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Suit No. 75 of 1963, decided on 3rd March 1966.

S. 96 (2) (b) and Municipal Administration Ordnance (X of 1960), S. 33 & Third Sch, item No. 26‑Terminal tax charged by Karachi Municipal‑Corporation immediately before enforcement of Municipal Administration Ordinance, 1960‑Continues to be enforceable after promulgation of Ordinance‑Corporation has power to collect and levy Terminal tax in respect of goods imported by sea and meant for place outside Karachi but while in transit through its municipal limit‑‑Karachi Municipal Corporation Rule Book, Sch. ,VIII, Ch. V, Terminal Tax Rules, r.,5‑B.

Pakistan Textile Mill‑Owners' Association v. Chief Commis sioner of Karachi P L D 1961 Kar. 474 ; Pakistan Textile Mill- Owners' Association v. Administrator of Karachi P L D 1963 S C 137; Pakistan Tubacco Co: Ltd. v. Karachi Municipal Corpora tion P L D 1964 Kar. 468 ; Civil Appeals K‑57, 58 and 59 of 1963 ref.

A. Rauf for Plaintiff.

Fazle Haq for Defendant No. 1.

S. A. Nusrat for Defendant No. 2.

Date of hearing: 23rd February 1966.

Plaintiff (Industrial Development Corporation of West Pakistan is a corporate body having been established under Ordinance XXXVIII of 1962. With its office at PIDC House at Kutchery Road, i. e. within the municipal limits of Karachi Municipal Corporation (defendant No. 1). The business and projects as well as all the undertakings and properties of the original body corporate called Pakistan Industrial Development Corporation have been transferred to the plaintiff as provided under the Industrial Development Corporation Dissolution Ordinance, 1962. Plaintiff has further alleged that it has been importing various commodities for different projects and under takings and has been paying all taxes including the terminal tax scrupulously to defendant No. 1. Its further case is that the plaintiff imported various types of machinery, spare parts, appliances and fittings' for the exclusive use of its natural gas fertilizer project at Multan in 1960 and all these goods were loaded from the Karachi Harbour for its destination to Multan and defendant No.1 has charges terminal tax according to the revised Schedule in spite of the protests made by its clearing agents. Stand taken by it is that defendant No. 1 is not entitled to levy this terminal tax as all the goods referred to above were not consumed and massed with other goods within the municipal limits. It has also challenged the notification dated 4‑6‑1957 and urged that it does not apply to goods which do not enter the municipal limits as the arrears of KPT and KMC (defendant No. 1) have been clearly demarcated in terms of City of Karachi Municipal Act and KPT Act, secondly that defendant No. 1 is not competent to levy tax on goods in transit even within the KMC limits, thirdly that the sanction accorded by the Chief Commissioner is bad as he was trot a Provincial Govt. and, lastly that the tax could not be levied at the instance of Municipal Corporation. Present suit has therefore been filed for declaration that the action of defendant No. 1 to recover terminal tax on goods which are in transit and meant for the place outside its limits is illegal and ultra vires of its powers and secondly for recovery of Rs. 26,486/7 and grant of permanent injunction.

2. All these claims made by the plaintiff have been disputed by both the defendants. Case of defendant No. 1 is that it was never informed by the plaintiff prior to the institution of the present suit that the goods imported by it were meant to be used in various districts and other places of West Pakistan outside the municipal limits of Karachi Municipal Corporation, and secondly that the KPT area was within the Municipal limits. Stand taken by is that the tax in question was being realised under the Municipal Rules and not under the orders of the Municipal Commissioner KMC, and secondly that it was competent to levy the terminal tax in question, i.e. on goods imported by the plaintiff during the years of 1960‑61, 61‑62 at the revised schedule rates of 1957 for the reasons that the goods in question were unloaded and reloaded in KPT within the municipal limits. Practically same stand is taken by defendant No. 2 Provincial Government of West Pakistan).

3. On these pleadings following issues were framed :‑‑

(1) "Whether the plaintiff has been transferred the business and project, undertakings and properties of the Pakistan Indus trial Development Corporation.

(2) Whether the defendant No. 1 had been legally realizing the terminal tax on goods alleged in the plaint to be exclusively for upcountry.

(3) Whether the then Chief Commissioner of Karachi was competent to revise Schedule of Terminal Tax in regard to goods imported and brought within the limits of Karachi by Sea.

(4) Whether the then Chief Commissioner Karachi's directions in respect of the manner of realization of Terminal Tax were binding on the defendant No. 1.

(5) Whether plaintiff imported by sea various types of machinery plants, etc. for the exclusive use in the Natural Gas Fertilizer Projects at Multan and was made to pay Terminal Tax on such goods.

(6) Whether the goods imported were processed or mixed in other goods within the Municipal Limits.

(7) Whether the defendant No. 1 could legally realize Terminal Tax on goods which did not enter into the Municipal Limits

(8) Whether Terminal Tax could be imposed on goods while in transit and were imported by sea.

(9) Whether defendant No.1 recovered from the plaintiff the suit amount in contravention of law and also in violation of the orders and directions of the Provincial/Central Government.

(10) Whether the suit is barred by Limitation

(11) Whether the suit is barred under Art. 94 of the Basic Democracies Order, 1959.

(12) Whether the suit is barred by West Pakistan Municipal Appeal Rules and Rules 15 and 17 of the KMC Terminal Tax Rules.

(13) Whether defendant No. 2 has been improperly impleaded.

(14) To what relief the plaintiff is entitled to

(15) General

(16) Whether the defendant No. 2 entitled to costs under section 35‑A, C. P. C."

My findings and reasons are as follows :

4. Issue No. 8.‑This is the only material issue and accord ingly parties' Advocates had advanced their arguments in respect of it only. Fazal Mohd. Exh. 10 was the only witness who was re‑examined by the Plaintiff. He has produced receipts Exhs. 6 to 9 issued by defendant No. 1 for the payment of these taxes as well as long correspondence (Exhs. 10 to 21) which had ensued between the parties. He had admitted that whenever goods wagons were not available the imported goods were sent to Multan via TPX yard and as such these goods had to pass through the city of Karachi to the yard from the sea port. He had added that according to his information KPT area was not within the Municipal limits of Karachi City Corporation but it formed separate notified area. This was the only evidence adduced by the parties.

5. It is apparent from the pleadings referred to above that the amount of terminal tax recovered by defendant No. 1 from the Plaintiff has not been disputed. Similarly the parties have not disputed the nature of this tax, i.e. the amount collected was in respect of terminal tax for the goods imported by the plaintiff by sea for its consumption at Multan. It is further evident that these imported goods had passed through the municipal limits of defen dant No. 1 only in transit. On the basis of these facts it was argued before me on behalf of the plaintiff' that at the relevant time defendant No. 1 could not recover such terminal tax for these imported goods. He bad then referred me to the history in respect of levying of such taxes by making reference to the relevant provisions of the Karachi Municipal Act, 1933 which was later on repealed and substituted by Ordinance No. X of 1960, section 96 in Chapter 8 of the Act deals with taxes and its sub‑clause (2) reads as follows :‑

"In addition to the taxes mentioned in subsection (1) the Corporation may, for the purposes of this Act, impose any of the following taxes, namely,

(a) a tax at rates not exceeding those specified in Schedule 11 on all vehicles and animals used for riding, draught or burden kept for habitual use within the City;

(b) a terminal tax at rates prescribed by the Corporation with the approval of the Provincial Government on goods imported into or exported from the terminal tax limits."

He had also referred me to the relevant schedule and the notifica tion No. F‑2/4/50‑LSG published in the Gazette of Pakistan dated 14‑6‑57. According to him no such provision, i.e. Schedule existed for recovery of this kind of tax in respect of these goods, i. e. imported by sea in Ordinance No. X of 1960. Section 33 of this Ordinance deals with Municipal tax and it is reproduced below:

"A Municipal Committee, with the previous sanction of the Government, may levy, in the prescribed manner, all or any of the taxes, rates, tolls and fees mentioned in the Third Schedule."

Item No. 4 of the third schedule deals with taxes on the imported goods for consumption use or sale in the municipality, while item No. 5 is in respect of tax on the export of goods through a municipality. For our purpose item No. 26 was considered relevant and it reads as follows :‑‑

"Any other tax which the Government is empowered to levy by law.

Mr. A. Rauf for the plaintiff had then referred to the constitu tion position in respect of goods imported by sea and had pointed out that it was different at various times, i. e. in the Constitution of 1956 and then again in 1962. His case, in brief, therefore, is that defendant No. 1 could not recover such taxes under schedule attached to Act of 1933 after Ordinance X of 1960 was made and promulgated. Similar question came for discussion before the Division Bench of this Court and its finding is reported in Pakistan Textile Mill Owners' Association v. Chief Commissioner of Karachi (P L D 1961 Kar. 474). The writ petition was filed by the Pakistan Textile Mill‑Owners Association and others. The facts of that case are that their business premises were within the municipal limits of Karachi Municipal Corporation and the raw materials and other items required by the Mills for manufacturing process and the finished products of the Mills meant for distribution had to pass through the Terminal Tax limits of the Karachi Municipal Corporation and the Corporation levied a terminal tax on all the articles of the description mentioned in the revised Schedule of Terminal Tax contained in the Notification No. F‑2/4/5U‑LSG published in the Gazette of Pakistan dated 14th June 1957. The main objection raised is that petition was that all these goods were not consumed and nor massed with other goods within the Municipal limits but only had to pass through its limits, It was held that the terminal tax levied by Karachi Municipal Corpora tion under this notification was validly levied. The matter went into appeal before the Supreme Court and its decision is reported in Pakistan Taxtile Mill Owners' Association v. Administration of Karachi (P L D 1963 S C 137). After discussing the constitutional position it was observed as follows :‑

"The position, therefore, that emerges from a consideration of the above provisions is that on the date the impugned Notification was published in the Gazette of Pakistan on the 14th June 1957, the Provincial Legislature had no power to legislate in respect of terminal tax on goods or passengers carried by sea or air or to levy the said tax upon such goofs, but it possessed the power to legislate in respect of terminal taxes in respect of goods or passengers carried by railway, which had, under the Government of India Act of 1935, previously been vested in the Federal Legislature. In 1957 therefore, the Chief Commissioner of Karachi, even though he was the Provincial Government for the City of Karachi, could not have exercised the power of sanctioning any variation of the rate of terminal taxes in force immediately before the Constitution Day in respect of goods or passengers imported by sea or air."

Levying of such tares on these goods was held to be valid. The appeal was partially allowed in the following words :‑

"The revised Schedule is held to be invalid and inoperative so far as the goods imported by sea are concerned but its validity is upheld to respect of goods imported by road and rail. A writ of mandamus will, accordingly issue to the respondents herein directing them to cancel and/or withdraw the revised Schedule in so far as it relates to goods carried by sea or air."

Mr. Fazle Haq bad therefore conceded that the plaintiff was entitled to recover difference between rates of terminal tax prior to Schedule 1957 and Schedule 1957 to recover it from defendant No.1. Similar question came for decision before the Division Bench of this Court and its finding is reported in Pakistan Tobacco Co. Ltd. v. Karachi Municipal Corporation (P L D 1964 Kar. 468). Same view has been taken by it and it is based on the decision of the Supreme Court reported in P L D 1963 S C 137. Mr. Fazle Haq, the learned counsel for defendant No. 1 had also relied upon an unreported case of the Supreme Curt in Civil Appeal K‑57, 58 and 59 of 1963. For all these reasons I agree with defendants No. 1 that it could levy terminal tax in respect of goods imported by sea while in transit through its municipal limits. I therefore decide this issue in favour of defendant No. 1.

6. Issues Nos. 1 to 7, 9 to 14.‑All these issues do not arise in view of my finding on issue No. 8. Even the parties' Advocates did not argue these issues before me. Finding accordingly.

7. Issue No. 15.‑Mr. A. Rauf, the learned counsel for the plaintiff had admitted before me that he had claimed no relief against defendant No. 2. Mr. Nusrat, the learned counsel for defendant No. 2 had prayed for special costs. But no case is made out for it. Defendant No. 2 was a necessary party and it had to be joined in this suit. I therefore find no reason to allow special costs. Suit against both the defendant is dismissed with costs.

K. B. A.

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