IN THE SUPREME COURT OF PAKISTAN (Appellate Jurisdiction

IN THE SUPREME COURT OF PAKISTAN

(Appellate Jurisdiction)

Present:

Justice Qazi Faez Isa, CJ

Justice Amin-ud-Din Khan

Justice Athar Minallah

Civil Appeals No.1363 to 1365 of 2018

(Against the judgment dated 15.07.2017 of the High Court of

Sindh, Karachi passed in Constitution Petitions No. D-

2892/14, D- 1135 and D-3539/2016)

And

Civil Misc. Application No. 4728 of 2023

[For impleadment by M/s Zubi International Private

Limited, through its Assistant Manager, Hafiz Zahid

Hassan]

In CA. 1363/18:

Cantonment Board Faisal and another. … Appellants

Versus

Habib Bank Limited, Karachi and another. … Respondents

And

In CA. 1364/18:

Cantonment Board Clifton, Karachi. … Appellant

Versus

K & N Foods (Pvt.) Limited and others. … Respondents

And

In CA. 1365/18:

Cantonment Board Clifton, Karachi. … Appellant

Versus

M/s Venus Pakistan (Pvt.) Limited and others. … Respondents

For the Appellants: Mr. Muhammad Umer Riaz, ASC.

(In all cases) Assisted by Ch. Abubakar.

Mr. Zaki Haider, CEO, Clifton.

Mr. Aamir Rashid, CEO, Faisal.

Mr. Tanveer Ashraf, Director, ML & C.

Mr. Javed Abbasi, Law Officer, ML & C.

(Though video-link from Karachi)

For the Applicant: Mr. M. Naeem Sadiq, ASC.

(In CMA. 4728/23)

On Court’s Notice: Mr. Mansoor Usman Awan,

Civil Appeal No. 1363 of 2018 etc.

2

Attorney-General for Pakistan.

Ch. Aamir Rehman,

Additional Attorney-General.

Respondents No. 1-2: Ex-parte.

(In CA. 1363/18)

For Respondent No. 1: Mr. Tahir Ishaq Mughal, ASC.

(In CA. 1364/18) Mrs. Shaista Altaf, ASC.

For Govt. of Sindh: Mr. Zeeshan Adhi,

(In CA. 1364 & 1365/18) Additional Advocate-General, Sindh.

Mr. Saifullah, Asst. Advocate-General, Sindh.

Mr. Ghulam Nabi Shah, Addl. Director Excise & Taxation.

Mr. Ayaz Ali Mangi, Dy. Director (P-II).

(Through video-link from Karachi)

Respondents No. 2, 3 and 5: Ex-parte.

(In CA. 1364/18)

Respondents No. 1 and 3: Ex-parte.

(In CA. 1365/18)

Date of Hearing: 13.10.2023.

JUDGMENT

Qazi Faez Isa, CJ.

Civil Appeals No. 1363 to 1365 of 2018: These Civil Appeals, assailing the

judgment dated 15 July 2017 of a Division Bench of the High Court of

Sindh at Karachi, are filed by the Cantonment Board Faisal and

Cantonment Board Clifton (hereinafter ‘Cantonment Boards’). Leave to

appeal the judgment of the High Court was granted on 30 October 2018.

2. The Cantonment Boards had levied provincial taxes in respect of

professions, trades, callings and employments mentioned in Article 163 of

the Constitution of the Islamic Republic of Pakistan (respectively ‘the

professional taxes’ and ‘the Constitution’). Article 163 is reproduced

hereunder:

‘Provincial taxes in respect of professions, etc. A

Provincial Assembly may by Act impose taxes, not exceeding

such limits as may from time to time be fixed by Act

of Majlis-e-Shoora (Parliament), on persons engaged in

professions, trades, callings or employments, and no such

Act of the Assembly shall be regarded as imposing a tax on

income.’

The High Court held that the Cantonment Boards could not levy the

professional taxes.

Civil Appeal No. 1363 of 2018 etc.

3

3. Learned Mr. Muhammad Umer Riaz, who represents the Cantonment

Boards, referred to section 60 of the Cantonments Act, 1924 (‘the

Cantonments Act’), which enabled cantonment boards to perform local

government functions. He submitted that after the passing of the impugned

judgment the Constitution underwent a change with the insertion of Article

140A therein.

1

He submitted that after this change cantonment boards

could levy the professional taxes. Reference was also made to Article 74 of

the Constitution and to the second entry to the Federal Legislative List,

2

and by reading these provisions together, cantonment boards are

empowered to impose taxes with regard to local self-government and

cantonment areas, including the professional tax taxes on those engaged in

professions, trades, callings or employments in cantonment areas. The

impugned judgment, submitted learned counsel, had relied upon the

decision of this Court in the case of ICI Pakistan Ltd. v Tehsil Council

3

(‘the

ICI case’) but after the incorporation of Article 140A into the Constitution it

was no longer applicable. He also sought to distinguish the decision in the

ICI case by contending that the matter therein pertained to the imposition

of the professional taxes through a notification, and not through an act of a

provincial assembly, however, the province of Sindh had enacted the Sindh

Local Government Act, 2013 (‘Sindh Local Government Act’), which had

empowered local councils to impose and collect the professional taxes. He

submitted that the Cantonment Boards could impose professional taxes

pursuant to notification S.R.O. No. 1374(I)/2012,

4

which was issued in

supersession to notification No. 903, dated 13 April 1946, of the War

Department.

4. Since the matter may have required interpretation of Federal and

provincial laws and also of the Constitution, notices were issued to the

Attorney-General for Pakistan and to the Advocate-General, Sindh in terms

of Order XXVII-A of the Code of Civil Procedure, 1908. However, it

transpired that this Court had already decided the issue herein in the ICI

case; therefore, these appeals were not required to be heard by a five-

member or larger Bench in terms of section 4 of the Supreme Court

(Practice and Procedure) Act, 2023.

1

Through section 48 of the Constitution (Eighteenth Amendment) Act, 2010.

2

Constitution of the Islamic Republic of Pakistan, Fourth Schedule.

3

PLD 2007 Supreme Court 428.

4

Published in the Gazette of Pakistan, Extraordinary, dated 15 November 2012.

Civil Appeal No. 1363 of 2018 etc.

4

5. Mr. Mansoor Usman Awan, the learned Attorney-General for Pakistan

(‘AGP’), supported the contentions of the learned counsel for the appellants.

He added that the province of Sindh is constitutionally and legally

empowered to impose the professional taxes and had authorized local

governments to impose and collect them under section 96 of the Sindh

Local Government Act. Therefore, cantonment boards, which also perform

functions of local governments, can also impose and collect the professional

taxes.

6. Mr. Zeeshan Adhi, the learned Additional Advocate-General, Sindh

(‘AAG’) supports the impugned judgment. He submitted that under Article

163 of the Constitution only provinces are empowered to impose the

professional taxes, and Parliament’s legislative power is limited to fixing the

maximum limit the provinces may impose. The Federal law which fixed the

maximum limit is the Professions Tax Limitation Act, 1941; the maximum

limit was raised on 1 July 1997 to one hundred thousand rupees per

annum. The professional taxes, submitted the learned AAG, were levied

pursuant to section 11 of the West Pakistan Finance Act, 1964,

5

reproduced hereunder:

‘11. Tax on trades, professions callings and employment.- (1)

With effect from the first day of July 1964, there shall be

levied and collected from the following classes of persons,

namely:-

(a) Persons who in the preceding financial year, were

assessed to income-tax under the Income-tax Act,

1922, in respect of earnings or income from any

profession, trade, calling or employment, as the case

may be, pursued either wholly or in part within this

Province.

(b) Persons who in the preceding financial year, were

assessed to Agriculture Income-tax or who paid land

revenue in excess of Rs. 250,

(c) Legal practitioners of not less than 5 years standing,

(d) Income-tax practitioners,

(e) Clearing agents, licensed or approved as Custom

House Agents,

5

PLD 1964 West Pakistan Statutes 315.

Civil Appeal No. 1363 of 2018 etc.

5

(f) Contractors supplying goods, commodities and

services to the Central or Provincial Governments or

any Local Authority,

(g) Persons holding license under the Import and Export

(Control) Act, 1950.

a tax in respect of the professions, trades, callings or

employments, for each financial year at the rate of thirty

rupees in addition to any tax, rate, duty or fee that may be

payable under any other law:

Provided that nothing in this section shall authorize the levy

of more than thirty rupees as tax payable by any person for

any financial year.

Explanation.- In this section-

(i) the expression “person” includes a company;

(ii) the expression “land revenue” excludes any water rate,

payable in respect of irrigated land.

(2) Government may, by notification in the official Gazette,

exempt any class of persons from the operation of subsection

(1) or remit, in whole or in part, the tax payable under

subsection (1).’

The learned AAG submitted that in the province of Sindh the

Government of Sindh alone collects the professional taxes, and though the

Sindh Local Government Act may have authorized local governments to do

so, in practice no local government had done so.

7. Section 60 of the Cantonments Act, on which the appellants and the

learned AGP rely, grants a general power of taxation, submitted the learned

AAG, and this provision cannot prevail over Article 163 of the Constitution,

which specifically authorizes the provinces to impose the professional

taxes. The power to impose and collect the professional taxes neither vests

in Parliament, the Federal Government nor in cantonment boards, which

come under the Federal domain, submitted the learned AAG. With regard to

the contention that the second entry of the Federal Legislative List

6

empowers cantonment boards to impose and collect the professional taxes,

he submitted that the second entry merely refers to local self-government in

cantonment areas, and its meaning cannot be extended to authorize them

to impose the professional taxes. He added that Federal taxes are

enumerated in entries 43 to 53 of the Federal Legislative List, and none of

6

Constitution of the Islamic Republic of Pakistan, Fourth Schedule.

Civil Appeal No. 1363 of 2018 etc.

6

them mentions the professional taxes. As regards the submission that

Article 140A of the Constitution had brought about a change and allowed

local governments to impose the professional taxes, he submitted that

Article 140A only requires financial responsibility from local governments

and it cannot be extended to mean that it has authorized the imposition of

the professional taxes, and Article 140A does not negate Article 163 of the

Constitution, which is the only specific authorization to impose the

professional taxes in the Constitution and has to be given effect to. The

learned AAG also referred to Article 77 of the Constitution and submitted

that it further supported his contention. Concluding his submissions, the

learned AAG stated that the matter which is under consideration has

already been determined by this Court in the ICI case (particularly at pages

431, 432A and 432B of the judgment therein); reliance was also placed on

the decisions in the cases of Province of Punjab v Sargodha Textile Mills

Ltd.

7

and Flying Cement Co. v Federation of Pakistan.

8

8. Learned Mr. Tahir Ishaq Mughal and learned Mrs. Shaista Altaf

represent K & N Foods (Pvt.) Limited (respondent No. 1 in Civil Appeal No.

1364 of 2018). They supported the impugned judgment and adopted the

submissions of the learned AAG. Learned Mr. Muhammad Naeem Sadiq

had filed CMA No. 4728/2023 on behalf of Zubi International Private

Limited. He also supported the impugned judgment, adopted the

submissions of learned AAG and stated that the benefit of the impugned

judgment should also be extended to the applicant.

9. We have heard the learned counsel for the parties and acknowledge

their assistance and the assistance provided by the learned AGP and the

learned AAG. The history of the professional taxes is set out in the case of

Province of Punjab v Sargodha Textile Mills Ltd. and the issue in hand has

been decided in the ICI case.

10. However, during the pendency of these appeals section 60(1) of the

Cantonments Act underwent a change. The earlier provision and the

existing one are reproduced herein below:

Section 60(1) as it was till 4 August 2023:

7

PLD 2005 Supreme Court 988.

8

PLD 2016 Lahore 35.

Civil Appeal No. 1363 of 2018 etc.

7

60. General power of taxation.- (1) The Board may, with

the previous sanction of the Federal Government, impose in

any cantonment any tax which, under any enactment for the

time being in force, may be imposed in any municipality in

the Province wherein such cantonment is situated:

Section 60(1) as it now is, from 5 August 2023:

‘60. Power to levy taxes, etc. (1) The Board may, with the

previous sanction of the administrative division, impose in a

cantonment any or all the taxes, fees, tolls or charges as

specified in the Schedule VII.’

The above amendment was made by the Cantonments (Amendment)

Act, 2023, promulgated on 5 August 2023, which had also made additions

to Schedule VII of the Cantonments Act and included therein the

professional taxes. The administrative division mentioned in section 60(1) is

defined in section 2(a)(i) of the Cantonments (Amendment) Act, 2023, as

under:

‘“administrative division” means the division to which

business of cantonments stands allocated.’

The Second Schedule to the Rules of Business, 1973,

9

made pursuant to

Articles 90 and 99 of the Constitution, stipulate that the business of

cantonments stands allocated to the Defense Division. The aforesaid change

meant that, previously the sanction of the Federal Government was

required to be obtained for cantonment boards to impose taxes but now it

has been delegated to a Division. This downgrading the power of the

Federal Government does not seem to conform to democratic principles,

and obfuscates transparency.

11. Article 163 of the Constitution alone authorizes the provinces to

impose the professional taxes, and this Court had already decided this very

issue in the ICI case, as under:

‘8. A bare perusal of the aforesaid Article [163] shows that

the repository of the power to impose professional/trade tax

is only the Provincial Assembly and that too by an Act. The

Article neither empowers the Provincial Assembly to delegate

its authority to impose such a tax in favour of the Punjab

Government or a Local Council nor it permits imposition of

such a tax by subordinate legislation i.e. the notifications

which were impugned in the two constitutional petitions filed

by the appellant company. The argument of the learned

counsel appearing for the Local Council based on sections

9

Rules of Business, 1973, Second Schedule, entry 7(a)(ii).

Civil Appeal No. 1363 of 2018 etc.

8

137 and 138 is totally misplaced because Article 163 stands

in the way and any provision in any statute to the contrary

will have to yield in favour of the said Article.’

10

‘9. Perusal of section 137 shows that power of a Local

Council to levy impugned tax was subject to any other

provision of law. The limitation on the powers of the Local

Government to impose tax is inbuilt in the said provision.

Article 163 places a complete embargo to levy

professional/trade tax except by an Act of a Provincial

Assembly… .’

‘10. In view of the above we allow Civil Appeal Nos. 1902 of

2002 and 1381 of 2005 of the ICI Pakistan Limited and

declare that the Tehsil Council, Pind Dadan Khan (now

Tehsil Municipal Administration) is not lawfully empowered

to levy any professional/trade tax. In view of the conclusion

reached by us, Civil Appeal No. 1382 of 2005 filed by the

Local Council is dismissed.’

11

12. We are in complete agreement with the decision of this Court in the

ICI case. The attempt to distinguish it on the ground that, after the

insertion of Article 140A into the Constitution it changed the existing

constitutional scheme, is not correct. Neither has Article 163 been made

redundant nor has Article 140A empowered the Federation, including

cantonment boards, to impose the professional taxes. It is also not correct

to state that since the second entry of the Federal Legislative List mentions

local self-government and cantonment areas the Federation has been

authorized to impose the professional taxes. Article 163 of the Constitution

specifically empowers the provinces to impose the professional taxes; it is

the only provision in the Constitution which permits or authorizes this, and

it must be given effect to; it cannot be disregarded or whittled down by

untenable submissions.

13. Article 163 of the Constitution had already been interpreted by this

Court in the ICI case, with which we are in agreement. Decisions of this

Court are binding on all executive functionaries, including cantonment

boards, as mandated by Article 189 of the Constitution. Therefore, section

60(1) of the Cantonments Act and its Schedule VII to the extent that they

may authorize the imposition of the professional taxes are ultra vires the

Constitution. Moreover, this oblique attempt to undo the decision in the ICI

case cannot be allowed to succeed.

10

ICI Pakistan Ltd v Tehsil Council, PLD 2007 Supreme Court 428, p. 431A.

11

Ibid., p. 433C.

Civil Appeal No. 1363 of 2018 etc.

9

14. For the aforesaid reasons, these appeals are dismissed with costs

throughout. The professional taxes mentioned in Article 163 of the

Constitution recovered by the Cantonment Boards was unconstitutional,

consequently, they cannot be retrained, which should be refunded and

would have to be refunded, as held in the case of Pfizer Laboratories Ltd. v

Federation of Pakistan:

12

‘(viii) That when moneys are paid to the State which the

State has no legal right to receive, it is ordinarily the duty of

the State, subject to special provisions of any particular

statute or special facts and circumstances of the case, to

refund the amount so received and in case of failure, a

superior Court in exercise of its Constitutional jurisdiction

can direct the refund of the same if no disputed questions of

facts are involved.’

15. We would like to clarify that this judgment follows the decision in the

ICI case, and that the observations made herein are with regard to the

professional taxes mentioned in Article 163 of the Constitution, section

60(1) of the Cantonments Act and its Schedule VII.

Chief Justice

Judge

Islamabad:

13.10.2023

(M. Tauseef/Hassan)

Approved for Reporting

12

PLD 1998 Supreme Court 64, p. 88.