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PLD 2017 Supreme Court 28
Present: Mian Saqib Nisar, Mushir Alam and Tariq Parvez, JJ
WORKERS’ WELFARE FUNDS, M/O HUMAN RESORUCES DEVELOPMENT, ISLAMABAD through Secretary and others—Appellants/Petitioners
versus
EAST PAKISTAN CHROME TANNERY (PVT) LTD. through G.M. (Finance), Lahore and others—Respondents
Civil Appeals Nos. 1049 to 1055/2011, Civil Misc. Application No. 1841/2016 in Civil Appeal No.1054/2011, Civil Appeals Nos. 24 to 26, 64 to 66, 918 to 944, 961 and 1061/2013, 1266 to 1299, 1364 to 1379/2014, 72 to 74, 178, 179, 388, 316 to 321, 583 to 585/2015 and Civil Petition No. 1767/2012, Civil Misc. Application No.8118/2015 in Civil Petition No. 1767/2012, Civil Appeals Nos. 107 to 114 and 755/2016, Civil Petition No. 1005/2016, Civil Appeals Nos. 1022 and 1341/2016 and Constitution Petitions Nos. 5 to 8/2016, Civil Appeal No. 1298/2016, Civil Misc. Applications Nos. 3520 to 3522/2016 in Constitution Petitions Nos. 5 to 7/2016.
(Against, the judgment dated 19-8-2011/3-10-2012, 15-2-2012/ 1-3-2013/ 20-5-2013/ 1-5-2013/ 28-5-2013/ 29-5-2014/ 11-3-2011/ 29-10-2015/27-10-2015 /23-9-2014/25-2-2016,/17-11 -2015/ 20-5-2015/ 12-1-2016 of the Lahore High Court, Lahore/High Court of Sindh, Karachi/Lahore High Court, Lahore/High Courts of Sindh, Karachi/Peshawar High Court, Peshawar/High Court of Sindh, Karachi/Peshawar High Court Peshawar/Islamabad High Court, Islamabad/Peshawar High Court, Peshawar passed in W.Ps.Nos.8763, 4216, 4217, 8766, 8767 and 8768/2011, Const.Ps. Nos.l588-D, 1589-D and 1743-D/2012, W.Ps.Nos.2100 to 2102/2012, Const. Ps.Nos.3753-D/2009, 1483-.D, 4119-D, 4120-D and 4121-D/2011, 3618-D/2010, 367-D, 699-D, 3482-D, 3483-D, 3484-D, 3488-D to 3494-D and 495-D/2011, 3521-D/2010, 702-D, 703-D, 704-D, 706-D, 1048-D and 1619/2011, 452-D/2010, 2109-D/2013 and 2039/2010, T.Rs. Nos.2 to 4, 38 and 42/2012, 9, 34, 42, 44, 45, 76, 79, 86, 98 and 100/2013, 4/2014, 43, 46, 48, 64, 65, 77, 78, 80, 81, 82, 84, 85, 97, 99, 101 and 123/2013, 5/2014, 87/2013, W.Ps. Nos. 1425/2010, 981 and 3420/2012, 1139/2014 , 981/2012, 144 and 579/2014, 1425/2010, T.Rs Nos. 9/2012, 19 and 102/2013 and 15 and 16/2014, 74, 18, 55 to 57 , 51, 52 and 81 to 83/2014, Const.P.No.260/2008, T.Rs. Nos.35, 38 and 45 to 50/2015, W.Ps. Nos. 2250 and 4203/2012 and T.Rs. No.58/2015, W.P.No.31/2015 and T.R.No.54/2015)
(a) Tax—
—“Tax” and “fee”—Distinction—Tax was a compulsory exaction of monies by public authorities, to be utilized for public purposes— Distinguishing feature of tax was that it imposed a common burden for raising revenue for a general as opposed to a specific purpose; the latter being one of the key characteristics of a fee. [p. 45] A
Government of North-West Frontier Province through Secretary Agriculture and others v. Rahimullah and others 1992 SCMR 750 and Federation of Pakistan through Secretary M/o Petroleum and Natural Resources and another v. Durrani Ceramics and others 2014 SCMR 1630 ref.
(b) Workers' Welfare Fund Ordinance (XXXVIof 1971) —
—-Ss. 2, 4, 6, 10 & 10A [as amended by section 12 of the Finance Act (III of 2006) and subsequently by S. 8 of the Finance Act (I of 2008)1
& Preamble—Constitution of Pakistan, Art. 73(2)—Income Tax Ordinance (XLIX of 2001), S.60A—Vires of amendments made by Finance Acts, 2006 and 2008—Obligation on industrial establishments to contribute towards the Workers’ Welfare Fund—Whether such obligation was a ‘tax’—Whether amendments to the Workers’ Welfare Fund Ordinance, 1971 could have been lawfully brought through Money Bills i.e. Finance Acts of 2006 and 2008—Contributions made to the Workers’ Welfare Fund were not in the nature of a “tax”— Workers’ Welfare Fund could only be used for very specific purposes as stated exhaustively in the Workers’ Welfare Fund Ordinance, 1971 itself, and not for general or undefined purposes—Such particular feature of the contribution made in terms of the said Ordinance automatically precluded it from being classified as a “tax”—Further S.60A of the Income Tax Ordinance, 2001 provided that any contributions made by a person under the Workers' Welfare Fund Ordinance, 1971 would be deducted from the total income of that person, which suggested that the contributions were not a tax, as they were being deducted from the total income, as opposed to being considered as a “tax credit”—Amendments made in the Workers' Welfare Fund Ordinance, 1971 by way of Finance Acts of 2006 and 2008 did not fall within the parameters of Art. 73(2) of the Constitution, therefore, they were declared to be unlawful and ultra vires the Constitution.
According to Preamble to the Workers' Welfare Fund Ordinance, 1971, it was passed to provide for the establishment of a Workers’ Welfare Fund, in order to provide residential accommodation and other facilities for workers and for matters connected therewith or incidental thereto, [p. 45] B
Governing Body of the Workers’ Welfare Fund, established to manage and administer the said fund, was supposed to do so in light of the exhaustive purposes enumerated in section 6 of the Workers' Welfare Fund Ordinance, 1971. Further, the Governing Body could only allocate funds to the Provincial Government, or any agency of the Federal Government and any Body Corporate for the purposes mentioned in Section 6(a) and (b) of the Ordinance and for no other purpose, and any funds so allocated to any such body could not be used for any purpose other than that for which they were allocated or as permitted by the Governing Body. This clearly established two things: that the Government had no control over the Workers’ Welfare Fund, and that the funds could only be used for very specific purposes as stated exhaustively in the Ordinance itself, and not for general or undefined purposes. This particular feature of the contribution(s) made in terms of the Ordinance automatically precluded them from being classified as a “tax” [p. 47] C
Section. 4(7) of the Workers’ Welfare Fund Ordinance, 1971 stated that the payments made by industrial establishments to the Workers’ Welfare Fund under the Ordinance were to be considered as expenditure while assessing income tax. It was a necessary corollary that the contributions to the Workers’ Welfare Fund could not be a “tax” if they were to be considered as an expenditure while assessing income tax. Such argument was bolstered by section 60A of the Income Tax Ordinance, 2001 which provided that any contributions made by a person under the Workers' Welfare Fund, Ordinance, 1971 would be deducted from the total income of that person. This also suggested that the contributions were not a tax, as they were being deducted from the total income, as opposed to being considered as a tax credit, in which case the contributions would be subtracted from the total tax to be paid. Contributions made to the Workers’ Welfare Fund were not in the nature of a tax. [p. 47] D & E
Amendments sought to be made in the Workers' Welfare Fund Ordinance, 1971 by the Finance Acts of 2006 and 2008 pertaining to the contributions towards the Workers’ Welfare Fund did not relate to the imposition, abolition, remission, alteration or regulation of any tax, or any matter incidental thereto. Since the amendments relating to such contributions did not fall within the parameters of Article 73(2) of the Constitution, the impugned amendments by the respective Finance Acts of 2006 and 2008 were declared to be unlawful and ultra vires the Constitution, [pp. 50, 51] M & O
(c) Employees’ Old Age Benefits Act (XIV of 1976)—
-—Ss. 9, 22, 22A, 22B & 23 [ as amended by the Finance Act (IV of 2007) and Finance Act (I of 2008)] & Preamble—Constitution of Pakistan, Art. 73(2)—Vires of amendments made by Finance Acts, 2007 and 2008—Obligation on employers to contribute towards the Employees' Old-Age Benefits Fund—Whether such obligation was a
According to Preamble to the Employees’ Old Age Benefits Act, 1976 it was a law relating to old-age benefits for the persons employed in industrial, commercial and other organisations and matters connected therewith, [p. 48] F
Section 17(4) of the Employees’ Old Age Benefits Act, 1976, provided that the assets of the Institution shall be utilized solely for the purposes of the Act. The various benefits available under the Employees’ Old Age Benefits Act, 1976 were old-age pension (section 22), old-age grant (section 22A), survivors’ pension (section 22B) and invalidity pension (section 23). Thus the scheme of the Act clearly suggested that the contributions were to be used for specific purposes pertaining to employees’ old-age benefits, as opposed to general purposes. Such feature of the contribution removed it from the ambit of a tax. [p. 48] G
Amendments sought to be made in the Employees’ Old Age Benefits Act, 1976, by the Finance Acts of 2007 and 2008 pertaining to the contributions towards the Employees’ Old-Age Benefits Fund did not relate to the imposition, abolition, remission, alteration or regulation of any tax, or any matter incidental thereto. Since the amendments relating to such contributions did not fall within the parameters of Article 73(2) of the Constitution, the impugned amendments by respective Finance Acts of 2007 and 2008 were declared to be unlawful and ultra vires the Constitution, [pp.50, 51] M & O
(d) Workmen’s Compensation Act (VIII of 1923) —
—5. 3 [as amended by the Finance Act (IV of 2007)] & Preamble — Constitution of Pakistan, Art. 73(2)—Vires of amendments made by Finance Act, 2007—Obligation to pay compensation to employees under the Workmen’s Compensation Act, 1923—Whether such . obligation was a ‘tax’—Whether the amendments made to the Workmen’s Compensation Act, 1923, could have been lawfully brought through a “Money Bill” i.e. Finance Act, 2007—Preamble to the Workmen’s Compensation Act, 1923 states that it was passed to provide for the payment of compensation for injury by accident by certain classes of employees to their workmen—Scheme under the Workmen’s Compensation Act, 1923 was a fÓrm; of insurance, providing compensation to workers (or their dependents in case of a fatal accident) injured in the course of employment in exchange for relinquishment of the employee’s right to take legal action against the employer—Compensation payments made under the Workmen’s Compensation Act, 1923 were not a common burden exacted to meet the general expenses of the State, rather they were particular payments made for a very specific purpose, i.e. to compensate workmen injured in the course of employment, therefore they could not be said to be in the nature of a “tax”—Amendment sought to be made In theWorkmen’s Compensation Act, 1923, by the Finance Act of 2007 pertaining to payment of compensation to employees did not relate to the imposition, abolition, remission, alteration or regulation of any tax, or any matter incidental thereto—Since the amendment relating to such compensation did not fall within the parameters of Art.73(2) of the Constitution, the impugned amendment by the Finance Act, 2007 was declared to be unlawful and ultra vires the Constitution. [pp. 48, 49, 50, 51] H, I, M&O
(e) Industrial and Commercial Employment (Standing Orders) Ordinance (VI of 1968)—
—S.O. 12(6) fas amended by the Finance Act (IV of 2007)]— Constitution of Pakistan, Art. 73(2)—Vires of amendment made by Finance Act, 2007—Payment of gratuity under the Industrial and Commercial Employment (Standing Orders) Ordinance, 1968—Whether obligation to pay such gratuity was a ‘tax’—Whether the amendments made to the Industrial and Commercial Employment (Standing Orders) Ordinance, 1968 could have been lawfully brought through a Money Bill i.e. Finance Act, 2007—Standing Order 12(6) of the Industrial and, Commercial Employment (Standing Orders) Ordinance, 1968, as amended by the Finance Act, 2007, broadly provided for payment of gratuity by the employer in case a workman resigned from service or his services were terminated by the employer for any reason other than misconduct—Gratuity was a lump sum payment made by the employer to an employee at the end of his service (either by retirement or termination for reasons other than misconduct) as a mark of recognition for the latter’s service—Gratuity was a defined benefit plan—Gratuity payments made by employers were very specific as opposed to having a generic purpose to meet the State’s expenses and could therefore by no stretch of imagination be referred to as a tax— Amendment sought to be made in the Industrial and Commercial Employees (Standing Orders) Ordinance, 1968, by the Finance Act, 2007 pertaining to payment of gratuity to workmen did not relate to the imposition, abolition, remission, alteration or regulation of any tax, or any matter incidental thereto—Since the amendment relating to such gratuity did not fall within the parameters of Art. 73(2) of the Constitution, the impugned amendment by the Finance Act. 2007 was declared to be unlawful and ultra vires the Constitution. (PP. 49, 50, 51] J, M&O
(f) Companies Profit Workers’ Participation Act (XII of 1968)—
""Ss. 2(b), 2(f) & 4 [as amended by the Finance Act (IV of 2007)] — Constitution of Pakistan, Art. 73(2)—Vires of amendment by Finance Acty 2007—Payment of certain percent of profits of a company to the Workers’ Participation Fund—Whether such payments were a ‘tax’— Whether the amendments made to the Companies Profit Workers’ Participation Act, 1968 could have been lawfully brought through a Money Bill i.e. Finance Act, 2007—Companies’ Profit Workers’ Participation Act, 1968 provided for companies to which the Act applied to establish a Workers’ Participation Fund and to make annual payments of certain percent of its profits during that year to the said Fund to provide benefits that accrued from it to the eligible workers of the company—Employees may voluntarily choose to contribute to the Workers’ Participation Fund—Workers' Participation Fund was to be managed and administered by a Board of Trustees in accordance with the provisions of the Act, the scheme and any rules made in such behalf—Workers’ Participation Fund was a profit-sharing plan that gave employees a share in the profits of a company, with the primary aim to give the employees a sense of ownership and greater participation in the company—Such contributions were for a specific purpose, i.e. a plan for the benefit of employees, much like other investment plans, and therefore did not qualify as a “tax”Amendment sought to be made in the Companies Profit Workers’ Participation Act, 1968, by the Finance Act, 2007 pertaining to payments in the Workers’ Participation Fund did not relate to the imposition, abolition, remission, alteration or regulation of any “tax”, or any matter incidental thereto—Since the amendment relating to such payment did not fall within the parameters of Art. 73 (2) of the Constitution, the impugned amendment by the Finance Act, 2007 was declared to be unlawful and ultra vires the Constitution, [pp. 50, 51} K, M & 0
(g) Minimum Wages for Unskilled Workers Ordinance (XX of 1969)-
—S. 3 & Sched. [as amended by the Finance Act (IV of 2007)]— Constitution of Pakistan, Art. 73(2)—Amendments made to the Minimum Wages for Unskilled Workers Ordinance, 1969 through a Money Bill i.e. Finance Act, 2007— Constitutionality—Preamble to the Minimum Wages for Unskilled Workers Ordinance, 1969, provided that the said Ordinance was enacted to fix the minimum rates of wages for unskilled workers employed in certain commercial and industrial establishments—Requirement of payment of minimum wages to unskilled workers could not be construed as a “tax”, thereby amendments made to the Minimum Wages for Unskilled Workers Ordinance, 1969, could not be effected through a Money Bill i.e. Finance Act, 2007. [p. 50] L
(h) Constitution of Pakistan—
—Arts. 70 & 73—Practice of making amendments in statutes through a Money Bill i.e. Finance Act—Supreme Court observed that not everything that pertained to finance would necessarily be related to tax; that merely inserting amendments, albeit relating to finance but which had no nexus to tax, in a Finance Act did not mean that such Act was a Money Bill as defined in Art.73(2) of the Constitution; that the tendency to tag all matters pertaining to finance with tax matters in Finance Acts must be discouraged, for it allowed the legislature to pass laws as Money Bills by bypassing the regular legislative procedure under Art. 70 of the Constitution by resorting to Art. 73 thereof which must only be done in exceptional circumstances as and when permitted by the Constitution. [p. 50] N
(i) Fee —
—Characteristics—Payment/contribution would qualify as a fee if it was for specific purpose and possessed the element of quid pro quo. Ip. 51] P
For the Appellant(s):
Mir Afzal Malik, Advocate Supreme Court and Ch. Akhtar Ali, Advocate-on-Record (in C.As. 1049 to 1055/2011 and 64 to 66/2013).
Mir Afzal Malik Advocate Supreme Court and Tariq Aziz, Advocate-on-Record (in C.As. 1364 to 1371/2014).
Ms. Asma Jaehangir, Advocate Supreme Court, and Ch. Akhtar Ali Advocate-on-Record (in C.As. 24 to 26/2013).
Abid S. Suberi, Advocate Supreme Court, (in C.A. 918/2013).
Hashmat Ali Habib, Advocate Supreme Court, (in C.A. 919/2013).
Rashid Anwar, Advocate Supreme Court, (in C.As. 923 to 930, 937 to 938/2013).
Ghulam Shoaib Jally, Advocate Supreme Court, and M.S.Khattak, Advocate-on-Record (in C.As. 1266 to 1299/2014, 1372 to 1379/2014 , 72 to 74', 178, 179, 316 to 321, 388 and 583 to 585/2015, 1022, 1341 & 1298/2016).
Rehman Ullah, Advocate Supreme Court (in C.As. 107 to 114 and 755/2016).
Nemo (in C.As. 920 to 922, 936, 942 to 944, 931 to 935, 939 to 941 and 961/2013).
For the Petitioners:
Hafiz S.A. Rehman, Senior Advocate Supreme Court (in C.Ps 1767/2012 and C.M.A. 8118/2015.
Malik Jwwad Khalid, Advocate Supreme Court ((in C.P. 1005/2016).
Raheel Kamran Sheikh, Advocate Supreme Court (in C.Ps Nos.5 to 8 of 2016).
Raja Nadeem Haider, Advocate Supreme Court (in C.M.No.1841 of 2016).
For the respondents:
Isaac Ali Qazi, Advocate Supreme Court (in C.A. No.937/2013, 1271, 1276, 1373, 1377/14 , 388 , 316, 584 , 5 85/15, 107 to 109, 111, 113/2016).
Mian Yousaf Umar, Advocate Supreme Court (in C.As. 1049 to 1055/2011).
Mehmood Abdul Ghani, Advocate Supreme Court and M.S. Khattak, Advocate-on-Record (in C.As. 24 to 26/2013).
Naveed Ahmed Andrabi, Advocate Supreme Court (in C.As. 64 t to 66/2013)..
Dr. Farhat Zafar, Advocate Supreme Court and Raja Abdul Ghafoor, Advocate-on-Record (in Const.Ps. 5 to 8/2016 and C.M.As. 3520 to 3522/2016).
Mir Afzal Malik, Advocate Supreme Court and Tariq Aziz, Advocate-on-Record (in C.As. 918 to 920, 923 to 935, 938 to 941, 943 and 944/2013).
Khalil-ur-Rehman, Advocate Supreme Court and M.S. Khattak, Advocate-on-Record (in C.A. 1274/2014).
Muhammad Saleem Mangrio, Advocate Supreme Court (in C.As.Nos.64/2013, 918 to 929/2013, 931 to 936, 939 to 942/2013).
Syed Arshad Ali, Advocate Supreme Court (in C.A. 1365/2014).
Mian Shafaqat Jan, Advocate Supreme Court (in C.As. 320 to 321/2015).
Shumail Butt, Advocate Supreme Court (in C.A. 1378/2014). Arshad Zaman Kiyani, Advocate Supreme Court, Muhammad
Saleem Khan, Advocate Supreme Court, Asif Fasih-ud-Din Vardaq, Advocate Supreme Court, Qazi Ahmed Naeem Qureshi, Advocate Supreme Court, and Tariq Aziz, Advocate-on-Record (in C.A. 1767/2012).
. Ms. Misbah Gulnar Sharif, Advocate Supreme Court (in C.A. 942/2013).
Tasleem Hussain Advocate Supreme Court (in C.As. 1374 to 1379/2014).
Habib Ahmed Qureshi, Advocate Supreme Court (in C.A. 1364/2014).
Sohail Mahmood, DAG, Abid Hussain Channa, S.O.(Finance), Mudassir Khalid Abbasi, A.A.G. Punjab and Abbas Ali, Law Officer, Labour Deptt. Punjab.
Noor Ahmed Wahgra, Dy. Director (Legal), EOBI
Faisal Tariq, Dy. Director (Legal) Workers Welfare Fund, Islamabad.
Nemo (C.As. 1272, 1274, 1278 and 1299/2014).
Not represented (in C.As. 1061, 1266 to 1268, 1270, 1273, 1275, 1277, 1279 to 1289, 1364, 1366 to 1368, 1370 to 1372, 1375/2014, 72 to 74, 178, 179, 317 to 319, 583/2015, 110, 112, 114 and
1022/2016).
Date of hearing: 27th September, 2016.
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