SC Judgement regarding Cess Dated 22nd of August, 2014


( Appellate Jurisdiction )



CIVIL APPEAL NOS. 1540-1599 OF 2013  



(On  appeal  from  the  judgment/order  of  the Peshawar High Court, Peshawar dated 13.6.2013 in Writ  Petition Nos.2582-P,  2880-P,  2457-P,  2546-P,  2578-P,  2653-P,  2804-P,  3050-P,  3156-P,  2654-P, 2579-P,  2750-P,  2831-P,  3022-P,  3023-P,  3089-P, 2454-P,  2455-P,  2459-P,  2738-P,  2740-P,  2801-P, 3051,  2581-P,  2583-P,  2584-P,  2613-P,  2728-P, 2802-P,  3087-P,  2456-P,  2523-P,  2585-P,  2611-P, 3380-P,  3088-P,  3090-P,  2577-P,  2580-P,  2739-P, 2881-P,  2941-P,  2976-P,  3270-P,  2612-P,  2911-P, 2913-P,  2940-P,  2987-P,  3104-P,  3228-P,  2395-P, 2424-P,  2910-P,  2974,  3214-P,  3227-P,  3229-P, 3271-P, 2514-P/12 and judgment dated 24-10-2013 passed by Peshawar High Court, Abbottabad Bench in Writ Petition No.788-A/2012)

 Federation of Pakistan through the Secretary

M/o Petroleum & Natural Resources & another    (in all cases)                                                                                                                                                                 …Appellants


Durrani Ceramics & others                                                           (in CA 1540/13)

M/s Zam Zam CNG Filling Station & others                            (in CA 1541/13)

Khyber Match & others                                                                 (in CA 1542/13)

M/s T.K.M. Enterprises, Peshawar & others                        (in CA 1543/13)

Libra (Pvt) Ltd & others                                                                 (in CA 1544/13)

Al-Jasmin (Pvt) Ltd & others                                                        (in CA 1545/13)

M/s Khyber Electric Lamps & others                                        (in CA 1546/13)

M/s Kumail CNG Filling Station & others                                (in CA 1547/13)

M/s Brightex Industries (Pvt) Ltd & others                           (in CA 1548/13)

Ashraf Match Factory (Pvt) Ltd & other                                  (in CA 1549/13)

Swat Tyre & Rubber Co. (Pvt) Ltd & others                           (in CA 1550/13)

Frontier Ceramics Ltd & others                                                  (in CA 1551/13)

AR Processing Industries (Pvt) Ltd & others                         (in CA 1552/13)

M/s Diamond Filling & CNG Station & others                       (in CA 1553/13)

M/s Gas Centre II CNG Station & other                                  (in CA 1554/13)

M/s Capital CNG Station & others                                             (in CA 1555/13)

Royal Textile Mills Ltd & others                                                  (in CA 1556/13)

Sarhad Textile Mills Ltd & others                                               (in CA 1557/13)

Lahore Steel Mills & others                                                          (in CA 1558/13)

M/s Taj Vegetable Oil Processing Units (Pvt) Ltd etc.       (in CA 1559/13)

M/s Gateway CNG Filling Station & others                            (in CA 1560/13)

M/s Enem Multi Textile (Pvt) Ltd & others                            (in CA 1561/13)

M/s Green Hill CNG Station (Pvt) Ltd & others                     (in CA 1562/13)

M/s A.G.E. Industries (Pvt) Ltd & others                                (in CA 1563/13)

Premier Formica Industries Ltd & others                               (in CA 1564/13)

S.S. Polypropylene (Pvt) Ltd & others                                      (in CA 1565/13)

Swat Ceramics Company (Pvt) Ltd & others                         (in CA 1566/13)

M/s  Peshawar Chemical Industries & others                      (in CA 1567/13)

M/s Mohsin Match Factory (Pvt) Ltd & others                    (in CA 1568/13)

Swat CNG Station, Swat & others                                                (in CA 1569/13)

Frontier Foundry (Pvt) Ltd & others                                         (in CA 1570/13)

M/s A.J. Textile Mills Ltd & others                                            (in CA 1571/13)

M/s M.K.B. Enterprises (Pvt) Ltd & others                            (in CA 1572/13)

M/s I.T.H.F.Z. Mills Ltd & others                                                (in CA 1573/13)

M/s United Rubber (Pvt) Ltd & others                                    (in CA 1574/13)

M/s Power Tech CNG Filling Stations & others                    (in CA 1575/13)

M/s Behram CNG Station & others                                          (in CA 1576/13)

M/s Bilour Industries (Pvt) Ltd & others                                 (in CA 1577/13)

United Rubber (Pvt) Ltd & others                                             (in CA 1578/13)

M/s Super Taj CNG Station & others                                       (in CA 1579/13)

M/s Peshawar II CNG Filling Station & others                      (in CA 1580/13)

M/s Blue Tee Filling Station & others                                       (in CA 1581/13)

M/s Super CNG & others                                                              (in CA 1582/13)

M/s Khurshid & Gul Brothers CNG Station & others         (in CA 1583/13)

M/s Gul Shahzada Enterprises (Pvt) Ltd & others              (in CA 1584/13)

M/s Daudzai CNG Filling Station & others                              (in CA 1585/13)

M/s Wadud Woollen Mills Ltd & others                                  (in CA 1586/13)

M/s Yassrab CNG Filling Station & others                               (in CA 1587/13)

M/s Asim CNG Station & others                                                (in CA 1588/13)

Daudsons Industries (Pvt) Ltd & others                                  (in CA 1589/13)

M/s Shabqadr CNG Filling Station & others                           (in CA 1590/13)

M/s Hafeez Iqbal Oil Ghee (Pvt) Ltd & others                      (in CA 1591/13)

M/s Rehman Cotton Mills Ltd & others                                  (in CA 1592/13)

M/s Alam Match (Pvt) Ltd & others                                         (in CA 1593/13)

M/s Aman CNG & others                                                              (in CA 1594/13)

Khushal CNG Filling Station & others                                       (in CA 1595/13)

All Pakistan CNG Association (KPK Zone) & others            (in CA 1596/13)

M/s Shah’s-III CNG Station & others                                        (in CA 1597/13)

M/s Al Hafiz CNG-II Fillion Station & others                          (in CA 1598/13)

Ashraf Industries (Pvt) Ltd, Peshawar & others                    (in CA 1599/13)

Frontier Dextrose Ltd. and others                                                (in CA 21/14)


For the Appellants:                Mr. Salman Aslam Butt, AGP.

Mr. Muhammad Waqar Rana, ASC.

Assisted by:

Sardar Dil Nawaz Cheema, Advocate.

Mr. Nazir Malik, Director(Law) M/o Petroleum.

Mr. Hassan Mehmood, Director (Gas),


Mr. Salman Akram Raja, ASC.

Assisted by:

Mr. Husnain Arshad, Mr. Bilal Bashir,

Ms. Zainab Qureshi, Neshay Aqueel, and

Mr.Muhammad Shakeel Mughal, Advocates.

For Respondent No.4:      Mr. Abid S. Zuberi, ASC.

(in CA 1540/13):                       Assisted by:

Mr. Ayan Memon and M. Munir Khan, Advocates.

For Respondent-5:

(in CA 1540/13):                      Mr. Ahmed Nawaz Chaudhry, AOR/ASC

For Respondents 4-29

(in CA 1541/13):                       Syed Iftikhar Hussain Gillani, Sr. ASC.

Assisted by Mr.Saad Buttar, Advocate

 For Respondent-1:
(in CAs 1542,1544,1549,1551,
1570,1571,1577/13 and

For Respondent-2:
in CA 1568 &1592/13)           Mr. Athar Minallah, ASC.

For Respondent-1,2:

In CA 1546/13:                         Mr. Atif Ali Khan, ASC.

For Respondent-1:

(in CAs 1552,1559/13 &

For Respondents 1,4-13 

in CA 1591/13 &                       Mr. Haroon-ur-Rashid, ASC.

For Respondent-7:

and CA 1592/13)

For Respondent-1:

In CAs 1555,1580

and  1587/13 &

For Respondents-2:

In CAs 1553/13 &

For Respondents-1,2  

In CAs 1554/13 &

For Respondents 6,15          Mr. Makhdoom Ali Khan, Sr. ASC.

In CAs 1560/13 &                        Assisted by:

For Respondents 1-5             Mr. Khurram Hashmi, Mr. Umair Malik,

In CAs 1562/13 &                         Mr. Saad Hashmi, Mr. Tanveer Niaz,

For Respondents 1-15           Mr. Nader Mehboob,Mr. Zarnab & Shoaib.

In CAs 1569/13 &                         Advocates.

For Respondent-2:    

In CAs 1581, 1585/13 &

For Respondents-2-7:     

In CAs 1588/13 &

For Res-1,2,3,7,9,10    

In CA 1597/13:

For Respondent-1:   

CA 1556-1557/13:                       Sardar Muhammad Ghazi, ASC.

For Respondent-7,8, and

Respondents 12-14,18

in CA 1560/13:                              Mr. Ijaz Anwar, ASC.

For Respondent-1:

in CAs 1572/13 &

For Respondent-1,3:

in CA 1592/13                                Mr. Tasleem Hussain, AOR/ASC.

For Respondent-1:

in CA 1576/13:                              Mr. Tariq Mahmood, Sr. ASC.

For Respondent-6:

(in CA 1592/13)                            Syed Arshad Ali, ASC.

For the Respondents:

(in CAs 1543, 1545, 1547,

1548, 1550, 1561, 1562,

1566, 1569, 1573-1575,

1578, 1579, 1582-1584,

1586, 1589-1590, 1593-1596,

1598, 1599/13 & 21/14)

CMAs 970-972/14 in

CA 1540/13:                          Mr. Zulfiqar Khalid Maluka, ASC.

CMA 1066/14:                      Mr. Issac Ali Qazi, ASC.

CMA 1091/14:                     Mr. Ali Ahmed Khan Rana, ASC.

 Date of Hearing:    12,14,17 to 19.02.2014 & 04 and 05.03.2014.


    NASIR-UL-MULK,  J.—  The  respondents  are  industrial concerns and  owners  of  the  Compressed  Natural  Gas  (CNG)  Filling Stations  carrying  on  businesses  in  the  Province  of  Khyber Pakhtunkhwa  (KPK).  They filed  separate  Constitution  Petitions  before the-  Peshawar  High  Court,  assailing  the  levy  of  Gas  Infrastructure Development  Cess  (in  short „the Cess‟) under the  Gas  Infrastructure Development  Cess  Act,  2011  (in  short „the GIDC  Act‟),  as  amended from time to time.

2. The GIDC Act  was  introduced  as  a  „Money  Bill‟  under Article 73 of the Constitution of Pakistan of 1973 for the stated purpose of collection of the „Cess‟ for the construction of pipelines for importing natural gas and for equalization of gas prices with other imported fuels such  as  LNG from  all  gas  consumers  except  the  domestic  consumers N.R. and certain other exempted sectors (as provided in the Second Schedule to the GIDC Act). The GIDC Act received the assent of the President on 13.12.2011 and was notified in the Gazette of Pakistan vide Notification.

The  provisions  relevant  for  the  decisions  of  these  appeals  need  to  be reproduced in extenso. The term „Cess‟ has been defined in Section 2(a) of the GIDC Act to mean:

“„……..the  gas  infrastructure  development  cess chargeable  from  gas  consumers,  other than  the domestic  sector  consumers,  of  the  company  over and above the fixed sale price and payable under section 3;”

Section  3  provides the  following manner  of  payment  and  collection  of the „Cess‟:

“(1) The company shall collect and pay cess at the rates specified  in  the  Second  Schedule  and  in such  manner  as  the  Federal  Government  may prescribe.

(2)  A  mark  up  at  the  rate  of  four  percent  above three  months  KIBOR  prescribed  by  the  Federal Government shall be payable on any amount due under  sub-section  (1), if  the  said  amount  is  not paid within the prescribed time.”

 The  companies  mandated  to  collect  the „Cess‟ have  been mentioned  in  the  First  Schedule,  with  reference  to  its  definition  under Section 2(b) of the GIDC Act, 2011, as follows:

    “1.  Sui Northern Gas Pipelines Limited;

  1. Sui Southern Gas Company Limited;
  2. Mari Gas Company Limited;
  3. Pakistan Petroleum Limited; and
  4. Tullow Pakistan Development Limited.”.

 The  Federal Government  has  been  empowered  under  Section  7  of  the GIDC Act to bring about amendments in the First Schedule. The „Cess‟ rates as  chargeable  from  the  gas  consumers  under  Section  3  (1)  have been provided in the Second Schedule to the GIDC Act. The purpose of the levy of the „Cess‟ has been stated in Section 4 of the GIDC Act:

“Utilization  of cess.—  (1)  The  cess  shall  be utilized  for  or  in  connection  with  infrastructure development  of  Iran  Pakistan  Pipeline  Project, Turkmenistan  Afghanistan  Pakistan  India  (TAPI) Pipeline Project, LNG or other projects or for price equalization  of  other  imported  alternative  fuels including LPG.

 (2)  An  annual  Report  in  respect  of  the utilization  of  the  cess  shall  be  laid  before  the House  after  three  months  of  the  end  of  the  each fiscal year.”

3. After hearing the Federation, the High Court in W.P. 2514-P of  2012 allowed  the  Constitution  Petitions  of  the  respondents  on 13.06.2013,  declaring  the  levy,  imposition  and  recovery  of  the „Cess‟ unconstitutional with the direction to refund the „Cess‟ so far collected from  the  respondents  within  a  reasonable  time,  either  in  lump  sum  or to  be  adjusted  in  monthly  gas  consumption  bills  of  the  respondents.

The  following  grounds  prevailed  with  the  High  Court for  striking down the „Cess‟:

i.)  The bill culminating  into the GIDC  Act was  introduced  as Money  Bill in  contravention  of the  provisions  of  Article  73 (2) of the Constitution.

ii.)  There  was  no  intelligible  differentia  adopted  nor  sound rationale  given  for  the  disparity in „Cess‟ rate charged as given  in  the  Second  Schedule  of  the  Act,  both  region  wise and on the basis of the nature of industry,

iii.)  The GIDC Act was passed without convening any meeting of the  Council  of  Common  Interest  (CCI).  It  was  the constitutional responsibility of the Government to place the bill before CCI prior to its introduction in the Parliament.

iv.)  The „Cess‟ rates given in Second Schedule of the GIDC Act, which  differentiated among  geographical  regions,  were against  the provision of  Article  158  of  the  Constitution, which grants  the  Province  where  the  well-head  of  Natural Gas is  located precedence  over  other parts  of  Pakistan  in meeting its requirements from that well-head. The dictates of the said Article were not adopted in giving the Provinces from where natural gas is being extracted any concession in „Cess‟ rates.

v.)  The Bill was introduced in Parliament without being tabled before  the  Federal  Cabinet in  violation  of  the mandatory procedure provided  under  Federal  Government  Rules  of Business.

vi.)  Since the GIDC Act was  neither declared  to  be a  tax  nor revenue  of  any  kind  which  had  to  be  deposited  in  the Federal  Consolidated  Fund,  its  classification  and management  under  the  constitution „was  ambiguous‟ as  it was  not  certain  that  how  the  GIDC Act was  managed,  by whom and under whose authority.

vii.)  That  „Cess‟  was  collected on  the  subsisting  and  existing services  being  rendered  by  the  state/government  or  its functionaries  to  a  particular  segment  of  a society/consumer. The „Cess‟  could  not  be  collected  on future prospects of any proposed facilities which were yet to be provided.

4. Leave to  appeal  was  granted  to  the  Federation  of  Pakistan on 26.12.2013 to examine, inter alia, whether:

i) the Act could not have been introduced as money bill keeping  in  view  the  provision  of  the  Article 73(2) of the Constitution;

ii) there was  any  question  regarding  excessive  delegation of legislative powers under the Act for levying the cess;

iii)  there  was  any  discrimination  regarding  levy  of the cess on different consumers;

iv) the cess  was  ultra  vires  of  the  Constitution  on account  of  the  Schedule  of  the  Act  having  not been  placed  for  approval  before  the  Council  of Common  Interest  and  the  same  was  bad  in  law having  not  been  placed  before  the  Federal Cabinet;

v) cess can only be imposed for services provided as cess is a  form  of  tax  imposed  for  the  purpose  of  raising revenue.”

5. Mr. Makhdoom  Ali  Khan,  Sr.  ASC,  leading  arguments  on behalf  of  the  respondents  pointed  that  the  imposition  of the „Cess‟ is also  under  challenge  before  the  High  Court  of  Sindh  and  Islamabad High Court, which are awaiting the decision of the present appeals. He therefore sought permission to raise additional grounds taken up in the matters  pending  before  the  High  Courts but not  dilated upon in  the judgment  impugned  in  these  appeals.  The  request  is  reasonable, considering the importance of the issue and its application throughout the  country.  Mr.  Salman  Akram  Raja,  ASC, who  appeared  for  the “ Federation,  has  also  prayed  that  he  be  allowed  to  take  up new points not raised before the Peshawar High Court on behalf of the Federation. In all fairness to both the parties, we granted the requests.

6. The new points raised were so substantial that rather than assailing or  defending  the  reasoning  in  the  impugned  judgment  the learned counsel for both the parties argued the case afresh. The gist of the arguments  of  Mr.  Makhdoom  Ali  Khan,  Sr.  ASC, was  that  the  levy was a  „fee‟  and  not „tax‟  and  thus  the  same  could  not  have  been introduced  through  a  Money  Bill under  Article  73  of  the  Constitution; that  in the alternative  if  the „Cess‟ is  considered  to  be  a  tax,  the  levy does not fall under any of the entries in Part-I of the Federal Legislative List.

7. Though the High Court had made some observations on the question as to whether the „Cess‟ was a tax or not but, with respect, had not dilated  upon  the  nature  of  the  levy whether  the  same was „tax‟ or „fee‟. Finding on this  question was  crucial  for  determining  whether the „Cess‟ could  have  been  introduced  through  a  Money  Bill.  According  to Article 73(2) of the Constitution “a bill or amendment shall be deemed to be a money bill if it contains the provisions dealing with all or any of the following matters, namely:-

(a)  the  imposition,  abolition,  remission,  alteration or regulation of any tax.”

(b)  ……………………

(c)  ……………………

(d)  ……………………

(e)  ……………………

(f)  ……………………

(g)  ……………………”

8. The Money Bill according to Article 73(1) of the Constitution is to  be originated and  passed  by the  National  Assembly whereas the Senate can only make recommendations. It is common ground between the parties that nomenclature of the levy is immaterial for determining its nature and its substance is to be examined to determine whether the same is „tax‟ or „fee‟. Mr. Makhdoom Ali Khan, Sr. ASC, submitted that „fee‟ has an element of quid pro quo and the money so collected is to be utilized  for  benefiting the  people  from  whom  the  same  is exacted.

Reference  was  made  to  the  judgment  of  this  Court  in  Sheikh Muhammad Ismail & Co. v Chief Cotton Inspector Council ( PLD 1966 SC 388 ) wherein it was held that no hard and fast rule could be laid down to  distinguish „fee‟ from „tax‟ and  the  question  needs  to  be  decided  on the  basis  of  the  facts  and  circumstances  of  each  case.  For  the  same proposition  the  learned  counsel  relied  upon  the  cases  of Hirjin  Salt Chemicals (Pak.)  Ltd. v. Union  Council  &  Others ( PLJ  1982  SC  295) , Noor Sugar Mills v. Market Committee ( PLD 1989 SC 449 ), Collector of Customs and  others v. Sheikh  Spinning  Mills and  others ( 1999  SCMR 1402 ), Sanofi  Aventis v. Province  of  Sindh ( PLD  2009  Karachi  69 ) and Soneri Bank Limited v. Federation of Pakistan & Others [ 2013 PLC (LC) 134 ].

    The learned  counsel further  referred  to certain judgments on  the point from  the  Indian jurisdiction:  The  Commissioner,  Hindu Religious Endowments Madras v. Shri Lakshmindra Thirtha  ( AIR 1954 SC  282),  The  Hingir  Rampur  Coal  Co.  v.  State  of  Orissa  ( AIR  1961  SC  459 ), Sreenivasa  General  Traders v. State  of  Andhra Pradesh ( AIR  1983  SC  1246 ) and Calcutta  Municipal  Corporation  v. M/s Shrey Mercantile Pvt. Ltd ( AIR 2005 SC 1879 ).

9. Referring to the case of The Hingir Rampur Coal Co. v. State of Orissa (ibid) it was contended that the „Cess‟ would be a fee and not tax if  it  is  levied  on a “defined  class  of  interested  individuals,  and  that the  fund  raised  did  not  fall  into  the  general  mass  of  the  proceeds  of taxation but was applicable for a special and limited purpose.”. That the primary object and essential purpose of the levy must be distinguished from its incidental results or consequences. Referring to Pakcom Limited v. Federation  of  Pakistan (  PLD  2011  SC  44  ), on which reliance  was placed  on  behalf  of the Federation,  Mr.  Makhdoom  Ali  Khan,  Sr.  ASC, submitted  that  so  long  as  the  money  is  collected  for providing specific benefit to a particular class or group who contribute, the benefit to the contributors may  not  be  returned  or  assessed  with  mathematical exactitude against their contributions. In the light of the principles laid down  in  the  above  referred  judgments,  the  learned  counsel  contended that the „Cess‟ has  all  the  trappings  of  a  fee  and  not  a  tax as it  is allocated for a specific purpose that is to develop Iran Pakistan Pipeline Project,  Turkmenistan  Afghanistan  Pakistan  India  (TAPI)  Pipeline Project, LNG or other projects or for price equalization of other imported alternative fuels including LPG; that there is an element of quid pro quo in the levy, with some exceptions, for the users of the natural gas, who had invested in their respective infrastructures and depend on the gas and would be directly benefit from the increase in the supply of natural gas from  the  new  projects. To  augment  his  argument  that  the „Cess‟ imposed  is  a  fee,  the  learned  counsel  pointed  out  that  the  money  so collected  is  to  be deposited  under  a  separate  head  and  under  Section 4(2)  of  the  GIDC  Act account whereof is  to  be  presented  before  the Parliament in its Annual Report three months after each fiscal year. The same  thus  cannot  be  utilized  for  any  purpose  other  than  the  object mentioned  in  Sub-Section  (1)  of  Section  4  of  the  GIDC  Act.  He  next pointed out that even the Government did not treat the collection of the „Cess‟ as  tax  as  is  evident  from the Explanatory  Memorandum  on  the Federal  Receipt  prepared  by  the  Finance  Division, tabled  with  the Annual Budget  Statement  before  the  National  Assembly;  that  in  both such  statements  for  the  Financial  Year  2012-2013  and  2013-2014  the „Cess‟ was mentioned  in  the „Statement Of Revenue Proceeds‟ as Non-Tax  Revenue and  not  included  in  the „Receipts Tax Revenue‟.  It  was thus  argued  that  the „Cess‟  being  a  fee  could  not  have  been  levied through a Money Bill.

10. Mr. Abid S. Zuberi, ASC, appeared for the Karachi Electric Supply Company  Limited  (KESC),  which  was  not  a  party  before  the Peshawar  High  Court  but  since  it  had  also filed  Constitution  Petition before the High Court of Sindh challenging the „Cess‟, we allowed their application to make submissions. The learned counsel submitted that a „Cess‟ can  be  either  a „tax‟ or a „fee‟,  depending  upon  its  nature  and purpose.  He referred  to a  case  from Indian  jurisdiction  M/s Shinde Brothers  v. Deputy  Commissioner  Raichur  (  AIR  1967  SC  1512  ) to submit  that  the  earlier  concept  of rendering some  specific  service  to  a particular payer of fee is no longer considered necessary to sustain the levy as a „fee‟.  That  it  is  the  primary  object  of  the  levy  and  essential purpose stated to be achieved which would determine whether the levy is a „fee‟ or a „tax‟. The learned counsel pointed out that the „Cess‟ was not made part of the Federal Consolidated Fund and was earmarked for a specific purpose. The learned counsel submitted that  Jindal Stainless Ltd. Etc. v. State of Haryana & Others ( AIR 2006 SC 2550 ), reliance on  which  was  earlier  placed  by  Mr.  Salman  Akram  Raja,  ASC,  was distinguished  in Vijayalashmi  Rice  Mill  and  Others v. Commercial  Tax Officers Palakol [2006]  6  SCC  763. The  Court  in  the  latter  case  held that  as  the  question  raised  in  Jindal  Stainless‟s  case (ibid)  did  not concern the nature  of a fee, it can not  be held an authority explaining its nature.

11. Mr. Salam  Aslam  Butt, the  learned  Attorney  General  for Pakistan,  defending  the  levy submitted  that  features  of a  tax  are compulsory imposition for public purpose which is enforceable by law; that the „Cess‟ fulfills all the three requirements; that it was imposed for the  benefit  of  the  public  at  large  and  not  for  the few beneficiaries. Relying upon the judgment from the High Court of Australia in the case of Australian Tape Manufacturers Association Limited v. Common Wealth of  Australia  [1993]  176  CLR  480.  The  learned  Attorney  General submitted  that  since  the „Cess‟  goes  into  the  Federal  Consolidated Fund, it is a „tax‟ and not a „fee‟.

12. Mr. Salman Akram Raja,  ASC,  appearing  on  behalf  of the Federation of Pakistan argued that the „Cess‟ has to be treated, for every intent and purpose, a „tax‟ and not a „fee‟. He argued that the „Cess‟ has been understood and defined by opinion of the courts as tax raised for a special  purpose.  Reliance  in  this  regard  was  placed  on Shahtaj  Sugar Mills v. Province of Punjab (1998 CLC 1912) which was affirmed by this Court in Shahtaj Sugar Mills v. Province of Punjab (1998 SCMR 2492); Quetta Textile Mills v. Province  of  Sindh (PLD  2005  Kar.  55). That cases from Indian Jurisdiction have also adopted this definition of „Cess‟ as  a  tax  raised  for  a  special  purpose: M/s Shinde  Brothers v. Deputy Commissioner (supra); Kunwar  Ram  Nath  & Others  v. The  Municipal Board, Pilibhit (AIR 1983 SC 930).

13. Relying upon  judgments  from  the  Indian  jurisdiction for establishing a  distinction  between  the  two  types  of  levy,  Mr. Salman Akram Raja, ASC, argued that the primary purpose for the imposition is to be considered and that any incidental consequences of the levy are to be  discarded  from  the  calculation  of  the  difference  between „tax‟ and „fee‟.  Reliance  was  placed  on Dewan  Chand  Builders v. Union  of  India  [ 2012 (1) SCC  101 ]; Hingir  Rampur  Coal  Company v. The  State  of Orissa (supra). The existence of quid pro quo as a necessary element in the  classification  of  a „Cess‟ as  a  fee  was  reiterated  by  relying  upon cases  from  Indian  jurisdiction: Mohan  Meakin  Limited  v. State  of Himachal  Pradesh  and  Others [ 2009  (3)  SCC  157 ]; M.  Chandru v. Member-Secretary,  Chennai  Metropolitan  Development  Authority  and another  [  2009  (4)  SCC  72 ];  Jindal  Stainless  Ltd.  Etc.  v. State  of Haryana & Others [ 2006 (7) SCC 241 ]. The learned counsel however submitted that the law on the distinction between „tax‟ and „fee‟ in Pakistan has not undergone any change and that the case law from the Indian  Jurisdiction  is  only  of  secondary  and  illustrative  value.  He referred to the case of Pakcom Limited v. Federation of Pakistan (ibid) to point  out that  this  Court  had,  after  reviewing  the  case  law  on  the subject, reiterated the rule that „fee‟ is payment for a specific benefit or privilege  and  that  the  element  of quid  pro quo must  be  present  in  the imposition for  it to be declared as „fee‟. Reference was further made to Collector  of  Customs v. Sheikh  Spinning  Mills (  2013  PTD  969  ). The learned counsel provided a three tier test from perusal of the case laws, for determining the nature of a levy as tax. He contended that for a levy to be classified as a tax the following three condition-precedents have to be present;

i.)  that  the  subject  of  the  levy  is  covered  by  a  head  of taxation;

ii.)  that  the  payer  expects  no  special  consideration  or benefit;

iii.)  that any benefit which might accrue to the payer is only incidental whereas the entire country would benefit from the exaction.

14. Applying the said  criteria,  he  argued  that  the GIDC  Act neither assures  nor  provides  any  particular  benefit  to  the  payers.  That  the benefits which will accrue from increased supply of gas will be extended to  every  consumer  of  gas  including  the  domestic  consumers  and  the industrial  concerns.  As  the  increase in supply  of  gas  will  not  provide any special benefits to the payer the „Cess‟ must be treated as a tax and not a fee. Further, that the primary purpose of the imposition of the levy was raising revenue for the Pipeline Projects and price equalization and benefits following from it may not specifically accrue to the payers.

15. Responding to  the argument  of  Mr.  Makhdoom  Ali  Khan, Sr. ASC, of listing the „Cess‟ as Non-Tax Revenue in the Annual Budget Statement, Mr. Salman Akram Raja, ASC, referred to the case of Sheikh Muhammad Ismail & Co. v Chief Cotton Inspector Council (supra) that:

“Mere  forms  of  accounting  however,  should  not  be regarded  as  conclusive  in  this  regard.  So  long  as  the levy  is  raised  for  the  purposes  contemplated  by  an enactment  designed  to  serve  a  particular  trade  or commodity  production  and  the  realizations  made  are expended  actually  for  those  purposes,  the  levy  would remain a fee,  whatever method of keeping accounts for other Governmental purpose may be adopted.”

16. The question whether a particular levy is a „tax‟ or a „fee‟ has  been  the  subject  matter  of  long  line  judgments of  the  Courts  in Pakistan  as  well  as  in  India.  The  Courts  have  decided  this  question upon  examining  the  facts  and  circumstances  of  each  case  keeping  in mind the criteria for holding the levy a „fee‟ or „tax‟. „Cess‟ has  been defined as a „tax‟, which raises  revenue  to  be  applied  for  a  specific purpose.  Nomenclature,  however,  would  not  be  relevant  and  whether the  imposition  of  a  particular „Cess‟ can be termed as a „tax‟ or „fee‟ would  depend  upon  the  nature  of  a  levy.  [SEE Vijayalakshmi  Rice  Mill and Others v. Commercial Tax Officers Palakol (supra)].

17. Before referring  to  the  test  applied  by  our  Courts  for drawing distinction between „tax‟ and „fee‟, two  judgments,  one  by  the Indian Supreme Court in the case of Jindal Stainless Ltd. Etc. v. State of Haryana & Others (supra) and the other from Australian High Court in the  case  of  Australian  Tape  Manufacturers  Association  Limited  v. Common  Wealth (ibid), need  to  be  examined. The  first case, reliance upon which was placed by Mr. Salman Akram Raja, ASC, had laid down the principle of equivalence in determining whether a particular levy is a „fee‟. The Court held that this principle was converse of the principle of ability to pay and that the main basis of a fee or a compensatory tax was  the  quantifiable  and  measurable  benefit. That  under  the  principle of equivalence there is indication of quantifiable data namely the benefit which  is  measurable.  This  judgment  however  was  not  followed  by  the Supreme  Court  in  the  case  of Vijayalakshmi  Rice  Mill  and  Others v. Commercial Tax Officers Palakol (ibid) wherein it was held that Jindal Stainless Ltd.‟s case (supra) cannot be interpreted to mean that the sea change which has taken place in the concept of „fee‟ has vanished and that by this decision the old concept of „fee‟ has been restored and now it has to be established that a particular individual from whom the fee is realized must be rendered some specific service. The Court went on to hold that the principle laid down in Sreenivasa General Traders v. State of  Andhra Pradesh  (supra)  and State  of  Himachal  Pradesh  v. M/s Shivalik  Agro  Poly  Products (  AIR  2004  SC  4393  ) still  holds the  field regarding the nature of „fee‟.

18. The same treatment has  been  meted  by  the  Australian Courts  to  the  principle  laid  down  in Australian  Tape  Manufacturers Association Limited‟s case (ibid). According to the rule laid down in the said case the fact that the levy is directed to be paid in the Consolidated Revenue Fund is to be recorded as a conclusive indication that the levy is  exacted for  public  purpose  and  the  imposition  would be treated  as „tax‟. This statement of law by the Australian  High  Court  in  the  year 1993 was not followed in Luton v. Lessels [ 2002 ] HCA 13 where it was held  that the  destination  of  money  that  is  exacted  may  well  be significant  in  deciding  whether  it  is  exacted  for  public  purposes, however  the requirement of  legislation that  a  sum  be  paid  into  the Consolidated  Revenue  Fund  does  not  conclude  the  issue  of characterizing  the  law  as  one  imposing tax. That  not  every sum  that statute requires to be paid into the Consolidated Revenue Fund is a tax. The  rule  in Australian  Tape  Manufacturers  Association  Limited‟s  case (supra) has not been followed by the same Court subsequently (see Roy Morgan  Research  Pvt.  Ltd. v. Commissioner  of  Taxation [  2011  ]  HCA 35).

19. Upon examining  the  case  law  from  our  own  and  other jurisdictions it emerges that the „Cess‟ is levied for a particular purpose. It can either be „tax‟ or „fee‟ depending upon the nature of the levy. Both are compulsory  exaction  of  money  by  public  authorities. Whereas „tax‟ is a  common  burden for  raising  revenue  and  upon  collection  becomes part of public revenue of the State, „fee‟ is exacted for a specific purpose and  for  rendering  services  or  providing  privilege  to  particular individuals or  a  class  or a  community or  a specific area.  However,  the benefit so accrued may not be measurable in exactitude. So long as the levy  is  to  the  advantage  of  the  payers,  consequential  benefit  to  the community at large would not render the levy a „tax‟. In the light of this statement  of  law  it  is  to  be  examined  whether  the GIDC is a „tax‟ or a „fee‟.

20. To recapitulate  the „Cess‟  collected  is  to  be  utilized  for specific  purposes,  namely,  development  of  infrastructure  of  Iran Pakistan  Pipeline  Project,  Turkmenistan  Afghanistan  Pakistan  India (TAPI) Pipeline Project, LNG or other projects or for price equalization of other  imported  alternative  fuels  including  LPG.  An annual  report regarding utilization of the amount so collected is to be regularly placed before the House after three months of the end of each fiscal year (See S.4  of  GIDC  Act).  The  levy  therefore  is  to  be  utilized  only  for  the purposes  mentioned  in  the  GIDC  Act.  The  same  is  not  a  common burden  for  raising  revenue generally. The  money  so  collected  from  the levy is to be utilized for a specific purpose for the advantage and benefit of the consumers of gas. The „Cess‟ is basically to  be  levied  on  all consumers  of  gas  with  certain  exemptions,  mainly  for  domestic consumers. This exemption is by way of relief to such consumers. Even otherwise  the  data  so  provided  to  us  regarding  consumption  of  gas  by different sectors shows that the domestic sector consumes only 20.3 % of  the  total  gas  whereas  76  %  of  the total gas  is  consumed by  those from  whom  the „Cess‟  is  collected  (see  Pakistan  Energy  Year  Book, 2012).  The  latter  sector  has  invested  in  development  of  the infrastructure for  utilization  of  gas for  their  respective  concerns.  As envisaged in Section 4 of GIDC Act, the „Cess‟ is mainly to be utilized for development  of  the  pipelines  from  other  countries  and  other  similar projects  in  order to  ensure continuous  and  increased supply  of  gas  to this sector. Undoubtedly other consumers or country as a whole would also  benefit  from  such  Projects but  the  same  is  inconsequential compared to the advantage that will accrue to the payers.

21. Mr. Salman  Akram  Raja,  ASC,  had emphasized  that the „Cess‟ is also to be utilized for the price equalization of other imported fuels,  including  LPG.  This  argument  has  been  aptly  met  by  Mr. Makhdoom  Ali  Khan,  Sr.  ASC,  by  submitting  that  the  imported alternatives to the natural gas are more expensive than the natural gas available in Pakistan. That if the levy is used for equalizing the price of the  imported  alternative  fuels it  would  directly  benefit  the  users  of natural  gas  who can  still  afford  the  cheaper  fuel  and  remain competitive.

22. Another formidable argument on behalf of the respondents was based upon the National Assembly for the Financial Years 2012-13 and 2013-14. The Preface to the said Annual Budget dated 01.06.2014 reads:

“P R E F A C E

The  Annual  Budget  Statement  containing  estimated receipts  and  expenditure  for  financial  year  2012-13  is being tabled  in  the  National  Assembly  of  Pakistan  and  transmitted to the Senate of Pakistan as required under Article 80(1) and 73(1) of the Constitution of the Islamic Republic of Pakistan.

The statement  meets  the requirement of Article 80(2) of the  Constitution  which  stipulates  that  the  Annual  Budget Statement shall show separately:-

(a) the sums required to meet expenditure described by the  Constitution  as  expenditure  charged  upon  the Federal Consolidated Fund; and

(b) the sums reqired to meet other expenditure proposed to be made from the Federal Consolidated Fund;

                The  Statement  also  makes  a  distinction  between  expenditure on  revenue  account  and  other  expenditure,  both  Current  and Development,  as  required  by  the  Constitution.  Additionally information  pertaining  to  details  of  revenue,  capital  and externals receipts has also been included.

Abdul Wajid Rana

Secretary to the Government of Pakistan

 Finance Division

Islamabad, the 1st  June, 2012.”

Article 80 of the Constitution titled “Annual Budget Statement” provides that “The  Federal  Government  shall,  in  respect  of  every  financial  year, cause  to  be  laid  before  the  National  Assembly  a  statement  of  the estimated  receipts  and  expenditure  of  the  Federal  Government  for  that year……………”. This Annual Budget Statement along with money bill is to  be  simultaneously  transmitted  to  the  Senate so that  it  may  make recommendations  to  the  National  Assembly.  Page-6  of  the  Statement contains list of Non-Tax Revenue, which under the Object Code C03916 includes „Gas Infrastructure Development Cess‟. Similarly in the Annual Budget  Statement  (Federal  Budget  2013-14) that  carries  a similar worded preface, „Gas Infrastructure Development Cess‟ has again been listed  at  C03916  as Non-Tax  Revenue.  Thus  on  the  Government‟s own showing,  as reflected  in  the  Annual  Budget,  GIDC is  not  a „tax‟. No argument  has  been  advanced  on  behalf  of  the  appellants to explain away  the  categorization  of  GIDC  as  Non-Tax  Revenue  by  the Government in  the  Annual  Budget.  This  is  not  a  mere  accounting procedure  as  urged  by  Mr.  Salman  Akram  Raja, ASC,  who  in  this context had relied upon Sheikh Muhammad Ismail & Co. v Chief Cotton Inspector  Council  (supra),  but  were  part  of  the  Annual  Budget Statements. As  submitted  by  Mr.  Makhdoom  Ali  Khan, Sr.  ASC, the possible reason why the levy has been reflected as Non-Tax Revenue in the Budget was to exclude it from the divisible pool under the National Finance  Commission  (NFC)  Award.  The  above  determination  is sufficient to hold that being a „fee‟ the same could not have been imposed through a money bill and on this score the levy was liable to be struck down.

23. It follows from the above that GIDC is not a „tax‟ but a „fee‟. Having held so, the same could not have been introduced as money bill under Article 73 of the Constitution. However, we now take up the other contentious issue between  the  parties,  namely  whether GIDC can  be considered a „tax‟ under one or more of Entries 49, 51 and 52 of Part-I of  the  Federal  Legislative  List  and  if so  would it  not  offend  the provisions of Article 160 of the Constitution providing for distribution of taxes by the order of the President of Pakistan on the recommendations of the NFC between the Federal and Provinces. The said Entries read:

“49.  Taxes  on  the  sales  and  purchase  of  goods imported,  exported,  produced,  manufactured  or consumed, except sales tax on services.


51. Taxes on mineral oil, natural gas and minerals for use in generation of nuclear energy.

52. Taxes and duties on the production capacity of any plant, machinery, undertaking,  establishment  or installation  in  lieu of  the  taxes  and  duties  specified  in entries 44, 47, 48 and 49 or in lieu of any one or more of them.”

24. Mr.  Salman  Aslam  Butt,  learned  Attorney  General  for Pakistan on  the  interpretation  of  Entry  51,  provided  instances  where judiciary  had  interpreted  the  word  “and”  as  “or”  in  purposive interpretation for bringing out the true meaning of the statute. Relying upon  a  letter written by the Pakistan  Atomic  Energy  Commission  in which it was stated that „mineral oil‟ and „natural gas‟ are not used for production of nuclear energy, it was argued that “and” in Entry 51 should be read as “or” for bringing out the true meaning of it as intended  by  the framers of  the  Constitution.  Reliance  in  this  context was  placed  on: The  Mersey  Docks  and  Harbour  Board  v.  Henderson Brothers  [1888 (13)  A.C.  595 ]; Green  v. Premier  Glynrhonwy  Slate Company  Limited  [ 1928 (I)  K.B. 561 ]; The  Joint  Director  of Mines Safety v. M/s Tandur &  Nayandgi  Stone  Quarries  (P.)  Ltd. ( AIR  1987 SC  1253 );Gujrat  Urja  Vikash  Nigam  Ltd. v. Essar  Power  Ltd. ( AIR 2008 SC 1921 ); M. Arif v. District and Sessions Judge, Sialkot ( 2011 SCMR 1591 ); Khadim Hussain v. Additional District Judge ( PLD 1990 SC 632 ); Abdul Razak v. Karachi Building Control Authority ( PLD 1994 SC 512 ); Abdur Rauf Khan v. Land Acquisition Collector  ( 1991 SCMR 2164 ).  In  additions  to  reliance  on  Entry  51 the  learned  Attorney General  also  relied  on  Entry  52  to  argue  that  Cess  is  a  tax  on  the capacity  of  the  consumption  of  natural  gas.  In  support  of  this proposition  reference  was  made  to  M/s  Ellahi  Cotton  Mills  Ltd.  v. Federation of Pakistan ( PLD 1997 SC 582 ).

25. Mr. Salman  Akram  Raja,  ASC, submitted  that  his arguments concerning the interpretation of the Entries be considered as complimentary to those advanced by the learned Attorney General and be viewed in alternative where necessary. He argued that the ‘Cess’ as a „tax‟ can be levied by the Federal Government under Entries 49 and 51 of  the  Federal  Legislative  List,  contained  in  Part-I  to  the  Fourth Schedule of the Constitution.  He maintained that the purpose of Entry 51  was  to  cover  all  aspects  of  taxation  related  to  the  three  primary sources  of  non-hydel  energy  i.e. „mineral  oil‟, „natural  gas‟ and  those „minerals‟ which  can  be  used  in  the  generation  of  nuclear  energy,  so that  they  could  be  taken  out  of  the  purview  of  provincial  taxation. He referred to the “Last Antecedent Rule” of interpretation for arguing that general  words  qualifying  any  situation  should  be  read  so  that  they apply  to  most  pertinent  objects  and  not to  others;   reference  was  also made to the “mischief rule” and Rule Against Absurdity, the purpose of which  are  to  resolve  the  absurdity  contained  in a statute in  order to bring out the meaning intended by the framers of the Constitution; that in  this  case  minerals  should  be  restrictively  read  as  those  required  for the  generation  of  nuclear  energy  and  not „mineral  oil‟ or „natural  gas‟; that  as  „mineral  oil‟  and „natural  gas‟  are  not  used  directly  in  the generation of nuclear energy, they should be read as independent from other  minerals  used  in  the  generation  of  nuclear  energy. He  further argued  that  there  is  a  distinction  in  the  Fourth  Schedule  of  the Constitution  between  the  taxation  of  commodities  and  activities;  that Entry  49  for  instances  taxes  the  activity  of  sale,  similar  to  Entry  43 which  taxes  the  activity  of  import  and  export.  However,  the  purpose behind  the  Entry  51  by  the framers  was  to  tax  the  commodities  of energy  production  including „natural  gas‟ and „mineral  oil‟.  Reference was made to judgments from Indian jurisdiction to bring out distinction between the tax  on  objects as  opposed  to  a  tax  on  activities: Kerala State Electricity Board v. Commissioner of Central Excise [ 2008 (1) SCC 780 ]; Godfrey Phillips India Ltd. v. State of UP [ 2005 (2) SCC 515 ]. He then  referred  to  Entry  49  as  an  alternative  argument,  without  any prejudice  to  the  earlier  arguments  on  Entry  51;  that  as  Cess  is chargeable  from  the  consumers  of  natural  gas,  it  is  a  tax  on  the purchase  of  natural  gas  covered  by  Entry  49. That  since  there  is  no constitutional  bar  on  double  taxation,  the  sale  of  natural  gas  can  be taxed by the GIDC Act even though it is already being taxed under Sales Tax  Act,  1990.  Reliance  in  this  context  was  placed  on Pakistan Industrial  Development  Corporation  v.  Pakistan,  through  Secretary Ministry of Finance  ( 1992 SCMR 891 ).

26. Mr. Makhdoom  Ali  Khan,  Sr.  ASC,  replying  to  the arguments raised on behalf of Federation argued that Entry 51 should be  read  conjunctively  as  the  framers  of  the  Constitution  intended  to restrict  the  taxation  under  the  said  Entry  on such „mineral oil‟ and „natural  gas‟  along with „minerals‟ as are used  for  the  generation  of nuclear energy. That there is no mischief or absurdity contained in the said Entry requiring the use of external tools of statutory interpretation in order to read the word „and‟ as „or‟. In interpreting Entry 49, he agreed  that  there  is  no  bar  upon  double  taxation  as  envisaged  under the said Entry, however it was argued that parliament has to express its intention  to  levy  double  taxation in  clear  and  unambiguous language.

As no such clear or express intention for double taxation was provided for  in  the  GIDC  Act,  it  cannot  be  sustained  as  an  instance  of  double taxation.  Reliance  in  this  context  was  laid  upon  Pakistan  Industrial Development  Corporation  v.  Pakistan,  through  Secretary  Ministry  of Finance (ibid)

27. Further, Mr. Makhdoom Ali Khan, Sr. ASC, referred to the case of Engineer  Iqbal  Zafar  Jhagra  &  Senator  Rukhsana  Zuberi   v. Federation of Pakistan ( 2014 PTD 243 ), to point out that in the said case,  Attorney  General  had taken  the  position  before  the Court that Cess under the GIDC Act was not a tax but a cost under Section 2 (46) of the Sales Tax Act, 1990. As Cess had earlier been classified as a cost by the Attorney General, it cannot be classified as a tax.

28. Replying to the arguments raised by Attorney General while pressing Entry 52, Mr. Makhdoom Ali Khan, Sr. ASC argued that Entry 52 and  Entry  49  are  mutually  exclusive  as  they  provide  two  different modes for the levy of taxation. Cess if assumed to be a tax on capacity cannot be collected on the sale of natural gas. Reliance in this context was  placed  on Kohinoor  Industries  Ltd.,  Faisalabad v. Government  of Pakistan ( 1989 MLD 1 ); Central Board of Revenue v. Seven-Up Bottling Company (Pvt.) Ltd.( 1996 SCMR 700 ).

29. The learned  counsel  for  the  appellants  had  primarily focused on Entry No.51 of Part-I of the Federal Legislative List to show that „tax‟ on natural gas  could be  levied  through  money  bill.  Their argument  in  essence  was  that  the „mineral  oil‟  and „natural  gas‟ mentioned  therein  are to  be  read  independently  and not  restricted to their  use  in  generation  of  nuclear  energy  and  only „minerals‟  were subjected  to  such condition.  The  authorities  cited  by  the  learned Attorney  General  are  examples  of  situations  where  the  Courts have in particular circumstances read „or‟ instead of „and‟ and thus assigned disjunctive  meaning  to  particular  words  in  the  statutes.  Such construction  is permissible  if  it  reflects  the  true  intention  of  the Legislature  and if to  hold  otherwise  would  render  particular  words  in the  statute  either  meaningless  or lead  to absurdity.  This  is  what was stated  by  this  Court  in  the  case  of Abdur  Razaq v. Karachi  Building Control Authority (supra), relied  upon  by  the  learned  Attorney  General for  Pakistan. Mr.  Justice  Ajmal  Mian,  as  he  then  was,  writing  for  the Court,  and  after  citing  the  relevant  provisions  from  Maxwell  on Interpretation  of  Statues  and  Crawford  on  Statutory  Interpretation regarding use of „and‟ and „or‟ held that:

“15. From the above-quoted  passages  from  the  above celebrated  treatises  on  the  Interpretation  of  Statutes,  it is  evident  that  the  words  “and”  and  “or”  are interchangeable.  However,  in  ordinary  usage  the  word “and” is conjunctive and the word “or” is disjunctive. But  to  implement  the  legislative  intent,  it  may  become imperative to read “and” in place of the conjunction “or” and  vice  versa.  This  cannot  be  done  if  the  meaning  of the  relevant  provision  of  the  statute  is  clear  or  if  the above  construction  will  operate  to  change  the  meaning of the law.”

 In  the  above  case  this  Court  had  while  interpreting  the  relevant Regulation held that the use of the word „or‟ must be assigned  its disjunctive meaning,  thus  setting  aside  the  finding  of  the  High  Court which had read the same as „and‟ in the Regulation.

30. Mr. Salman  Akram  Raja,  ASC,  however,  laid  stress  on  the Rule  Against  Absurdity and Last  Antecedent  Rule.  The  latter  principle has  been  taken  from  the  principles  of  statutory  interpretation  by Justice (Retd.) G.P. Singh, who has described it as follows:

“Under  the  principle  of  Reddendo  Singula  Singulis where there are general  words of description, following an enumeration of particular things such general words are  to be construed  distributively;  and  if  the  general words are to apply to some things and not to others, the general words are to be applied to those things to which they  will,  and  not  to  those  which they  will  not  apply; that rule is beyond all controversy.”

31. Entry  51  mentions  three  items, namely  „mineral  oil‟, „natural gas‟ and „minerals‟ which are followed by the words “for use in generation  of  nuclear  energy”.  The  basic  rule  for  interpretation  of statutes  is  to  give  the  words their  ordinary  and  natural  meaning. Deviation from this rule is permissible only when it becomes necessary, for  example to  avoid or  overcome absurdity  or  render  certain  words meaningless.  This exercise is  undertaken when  assigning  the  words their  ordinary  meaning  does  not reflect  the  true  intention  of  the Legislature. By the use of „and‟ in between „natural gas‟ and „minerals‟ in  Entry  51,  all  the  three  items  are  to  be  read  conjunctively  with  the words  following  them. In  the  said  Entry  „and‟  could  have  been substituted by „or‟ only if without the change absurd  consequences would have followed. Restricting „mineral oil‟ or „natural gas‟ to their use in the generation of nuclear energy would not lead to any absurdity. The argument raised by learned Attorney General to give disjunctive rather than conjunctive interpretation to Entry 51 is based in the main on the letter  written  by Pakistan  Atomic  Energy  Commission  (PAEC),  which was  produced  during  the  hearing  of  the  cases and  it  appears  to  have been  written in  response  to  a  query  made  by  the Attorney  General  for Pakistan in between the hearings. Without going into the correctness or otherwise of the  view  expressed  in  the  said  letter, suffice it  is to  state that  such  outside  tool  cannot  be  taken  into  account  for  interpreting a Constitutional provision. Even if the opinion given therein is correct to the  extent  of  the  activity  carried  out  in  the  PAEC  it  does  not conclusively establishes that „mineral oil‟ and „natural gas‟ are nowhere  used for the generation of nuclear energy or that there is no possibility of their  such  use  in  future.  After  all  the  Constitution  is  a  living document  which  caters  for  future  development  and  progress.  Thus Entry 51 can only be accorded its natural meaning and the same shall be read conjunctively. Similarly the Last Antecedent Rule is of no help to  the  appellants  when  the  plain  reading  does  not  admit  of  any  other interpretation  but  that  only  such items  mentioned  therein  can  be subjected to tax that are used in the generation of nuclear energy.

32. As regards  Entry  49,  the  learned  Attorney  General  at  one stage  of  hearing  did  not  press  the  argument  that the „Cess‟  is  also covered under  it.  However, he later invoked when  Mr.  Salman  Akram Raja, ASC, pressed the same into service.  Mr.  Salman  Akram  Raja, ASC, had relied upon Entry 49 as alternative to Entry 51 and submitted that the „Cess‟ chargeable from the consumers of „natural  gas‟ may  be viewed as tax on the purchase of natural gas and thus covered by Entry 49. Referring to the case of Pakistan Industrial Development Corporation v. Pakistan, through Secretary Ministry of Finance (ibid) it was contended that although „natural gas‟ is already subject to Sales  Tax but there is no  bar against levy  of  additional  Sales  Tax.  Responding  to  this contention  Mr.  Makhdoom  Ali  Khan,  Sr.  ASC,  argued  that  intention  of the  Legislative in  levying double  taxation  must  be  expressed  in  clear terms  and  the  same  cannot  be  levied by mere  implication. He  also referred  to Pakistan  Industrial  Development  Corporation  v.  Pakistan,  through Secretary Ministry of Finance (ibid).

33. Both the  learned  counsel  are  correct  in  their  respective submissions as the following passage from the above referred authority shows:

“It is, thus, clear that unless there is any prohibition or restriction  imposed  on  the  power  of  Legislature  to impose  a  tax  twice  on  the  same  subject  matter  double taxation  though  a  heavy  burden  and  seemingly oppressive  and  inequitable  cannot  be  declared  to  be void  or  beyond  the  powers  of  the  Legislature.  It  may, however, be noted that double taxation can be imposed by clear and specific language to that effect. Where the language is not clear or specific by implication such levy cannot be permitted.

There  could  be  double  taxation  if  the  Legislature distinctly  enacted  it,  but  upon  general  words  of taxation,  and  when  you  have  to  interpret  a  taxing hands  of  the  assessee  on  the  basis  of  the  first  receipt may  be  subjected  income-tax  more  than  once  which unless  specifically  provided  in  a  clear  unambiguous language, is disapproved.”

34. Admittedly „natural gas‟ is subject to levy of Sales Tax and GIDC Act does not appear to suggest that it is another instance of Sales Tax levied by the Parliament on the supply of natural gas. As held in the above cited judgment, double taxation can be imposed only by clear and specific language and not by implication. The Federation‟s own stand in the  case  of Engineer  Iqbal  Zafar  Jhagra &  Senator  Rukhsana  Zuberi  v. Federation of Pakistan (supra) was that the „Cess‟ was not a Sales Tax. This is  evident  from  the  following reply  submitted  by  the  learned Attorney General for Pakistan on behalf of the Federal Board of Revenue in response to a query made by this Court:

“31.  The  learned  Attorney-General…  also  furnished replies  of  the  Federal  Board  of  Revenue  (FBR) to  the foregoing queries. The queries were replied to as under:

(iv)  GIDC  has  been  levied  under  the  Gas Infrastructure  Development  Cess  Act,  2011  and  can  be charged  only  by  companies  specified  in  the  First Schedule  to  the  Act,  from  their  consumers  (other  than domestic  consumers).  These  consumers  (which include CNG stations), cannot charge/further pass on  the  cess  as  such.  Thus,  GIDC  becomes  part  of the  cost  of  the  CNG  stations,  and  should  not  be considered as an indirect tax to be passed on the end consumers. Thus, like all other costs (such as cost of gas, labour, electricity, overheads, advertising etc.), in case of CNG stations, GIDC is a component of the cost of the  business  to  be  included  in  the  sale  price  of  the product.”

35. Upon the  above clear  position taken by the  Federation  the Court in Paragraph No.36 of the judgment declared and held that:

“(ix)  As  far  as  recovery  of  the  gas  development charges GIDC is concerned, it falls within the definition of section 2(46) of the Sales Tax Act, 1990 and no order is required to be passed in this behalf.”

 Thus under  Section  2(46)  of  the  Sales  Tax  Act,  1990 the „Cess‟ is one of the cost added to the price of the product for  the calculation of sales tax. It cannot therefore be termed as another Sales Tax.

36. Coming to Entry 52, Mr. Salman Akram Raja, ASC, had not urged that  the  GIDC  can  be  levied  under  the  said  Entry.  The  learned Attorney  General  initially  made  submissions  with  regard  to  the  said Entry  but  ultimately  did  not  seriously  press  the same.  Mr.  Makhdoom Ali  Khan,  Sr.  ASC,  in  response  to  the  said  argument  submitted  that Entry  49  imposing Sales  Tax  on „natural  gas‟ and  other  commodities and  Entry  52  empowering  the  imposition  of  tax  on  capacity  are mutually exclusive. That  since  the „natural  gas‟  has  already been subjected to Sales Tax no additional tax can be levied on the capacity.

The learned counsel in this context had referred to Kohinoor Industries Ltd.,  Faisalabad  v.  Government  of  Pakistan  (ibid),  Central  Board  of Revenue v. Seven-Up Bottling Company (Pvt.) Ltd. (ibid) and Ellahi Cotton Mills Ltd. v. Federation of Pakistan (supra). The above authorities clearly lay down, with reference to Entry 52 and other Entries in Part-1 of the Federal Legislative List, that tax cannot be levied under the said Entry if the  goods or  activity  has  already  been  subjected  to  tax  or  duty  under any other Entry. It follows that the GIDC is not covered by either of the three Entries, i.e. 49, 51 or 52 of Part-I of the Federal Legislative List. It was admitted on behalf of the appellant that for a „tax‟ to fall under the said Federal Legislative List it must be covered by Entries No. 43 to 53. Apart  from  the  said  three  no  other  Entries  were  pressed  in  service  on behalf of the appellants for declaring the „Cess‟ as „tax‟. On this count too the „Cess‟ could not have been introduced through a money bill under Article 73 of the Constitution.

37. The next  contentious  issue  raised  on  behalf  of  the respondents is based on Article 160 of the Constitution, which inter alia provides distribution of taxes between the Federation and the Provinces. Clause (2)(a) of Article 160 of the Constitution provides:

(2) It shall  be  the  duty  of  the  National  Finance Commission to make recommendations to the President as to:

(a) the distribution between the Federal and the Provinces  of  the  net  proceeds  of  the  taxes mentioned in clause (3);”

Clause (3) of the said Article provides details of the taxes to be form part of the divisible pool, which reads:

“(3) The taxes referred to in paragraph  (a)  of  clause  (2)  are the  following  taxes  raised  under  the  authority  of  Majlis-e-Shoora (Parliament), namely:-

(i)  taxes  on  income,  including  corporation  tax  but not  including  taxes  on  income  consisting  of remuneration  paid  out  of  the  Federal Consolidated Fund;

(ii)  taxes  on  the  sales  and  purchases  of  goods imported,  exported,  produced,  manufactured  or consumed;

(iii)  export  duties  on  c                otton,  and  such  other  export duties as may be specified by the President;

(iv)  such duties of excise as may be specified by the President; and

(v)  such  other  taxes as  may  be  specified  by  the President.”

Clause (4) of the said Article binds the President to pass an order  in  accordance  with  the  recommendations  made  by  the  National Finance Commission (NFC). The NFC consists of Minister of Finance of the  Federal  Government,  the  Ministers  of  Finance  of  the  Provincial Governments  and  such  other  persons  as  may  be  appointed  by  the President after consultation with the Governors of the Provinces.

38. It was  contended  on behalf  of  the  respondents  that  if  the „Cess‟ is considered to be „tax‟ it ought have been included in  the divisible pool for distribution between the Federation and the Provinces. That admittedly neither was it done nor was such inclusion possible in view of the purpose for which the „Cess‟ was levied as mandated by Section 4 of the GIDC Act, providing for utilization of the collection for specific projects and purposes.

39. In order  to  counter the  above  submissions  the  learned Attorney  General  drew  a  distinction  between  the  taxes  mentioned  in Articles 160 (3) and 77 of the Constitution. The latter Article states “No tax shall be levied for the purposes of the Federation except by or under the authority of Act of Majlis-e-Shoora (Parliament).” It was contended by the  learned  Attorney  General  that  Article  160(3)  of  the  Constitution  is confined  to  only  those  taxes  that  are raised  under  the  authority  of Majlis-e-Shoora  (Parliament)  and  therefore  excludes  taxes levied  by  or under  the  authority  of  the  Parliament.  It  was  thus  contended  that  the „Cess‟ was not raised but levied by the authority of an Act of Parliament.

To  fortify  his  submissions  he  made  references,  for  the  purpose  of contrast, to income tax, sales tax, federal excise and custom duty that were taxes levied under the authority of the Parliament. This argument was aptly countered by Mr. Makhdoom Ali Khan, Sr. ASC. According to him  all  taxes  are  levied  by  an  Act  of  Parliament  or  under  its  authority by  any  other  body. „Raise‟ according to the Black‟s Law  Dictionary means to gather  or  collect and  levy  as  the  imposition  of  a  tax.  Once  a „tax‟ is levied by the Parliament, its collection is left to other authorities.

The word „raise‟ therefore appearing in Article 160(3) of the Constitution refers to taxes levied by or under the authority of Parliament. The said Article does not provide for imposition of „tax‟ but refers to tax that are collected and gathered under the authority of the Parliament.

40. In the  context  of  Article  160  of  the  Constitution,  Mr. Salman Akram Raja, ASC, advanced another argument that the vires of the GIDC Act cannot be determined on the touchstone of Article 160 of the Constitution in that the levy of the „Cess‟ is distinct from question of its  distribution  amongst  the  provinces.  He  submitted  that  matters relating to the distribution of the taxes in the divisible pool, or its non-inclusion in the pool are to be resolved between the Federation and the Provinces.  In  support  of  this  contention  reference  was  made  to Jaora Sugar  Mills  Ltd.  v. State  of  Madhya  Pradesh  (  AIR  1966  SC  416  ).

Taking the argument further the learned counsel referred to Clauses (1) and (2) of Article 146 of the Constitution which read:

“146.  (1)  Notwithstanding  anything  contained  in  the Constitution,  the  Federal  Government  may,  with  the consent  of  the  Government  of  a  Province,  entrust  either conditionally or unconditionally to that Government or to its  officers  functions  in  relation  to  any  matter  to  which the executive authority of the Federation extends.

(2)  An  Act  of  Majlis-e-Shoora  (Parliament)  may, notwithstanding  that  it relates  to  a  matter  with respect to  which  a  Provincial  Assembly  has  no  power  to  make laws, confer powers and impose duties upon a Province or officers and authorities thereof.”

41. It was  submitted  that  the  question  of  distribution  of divisible pool can be resolved by invoking the above provisions. That in case a Province does not voluntarily give consent under Article 146(1) of the  Constitution,  the  Parliament  is  empowered  under  Clause  (2) of  the said Article to confer authority on the executive and impose the duty to carry out the purpose mentioned in Section 4 of GIDC Act. Clause (1) of Article 146 of the Constitution relates to the executive authority of the Federation  and  Clause  (iii) empowers  the  Parliament  to  impose  duty upon the Provinces in matters in which the Provincial Assemblies have no powers to make laws. The issue here is not simply utilization of the „Cess‟ for the purpose mentioned in Section 4 of the GIDC Act. It is its non-distribution  between  the  Federation  and  Provinces  under  Article 160  of  the  Constitution  if it is to treat as a „tax‟.  Additionally  the argument is more speculative as neither the Federal Government under Clause (1) or the Parliament under Clause (2) of Article 146 has taken any step under the said provisions.

42    It  was  pointed  out  on  behalf  of  the  respondents  that  the Ministry  of  Petroleum  and  Natural  Resources  was  of  the  view  that  the issue of levy of the „Cess‟ may be placed for  its  approval before  the Council of Commons Interest, which represents all the federating units.

Similar was the opinion expressed by the Ministry of Law, Justice and Parliamentary  Affairs.  This  fact  was  expressly  averred  in  the Constitution Petitions filed before the Peshawar High Court and was not denied by the Federal Government. True that such an advice or opinion or non-reference of the matter to the Council of Common Interest would not  render  the  levy  illegal  or  invalid,  nevertheless  it  would  have  been appropriate had the  federating  units  been  taken  into  confidence, particularly in the context of Article 160 (3) of the Constitution.

43. We were,  however,  persuaded  by the alternative  argument advanced by Mr. Salman Akram Raja, ASC, in the context of Article 160 of the  Constitution  that  violation  of  Article  160  of  the  Constitution  for not  including  the  „Cess‟  in  the  divisible  pool  cannot  be  made  the touchstone for declaring the very levy as unconstitutional. On this point we  would  refer  to  the  principle  laid  down  in  the  case of Jaora  Sugar Mills Ltd. v. State of Madhya Pradesh (ibid) where it was held:

“The validity of the Act must be judged in the light of the legislative  competence  of  the  Legislature  which  passes the  Act  and  in  certain  cases,  by  reference  to  the question  as to  whether  fundamental  rights  of  citizens have  been  improperly  contravened,  or  other considerations  which  may  be  relevant  in  that  behalf.

Normally,  it  would  not  be  appropriate or  legitimate  to hold  an  enquiry  into  the  manner  in  which  the  funds raised  by  an  Act  would  be  dealt  with,  when  the  Court  is  considering  the  question  about  the  validity  of the  Act  itself.  Validity  of  Section  3  of  the  Cess  Act cannot, therefore, be questioned on the ground that the cesses  recovered  under  it  are  not  dealt  with  in accordance  with  the  provisions  of  Art.  266  of  the Constitution.”

44. Mr. Salman  Akram  Raja,  ASC,  receives  support  from  the arguments  advanced  by  Mr.  Makhdoom  Ali  Khan,  Sr.  ASC,  while countering  the  submissions  made  by  the  learned  Attorney  General  on the  proposition  that ‘raised’ in  Article  160(3)  of  the  Constitution  does not include the „tax‟ levied under Article 77 of the Constitution. Mr. Makhdoom  Ali  Khan,  Sr.  ASC,  had submitted that „tax‟ is not levied under  Article  160(3)  of  the  Constitution  and  the  word ‘raised’ therein means  collection  and  gathering  of  the  tax  under the authority  of  the Parliament.  Additionally,  the  question  as  to  whether  „tax‟  ought  or ought  not  to  have  been  included  in  the  divisible  pool  is  a  matter between the Federation and the Provinces. The non-inclusion of any tax in the divisible pool may have other consequences but would not render the  levy  unconstitutional.  This  argument  proceeds  on  the  assumption that  the  „Cess‟  was  a  tax  invalidly levied  under  Article  77  of  the Constitution.

45. To conclude  the  GIDC  is  a  fee  and  not  a  tax,  in  the alternative it is not covered by any Entry relating to imposition or levy of tax under Part-I of the Federal Legislative List. On either counts the „Cess‟ could not have been introduced through a money  bill  under Article  73  of  the  Constitution.  The  same  was,  therefore,  not  validly levied in accordance with the Constitution.

46. For the forgoing reasons, the impugned judgments are not liable to be reversed. The appeals are therefore dismissed.




Chief Justice


ON  22nd August 2014.




“Approved for reporting.”



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