation but the respondents had misconstrued it to be retrospective in operation. In support of the argument that delegated Legislature was under constitutional disability to act with retrospective effect, the learned counsel for the petitioners invited our attention to the following passage by the learned authors F. C. S. Wade & G. Godfrey Phillips on Constitutional Law, Sixth Edition, page 575 :‑ "(d) Retrospective operation. In discussing the supremacy of Parliament mention has been made of legislation having retrospective operation. To change the character of past transactions carried out on the faith of the then existing law is repugnant to the conception of the rule of law. If on occasions it is inevitable that Parliament should yield to the proposals of a Chancellor of the Exchequer to stop a leakage in the revenue with effect from a date a few months earlier, this should be done by Parliament itself, as it occasionally is, and not be entrusted to delegated legislation, where there is no procedure apt for securing amendment of the new law. Such legislation can only be justified if Parliament has the opportunity of debating the matter as one of principles on second reading and of amending the proposal in committee, if need be."

15. Reliance was also sought (1) on the decision of the Supreme Court in Sheikh Rahmatullah v. Deputy Settlement Commissioner (P L D 1963 633 ) and Sheikh Fazal Ahmed v. Raja Ziaullah Khan and another (P L D 1964 S C 494). The following extract from the judgment of Cornelius, C. J. in Sheikh Rehmatullah's case will posy perusal:‑ "It is of course settled law that power given by a statute to act by notification with prospective effect as in section 3, cannot be effectively exercised with retrospective effect, whatever the language that may be employed, and consequently the Central Government's notification of 12th September 1959, must be supposed to have effect from that date and no earlier date, notwithstanding the use of words calculated to give it effect as from 8th August 1959. It is true that if in the interval between the two dates vested rights had accrued in consequence of the first notification, those could not be annulled by a mere notification of a latter date."

16. Kaikaus, J., delivering the judgment for the Supreme Court in Sheikh Fazal Ahmad's case, if I may say so with respect, lucidly summed up the discussion on the point at page 501 thus: "This amendment had come into force on 22‑2‑1963. An obvious objection to this amendment is that it is a notification by the Government in exercise of the power of subordinate legislation and such power does not include a power to give retrospective effect. The power of subordinate legislation which is exercised by the executive is a very limited power. Its exercise even to a limited extent had been objected to on the ground that the fact that a Legislature had been empowered to legislate on a particular subject did not imply that it could delegate its power of legislation to any other person or body of persons. The power of delegation had, however, to be accepted to a limited extent because in many cases it is almost impossible for the Legislature to make provisions in detail and in some cases the time or the occasion for applying a statute has to be left to the executive Government. It was considered that it was not possible for the Legislature to exercise its functions properly unless the grant of subordinate legislative power to the executive was permitted to this extent. However, the subordinate Legislative power is to be permitted only to the extent to which it is necessary for the proper exercise of its function by the Legislature and a power to legislate with retrospective effect has never been accepted as included in a power of subordinate legislation. In Rahmatullah v. Deputy Settlement Commissioner P L D 1963 S C 633 this Court held that a notification by the Government under the Displaced Persons (Compensation and Rehabilitation) Act could not have retrospective effect."

17. I may also, usefully borrow the terse observation of Pandrang Row, J. in S. Girdharilal Son & Co. v. B. Kappini Cowder and others (A I R 1938 Mad. 688), when at page 700 his Lordship observed:‑ "The real test is, when deciding whether a particular provision of law is to be given retrospective effect or not, not whether the law is a law of procedure or substantive law, but whether the law in question affects or impairs existing rights, including rights of action which are substantive rights, where existing rights would be adversely affected, Courts decline to give retrospective effect unless compelled thereto by the words of the statute." It follows from the above authorities that the subordinate delegated Legislature by way of notification is under constitutional disability to make notification which is retrospective in operation so as to take away or impair "vested rights".

18. A question may arise as to what is "vested right". The term "vested right" has not been defined by any statute. The learned counsel for the petitioners invited our attention to the discussion by A. S. Chaudhri, the learned author of Constitutional Rights & Limitations. Among other definitions at page 587 he defined the terms thus "It is an immediate fixed right of present or future enjoyment, and rights arc vested in contradistinction to being expectant or contingent." Continuing further on the same page it is observed: "It must be a title to the present or future enjoyment of property, or to the present or future enforcement of a demand, or a legal exemption from a demand made by another." It follows from the above discussion that the petitioners acquired vested rights of exemption of the whole of excise duty when on the faith of the first notification they placed the order for the machinery of the industrial undertaking. At any rate, the petitioners could not be denied of having acquired a vested right in regard to the exemption of the whole of excise duty when the industrial undertaking was completed and went into operation.

19. By our short order dated 26th August 1964, we had announced orders accepting the writ petition with costs, which is assessed at Rs.

500. This judgment would furnish the detailed reasons. K. B. A. Petition accepted.