1. Petitioners,1 are companies, engaged in the business of cleaning, dying, preparing or manufacturing cloth and yarn (textiles) and have challenged the constitutionality and legality of license fee imposed by the local government for the grant of license to carry on the above business within the limits of the local government.
2. License Fee has been levied under section 116, read with section 39(b) of the Punjab Local Government Ordinance, 2001 (“Ordinance”) by the respective local governments in Punjab. Every local government (District Government) has issued separate notification to this effect.
3. As a matter of background, impugned license fee, was earlier challenged by the petitioners before this Court and was struck down in Adil Textile Mills case2 primarily on the ground that there were no services rendered in return for the said fee. In other words, there was no quid pro quo. The judgment was assailed before the august Supreme Court of Pakistan by the local government and the case was remanded to the Zila Nazim, for a fresh decision, after attending to the objections of the petitioners, vide order dated 10.07.2006 passed in CA No.1764 to 1782/2005.
4. As a consequence, the matter was argued before the Zila Nazim, who after hearing the parties dismissed the claim of the petitioners vide impugned order dated 23-6-2007, thereafter, demand notice dated 13-9-2007 was issued to the petitioners for the recovery of the license fee for the years 2003-2004 to 2007-2008. Interim relief was granted by this Court, in these petitions, hence the recovery of the license fee has been suspended since the year 2007.
5. Learned counsel for the petitioners contend that the impugned license fee is unconstitutional and illegal because it is in effect a tax. In support of this argument, they have relied on the definition of the word “tax” under the Ordinance which includes “any cess, fee, rate, toll or other impost leviable under the Ordinance.” They, therefore, submit that the license fee is a tax and the provincial legislature lacks the legislative competence to impose such a tax because corporations can only be subjected to Tax on Corporations, which falls within the legislative competence of the Federal Legislature under item No. 48 of the Federal Legislative List (List). They argued that, if at all, only the Federal Legislature under item No. 54 of the List could charge license fee.
6. In the alternative, the petitioners have also argued that as no services are being rendered against the charge of license fee, therefore, in the absence of quid pro quo, the impugned license fee amounts to a “tax.” They placed reliance on Federation of Pakistan through Secretary M/o Petroleum and Natural Resources and another v. Durrani Ceramics and others (2014 SCMR 1630), Messrs Lucky Cement Factory Limited and others v. The Government of N.W.F.P. through Secretary Local Government and Rural Development Department, Peshawar and others (2013 SCMR 1511), Messrs East and West Steamship Company, a partnership Firm, carrying on business at Karachi, by its Partner Rustom F. Cowasjee, Parsi, residing at Karachi v. Pakistan, to be served through the Secretary to Government of Pakistan, Ministry of Commerce, Karachi, (2) The Shipping Authority, Government of Pakistan, Ministry of Commerce, Department of Shipping Control, El-Markas, Bunder Road, Karachi and (3) The District Magistrate, Karachi (PLD 1958 Supreme Court (Pak.) 41) and ICI Pakistan Ltd. v. Tehsil Council, Pind Dadan Khan and others (PLD 2007 Supreme Court 428).
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