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P L D 2002 SC 460

PAKISTAN TOBACCO COMPANY LTD
V/S
GOVERNMENT OF N.W.F.P THROUGH SECRETARY

Per Iftikhar Muhammad Chaudhry,J.(a) Constitution of Pakistan (9173) At. 151-

A perusal of sub-Article (1) of Article 151 of the Constitution
indicates that it does not provide absolutely free trade, commerce and intercourse throughout Pakistan i.e. inter-Provincial trade because under sub-Article (2) of Article 151 of Constitution, Majlis-e-Shoora (Parliament) has been empowered to impose such restriction on freedom of trade and commerce or intercourse between one Province and another or within any part of Pakistan, as may be required in public interest. For example if on account of shortage of food grains in any part of Pakistan or Province and to prevent/control its flow. Majlis-e-Shoora can impose such restriction, in the public interest. But presently we are not confronted with this proposition as we have noted hereinabove that according to view-point of learned counsel appearing for respondents “Tobacco Development Cess” is being charged on the exit point of those Districts which have their outlet in other Provinces including Punjab, Balochistan and Azad Jammu and Kashmir. Therefore, under sub-Article (3) of Article 151 of the Constitution, proposition for consideration would be “whether by levying/collecting of development cess on Tobacco, Provincial Government of N.W.F.P has violated these Constitutional provisions”. A study of sub-Article (3) reveals that in terms of its clause (a), the Provincial Assembly or Provincial Government has been divested from making any law or to take any executive action prohibiting or restraining the entry not or the export from the Province, of goods of any class or description. Plain reading of the words employed in this sub-Article would indicate that authority of promulgating a law would be of a Province, in order to ensure free trade, commerce and intercourse throughout Pakistan under Article 15(1) would not be available if such law has prohibited or restrained or hindered activities of the trade commerce etc.

Clause (a) of sub-Article (3) of Article 151 of the Constitution with be
examined with reference to definition of phrase “prohibiting or restraining” used therein in ordinary dictionary meaning. As per Black’s Law Dictionary (5th Edition), the origin of the word ‘prohibition’ is ‘prohibit’ which means to ‘forbid by law: to prevent: etc.’. Similarly in the World Book Dictionary by Scoot Fetzer Company, Chicago, word ‘prohibit’ has been defined as to forbid by law or authority: to prohibit the sale of alcoholic beverages; picking flowers in this part is prohibited ; the prevent; hinder.’ With reference to these definitions the word ‘prohibition’ has been used as the act of prohibiting or forbidding; prohibition against swimming in the city’s reservoirs; a law or laws against making or selling alcoholic liquors;’ etc.

The meaning of phrase ‘prohibition’ defined hereinabove in two
dictionaries persuades us to infer with reference to the scheme of section 11 of the Act that if the Government of N.W.F.P had placed a ban on the export of Tobacco to the other Provinces then the appellants could have presented successfully the case of complete violation of the Constitution.

Next important phrase used in clause (a) of sub-Article (3) of Article
151 of the Constitution is ‘restriction’. It has been defined in Black’s Law Dictionary (5th Edition) to be ‘a limitation often imposed in a deed or lease respecting the use to which the property may be put’. Whereas according to World Book Dictionary ‘restriction’ mean ‘something that restricts: limiting condition or rules; the restriction on the use of the playground: no fighting: no damaging property: the act of fact of restricting or the condition of being restricted:’ [p. 470 & 471] B,C, D & E

(b) Constitution of Pakistan (1973), Arts. 151(1)(3) & 142-
R/w S. 11 of North West Frontier Province Finance Act (I of 1996)-
S. 11 of North West Frontier Province Finance Act (III of 1997)-

The above discussion persuades us to hold that liberal and dynamic
interpretation of the word ‘free’ does not mean an unqualified freedom at all in the trade, commerce and intercourse between the provinces because unchecked freedom in the trade, commerce and intercourse without any reasonable prohibition and restriction would not be beneficial for an orderly society inasmuch as even there would be lack of discipline and to Provincial administration would not be in a position to control trade and commerce prohibited/contraband articles, therefore, a qualified restriction if imposed up to the trade which has not financially burdened the traders and had also not impeded the flow of trade and commerce, would not be violative of the provisions of Article 151(1)(3), clause (a) of the Constitution. It may also be observed that as far as simpliciter levy of cess by the Provincial Government (N.W.F.P) on the movement of tobacco outside the Province that would not tantamount to placing any prohibition or restriction on the trade, commerce and intercourse between the Provinces. However, if the entry of the goods into the Province or export of goods to the other Province is completely banned then of course it would amount to placing a complete prohibition, limitation and restriction as it happened in the cases of Arshad Akram & Co. (ibid) and Star Flour Mills (ibid). As far as the imposition of development taxes like “Tobacco Development Cess” is concerned, such levy would fall withn the definition of compensatory or incidental tax which would not cause hindrance in trade, commerce and intercourse rather such reasonable/nominal tax would facilitate the Provincial Government for the purpose of generating revenue for development etc.

It is important to note that clause (b), sub-Article (3) of Article 151
of the Constitution, itself authorizes the Provincial Government to impose a tax subject to the conditions namely that no tax will be imposed as between goods manufactured and produced in the Province and similar goods not so manufactured or produced to discriminate in favour of the former goods, meaning thereby that if similar goods is brought in the Province, then tax is imposed on it, whereas no local tax has been imposed on the goods which is manufactured in the Province because if such nature of tax is allowed the similar goods which is imported in the province would not be in a position to compete with the goods which is manufactured in the Province and in this manner there would be discrimination in the latter kind of goods. This sub-Article further says that no tax shall be imposed on the goods produced outside the Province which discriminates between the goods manufactured or produced in any area in Pakistan and similar goods manufactured or produced in any other area in Pakistan meaning thereby that if any goods is imported (brought in the Province) from a particular Province and tax imposed upon it, whereas similar goods which is manufactured or produced in the Province other than the gods which was imported from the particular Province and then if the tax is not imposed on the goods which is manufactured and produced in other area in Pakistan, it would cause discrimination. Although learned Division Bench of High Court had attended to these aspects of the case but in or opinion it requires no detailed discussion for the reason that admittedly the “Tobacco Development Cess” is recovered on the movement of the Tobacco outside the Province of N.W.F.P. It is admitted that even if the factories which are manufacturing tobacco products not in the Province of N.W.F.P they consumed locally produced tobacco instead of bringing tobacco from outside the Province. However, learned counsel appearing for the parties have also not dilated upon this aspect of the case, therefore, we are of the opinion that levy of cess is not causing hindrance in freedom of trade, commerce and intercourse, therefore, the provision of section 11 of the Act is not violative of Article 151(1)(3) of the Constitution.

In above paras of the judgement while dealing with the interpretation of
Article 151 of the Constitution, we have held that imposing of Tobacco Development Cess” by the Provincial Legislature is permissible being not contrary to the provisions of Article 151 (3)(a) of the Constitution and imposition of such tax on the trade and commerce can be considered to be compensatory tax for the purpose of development in the Province. It has also been held that imposition of the cess/tax will not cause prohibition or restriction in the movement of tobacco outside the Province. Simultaneously, it has also been observed that the Provincial Assembly is competent to levy a reasonable cess on the movement of tobacco. In view of these observations it is imperative to note that initially when in the year of 1996, cess was levied and the Provincial Legislature itself fixed its rate at Re.1 per kg. but in the N.W.F.P. Finance Act of 1997, section 11 was re-enacted in pursuance whereof powers to levy the development cess was delegated to the Government, which the latter was required to ix from time to time by Notification in the Official Gazette. A perusal of section 11 of the Act clearly demonstrates that no guidelines were provided enabling the Provincial Government to fix the rate from time to time by means of Notification. We are informed that vide a Notification, dated 9th July, 1997 being NO. AO-II/LCB/6-23/97 the Provincial Government through Finance Department had issued the revised Notification spelling out the rate of the cess. It seems that a Notification was issued wherein the rates of different items of tobacco were fixed including Rs.1.25 on tobacco leafs. At this stage it would not be out of context to note that as per section 11 of the Act of 1996 flat rate of development cess on tobacco was levied at the rate of Re. 1 per kg. As far s remaining items namely Choora, Naswar, etc., are concerned, no rate was fixed by the Provincial Legislature. In view of said position, we fail to understand that on the basis of which criteria cess was increased from Re. 1 per kg. to Rs. 1.25 per kg. and as how for the first time cess is being charged on the items other than the tobacco leafs namely Choora. Naswar, etc. Because substantive provision of law i.e. section 11 of the Act does not authorize recovery of cess on any other item except tobacco. There is possibility that the other items on which cess is being charged might be inferior type of tobacco or its derivatives. But according to provision of section 11, no authority was conferred upon the executive Government to recover cess on these items. Considering the case in hand from these angles, it is important to trace out the principles, governing the delegation of powers by the legislature to executive. There is consensus of the judicial opinion that delegation of powers should not be uncontrolled and unbridled and to check the arbitrary attitude of the executive in exercise of powers, the Legislature must provide some guidelines basing on the policy of the Government to exercise such powers. Reference in this behalf may be made to the case of P.N. Kaushal and others v Union of India and others (AIR 1978 SC 1457). Relevant para. wherefrom is read as under thus :-

“This is why the principle of excessive delegation, that is to say, the making over by the Legislature of the essential principles of legislation to another body becomes relevant in the present debate. Under our Constitutional scheme the Legislature must retain its own hands the essential legislative functions. Exactly what constitutes the essential legislative functions is difficult of define;

The Legislature must retain in its own hands the essential legislative
function. Exactly what constituted ‘essential legislative function, was difficult to define in general terms, but this much was clear that the essential legislative function must at least consist of the determination of the legislative policy and its formulation as a binding rule of conduct. Thus, where the law passed by the Legislature declares the legislative policy and lays down the standard which is enacted into a rule of law it can leave the task of subordinate legislation which by its very nature is ancillary to the status to subordinate bodies, i.e., the making f rules, regulations of bye-laws. The subordinate authority must do so within the framework of the law, subordinate legislation has to be consistent with the law under which it is made an cannot go beyond the limits of the policy and standard laid down in the law provided the legislative policy is enunciated with sufficient clearness or a standard is laid down the Courts should not interfere with the discretion that undoubtedly rests with the Legislature itself in determining the extent of delegation necessary in a particular case.

A statute challenged on the ground of excessive delegation must
therefore, be subject two tests, (1) whether it delegates essential legislative function or power, and (2) whether the Legislature has enunciated its policy and principle for the guidance of the delegate.”

Likewise a learned Division Bench of Lahore High Court, Lahore in the
case of Muhammad Aslam and other v. Punjab Government and others (1996 MLD 685) following the judgments from our own jurisdiction in the cases reported in PLD 1958 SC 41, PLD 1965 Dacca 156, PLD 1966 SC 854, PLD 1988 SC 416 has held that naked, unbridled and unguided powers cannot be conferred upon the outside agency like executive.

It is to be further seen that Article 142 of the Constitution has
demarcated, subject-matters, for the purpose of legislation by Majlis-e-Shoora and Provincial Assembly. The Majlis-e-Shoora have been promulgating laws on the basis of which executive Governments authorized to levy the tax but for doing so, guidelines are provided by the Legislature itself to the executive with a view to canalize such powers and also to avoid exercise of such power arbitrarily or without reasonability. Reference in this context can be made to section 18-A of the Customs Act. A perusal whereof would indicate that a complete guideline has been made available to the executive for the purpose of the recovery of regulatory duty. There is doubt that the levy of “Tobacco Development Cess” fall within the prerogative of Provincial Assembly and the same can be levied and collected for development purpose in the Province. Such identical laws viz. West Pakistan Sugarcane Control Act, 1963 are applicable in other Provinces and this Court in the case of Shahtaj Sugar Mills Ltd. and 3 others v. Province of Punjab and others 1998 SCME 2492 has held that levy of such development cess are not restricted to territorial limits or zone. Therefore, we are of the opinion that if the Provincial Assembly or the Government of N.W.F.P intended to levy “Tobacco Development Cess”, it should have either fixed the rate of the cess itself as it was done by means of section 11 of the N.W.F.P. Finance Act, 1996 or some guidelines should have been provided in the parent section, channelizing the power to the executive Government to fix the rate because in our considered opinion levy of such development cess must be reasonable being a type of compensatory tax which is charged on the movement of tobacco being taken outside the Province.

However, despite the fact that on account of excessive delegation of the
powers, the executive Government has often misused the authority conferred upon it by the Provincial Legislature but striking down of such law by the High court was not warranted because simultaneously it was the obligatory duty of the Court to save the law instead of destroying it. Thus, in our opinion section 11 of Act even now can be saved by making directions to the Provincial Government to issue fresh notification for purposes of fixing the rate of cess/tax strictly following the procedure laid down under section 22 of the N.W.F.P general Clause Act, 1956 and till then the Notification dated 9th July, 1997 shall recover “Tobacco Development Cess” at the rate of Re. 1 per kg.

It is hoped that above exercise shall be completed by the Provincial
Government of N.W.F.P. if it is so intended within the period of three months, after the pronouncement of this judgment, failing which the observation of learned High Court of Peshawar tot he extent of the subject under discussion shall hold the field.

As consequence of foregoing reasons it is held that section 11 of the
Act,1997 is not ultra vires the Article 151 (1)(3)(a) of the Constitution. Resultantly Civil Appeals Ns. 1242, 1243, 1244, 1245, 1246 and 1248 of 1997 are hereby dismissed with costs. Whereas Civil Appeals Nos. 1249 and 1250 stand disposed of in view of the observation made hereinabove.

Order accordingly.

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