Mr. Justice Shahid Karim in his judgment has decided the issue regarding challenge to vires of provincial duty under commerce clause – Article 151 of 1973 Constitution in Writ Petition No. 24811 of 2015.
1. This petition under Article 199 of the Constitution of Islamic Republic of Pakistan, 1973 (Constitution) lays a challenge to the Notification No.SO(E&M)/2-3/2011 dated 24.06.2015 (impugned Notification) issued by the Secretary Excise & Taxation, Government of the Punjab, Excise & Taxation Department, upon the powers having been exercised by the Governor of the Punjab in terms of sections 31 and 32 of the Punjab Excise Act, 1914 (Act, 1914).
2. The impugned Notification reads as under:
“No.SO(E&M)/2-3/2011 (P-II). In exercise of the powers conferred under sections 31 and 32 of the Punjab Excise Act, 1914 (I of 1914), Governor of the Punjab is pleased to discontinue the application of the administrative policy of “duty follows consumption” and is further pleased to direct that Still Head Duty at the rates notified by the Excise & Taxation Department vide Notification No.SO(EXCIE)(E&T)2-3/2005 dated 30.06.2005 shall be levied and recovered on all Pakistan Made Foreign Liquor and Beer meant for consumption outside Province of the Punjab as well.
2. This Notification shall come into force on and from 01st July, 2015.”
3. It is clear from a reading of the impugned Notification that the Notification extends the application of an earlier Notification dated 30.06.2005 to all Pakistan Made Foreign Liquor and Beer meant for consumption outside Province of Punjab as well. In terms of the earlier Notification dated 30.06.2005, still head duty at certain rates had been notified by the Governor of Punjab. It seems that previously those rates, as notified in the Notification dated 30.06.2005, were not levied and recoverable on the goods mentioned in the impugned Notification. This has given a cause of action to the petitioners who, in a nub, contend that the imposition by the impugned Notification is tantamount to the levy of export duty on the goods being manufactured by the petitioners and consumed outside the Province of Punjab.
4. This judgment shall decide a connected petition W.P No.21927 of 2015, which has been brought by Sindh Wine Merchant Welfare Association through its President and which has called in question the impugned Notification as well on substantially the same grounds as in the instant petition.
5. The learned counsel for the petitioners Mr. Shahid Hamid, Advocate briefly alluded to the history of the present litigation. According to him, on 20.10.1997 a Notification was issued by the Government of the Punjab which was attacked by filing a constitutional petition by the petitioner, and which Notification was struck down by this Court in a judgment reported as 2001 CLC 42. Under the Notification of 20.10.1997, in exercise of the powers conferred by Section 31 of the Punjab Excise Act, 1914 (Act, 1914), the Governor of Punjab was pleased to direct the levy and recovery of export duty at the rate stated in the said Notification on Pakistan Made Foreign Liquor (PMFL) and Beer meant for export to other provinces. Primarily relying upon Article 151 of the Constitution, it was held by this Court that:
“7. It will be seen that Article 151(1) lays done that subject to clause (2), trade, commerce and intercourse throughout Pakistan shall be free. Article 151(2) empowers the Parliament to impose restriction on the above freedom as may be required in the public interest. Article 151(3) is in negative from and prohibits the Provincial Assembly or a Provincial Government to do the things mentioned in clauses (a) and (b). For the case, the relevant provision is that Provincial Government shall not have power to impose a tax, which, as between the goods manufactured or produced in the Province and similar goods manufactured or produced in any area in Pakistan, tends to discriminate is in favour of the former. In other words by imposing the impugned duty the respondent-Government has discriminated between the goods produced by the petitioner and the goods produced by the rivals in Sindh and Balochistan. However, this discrimination does not seem to be, in favour of the petitioner and as such may not be hit by Article 151(3)(b). the impugned levy impinges upon the freedom, as enshrined in Article 151(1). Reliance of Mrs. Nasira, Advocate on Mirpurkhas Sugar Mills Ltd. v. District Council, Tharparkar and 2 others 1990 MLD 317, Sayphire Textile Mills Ltd. and 9 others v. Government of Sindh and others PLD 1990 Kar. 402 is correct. In the first case the export tax imposed by Zila Council on the Sugar produced by the petitioners therein was declared as violative of the Constitutional provisions. In the second case also the export duty imposed upon the products of the petitioners-Mills was not upheld on the touchstone of Article 151 of the Constitution. Learned counsel also relied on Atiabari Tea Co. Ltd. v. The State of Assam and others AIR 1961 SC 232 and on perusal of the judgment the reliance again seems to be correct. I, therefore, hold that impugned imposition of export duty is violative of Article 151(1) of the Constitution.”
6. It can be seen from a reading of the portion of the judgment reproduced above that the Lahore High Court was of the opinion that the impugned levy impinges upon the freedom as enshrined in Article 151 (1) of the Constitution. It was thus held to be violative of free trade clause in Article 151 of the Constitution.
7. The learned counsel for the petitioners have made a frontal attack on the Still head duty whose operation has been extended by the impugned Notification to PMFL and Beer consumed outside the Province of Punjab to submit that it is in pith and substance the export duty which was struck down by this Court in the precedent cited above. According to him, the Government of the Punjab has sought to achieve indirectly what it could not achieve directly and the effect would be virtually the same. The learned counsel has drawn the attention of this Court to paragraphs 9, 10 and 12 of the petition in order to substantiate the oral arguments made in this behalf and to bring home the submission regarding the discrimination to have been meted out to the petitioner in this regard. It has been averred that by the impugned Notification Still head duty has been extended to PMFL and Beer when it is consumed outside the Province of Punjab and which has the effect of rendering the petitioners as uncompetitive in the markets of Province of Sindh to which 75% of the petitioner‘s exports relate. In accordance with the policy of “duty follows consumption” as spelt out in the Punjab Excise Manual, Vol. III, the petitioners were not liable to pay still head excise duty levied by the Government of the Punjab and were only liable to pay the duty imposed by the Government of Sindh under the Sindh Abkari Act, 1878. This had the effect of keeping the price of the petitioners‘ PMFL products competitive and commercially viable in the Province of Sindh. This has been described as an Administrative policy in the impugned Notification and in simple terms meant that the duty levied at the place of actual consumption ought to be paid irrespective the place of its manufacture. A chart, which has been prepared and brought forth in paragraph 10 of the petition, underscores the contention raised by the learned counsels for the petitioners.
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