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Writ Petition No. 3 of 1959, decided on 14th December 1962
Act, valid legislation‑Cess under S. 3 could be validly levied and collected on cotton consumed in Mill at Karachi after Karachi was formed into administrative unit and made Capital of Federation‑Pakistan (Establishment of Federal Capital) Order (IS of 1948) Adaptation of Central Acts and Ordinances Order, 1949 clauses 3 & 4‑Central Laws (Statute Reform) Ordinance (XXI of 1960), S., 3.
Chief Commissioner of Karachi v. Jamil Ahmed P L D 1961 S C 145 and Noor Muhammad v. Chief Commissioner and others (Civil Petition for Special Leave to Appeal No. K‑15 of 1961) ref.
Imposition of tax ‑ Ascertaining true nature of tax --Courts to look at substance of Act ‑ "Duties of excise"‑Tax upon goods and not upon sale or proceeds of sale of goods‑Duty on home produced goods can be imposed at any stage found lucrative and convenient by taxing authority‑Duty can be imposed even on raw produce required by manufacturer for his manufacture‑Cotton consumed in Mill to manufacture textile goods ‑ Cess on cotton under S. 3, Cotton Cess (Amendment) Act, 1948, held, duty on excise falling within item 45, Seventh Sch., Government of India Act, 1935‑Cotton Cess (Amendment) Act (XXX of 1948), S. 3.
A I R 1939 F C 1 ; Province of Madras v. Messrs Boddu Paidanna & Sons A I R 1942 F C 33 ; Governor‑General‑in‑Council v. Province of Madras A I R 1945 P C 98 and Firm Ram Krishna Ramnath Agarwal Kamptee v. The Secretary, Municipal Committee, Kamptee A I R 1950 S C 11 ref.
-- Federal legislation, after notification of emergency, in respect of matter enumerated or not enumerated in Provincial List‑Not invalid merely because formality of previous sanction by Governor General had not been complied with‑Defect curable under S. 109(2) if Governor‑General, had given assent to Bill after it had been passed‑S. 109 applicable irrespective of whether sanction required is sanction simpliciter or otherwise.
Muhammad Aslam and another v. Mst. Umar Bib P L D 1960 Lah. 312 ref.
‑ Powers of‑Delegation to Executive‑Policy framework provided by Act but details left to be filled in by Execu tive‑Delegation not ultra vires.
Crawford: "Statutory Construction" p. 26.
Liberty Cinema v. The Commissioner, Corporation of Calcutta and another A I R 1959 Cal. 45 ; Sobho Gyanchandani v. Crown P L D 1952 F C 29 ; In re: "Art. 143 Constitution of India" A I R 1951 S C 332 and George Walkem v. L. M. D. P. Board A I R 1939 P C 36 ref.
--Discretion given to Central Government to fix rate of Cess‑Delega tion of power, not ultra vires‑Notification No. F. 34‑7/47‑Dev., dated 14‑1‑49 and Notification No. 6‑124/55‑C & C dated 1‑1‑57 Not invalid.
Hassan A. Shaikh for Appellant.
Fazlur Rehman and S. A Nusrat for Respondents.
Dates of hearing : 30th and 31st October and 1st November 1962,
Messrs Paracha Textile Mills Ltd., the petitioners, have challenged in this Writ Petition the validity of the Cotton Cess (Amendment) Act, 1948 (XXX of 1948) on the ground that it was ultra vires of the Government of India Act, 1935. They have further challenged the rights of the respondents to levy, assess, impose, collect and or recover cess on cotton consumed by them in their mill within the limits ‑ of Karachi, the Federal Capital, under section 3 of the Cotton Cess Act, 1923, on the ground that Notification No. 6‑124/55‑C & C dated the 1st of January 1957, is illegal, ultra vires and without jurisdiction. The dispute between the parties has arisen in the following circumstances
2. The Cotton Cess Act, 1923 (XIV of 1923) was passed by the Indian Legislature for the creation of a fund to be expended by a committee specially constituted in this behalf for the improve ment, development, marketing and manufacture of cotton. Section 3 of this Act which received the assent of the Governor- General on the 16th of March 1923, as it originally stood read as under :‑
"There shall be levied and collected on all cotton produced in India and either exported from any customs‑port to any port outside the British India or consumed in any mill in British India a cess at the rate of two annas per standard bale of four hundred pounds avoirdupois, or, in the case of unbaled cotton, of six pies per hundred pounds avoirdupois ; Provided that the cess stall be levied and collected at double the above rates until the expiry of three years from the commencement of this Act'."
This section was amended by section 3 of the Indian Cotton Cess (Amendment) Act, 1924 (1 of 1924). By this, original section 3 was renumbered as subsection (1) of section 3 and a new sub section (2), which reads as under, was added to it
"The Central Government, may, by notification in the official Gazette, direct that the cess referred to in subsection (1) shall be levied and collected on all cotton produced in India and exported by land from British India to any foreign territory outside India which may be specified in the notification."
Section 3 was further amended by the Indian Cotton Cess (Amendment) Act, 1948 (XXX of 1948) passed by the Constituent Assembly in its legislative capacity. This Act received the assent of the Governor‑General on the 11th of January, 1949, and came into force on that day. After this amendment, section 3 of the Cotton Cess Act, 1923, read as under :‑
"There shall be levied and collected on all cotton either exported from the Provinces of Pakistan to any place outside Pakistan or consumed in any mill in the Provinces of Pakistan a cess at such rate as the Central Government may fix by notification in the Official Gazette."
3. In accordance with the above‑mentioned provision the Government of Pakistan, through the Ministry of Food, Agri culture and Health, issued a Notification No. F. 34‑7/47‑Dev., dated the 14th of January 1949, fixing the rate of Cotton Cess as under
"In exercise of the powers conferred by subsection (1) of section 3 of the Indian Cotton Cess Act, 1923 (XIV of 1923), the Central Government is pleased to fix the following rates of cess, namely : 4 annas per standard bale of 400 lbs. avoirdupois or in the case of unbaled cotton one anna per 100 Ibs. avoirdupois. These rates shall be deemed to have effect from the date on which the Indian Cotton Cess (Amendment) Act, 1948, comes into force."
By another Notification No. 6‑1124/55‑C & C dated the 1st of January 1957, the rate of cotton cess was enhanced. The said Notification is reproduced below :‑
"In supersession of the Ministry of Food, Agriculture and Health (Agriculture Division) Notification No. F. 34‑7/47‑Dev., dated the 14th January 1949, and in exercise of the ,powers conferred by section 3 of the Cotton Cess Act, 1923 (XIV of 1923) the Central Government is pleased to fix the following rates of cess with immediate effect, namely, rupee one per standard bale of 400 lbs. avoirdupois, or, in the case of unbaled cotton annas four per 100 lbs. avoirdupois."
4. The petitioners' case is that their cotton textile manufactur ing mill known as the Paracha Textile Mills was established in the year 1953 at S. I T. E., Mauripur Road, Karachi, within the limits of Karachi, the then Federal Capital. Since then they have been purchasing cotton for consumption and processing from the open market within the limits of Karachi. In the year 1958, the Secretary of the Pakistan Central Cotton Committee, respondent No. 2, issued a number of letters and finally on the 1st of January 1959, called upon the petitioners to furnish without any further delay a return in Form A together with Treasury challan from the date of the operation of the petitioners' mill with the object to recover the cotton cess purported to be mentioned in the aforesaid notifications. Copies of these letters were forwarded to the Collector of Karachi, respondent No. 3, requesting him to take suitable action under section 7 of the Cotton Cess Act for recovery of cotton cess from them. In these circumstances the petitioners apprehended that coercive measures would be adopted for the recovery of the cotton cess which they considered as an illegal demand. They have, therefore, prayed that writs of mandamus, certiorari and prohibition or any other appropriate writ be issued to the respondents prohibiting and restraining them from levying, assessing, imposing, collecting and recovering from them any cotton cess under the Cotton Cess Act, 1923, as pur ported to be amended by the Cotton Cess (Amendment) Act, 1948, by virtue of notifications issued under it on the 14th of January 1949, and the 1st of January 1957.
5. The petition is opposed on behalf of the respondents. Their case is that the respondents are entitled in law to levy the cotton cess under the provisions of the Cotton Cess (Amendment) Act, 1948, from the petitioners' Company and that the said Act is not ultra vires of the Government of India Act, 1935, and that even otherwise the Constituent Assembly had powers to pass the said Act. They have also challenged the jurisdiction of this Court in the matter under consideration.
6. Mr. Hassan A. Shaikh, the learned counsel for the petitioners, has urged before us (1) that the Cotton Cess (Amendment) Act, 1948 (XXX of 1948) was ultra vires of the Government of India Act, 1935 as it was passed by the Constituent Assembly (Legislature) of Pakistan which in its capacity of the Legislature of the Dominion had no power to pass under the Government of India Act, 1935, in respect of matters which exclusively fall within the Provincial List ; (2) that Act XXX of 1948 received the assent of the Governor‑General on the 19th of January 1949, when Karachi was demarcated as the Capital of the Federation and was not a Province or part of a Province, and as such cotton cess could not be levied and collected under section 3 of cotton consumed in any mill in the Capital of the Federation ; (3) that under the relevant entries of the 7th Schedule to the Government of India Act, 1935, as well as under the late Constitution of the Islamic Republic of Pakistan, even the Provincial Legislature had no power to levy cotton cess from consumers of cotton. The Provincial Legislature could levy it only on the entry of cotton into the local area for consumption, use or sale therein and not from consumers who may purchase it after, its entry into a local area and (4) that the provisions of section 3 of the said ‑Act as purporting to be amended by the Indian Cotton Cess (Amendment) Act (XXX of 1948) constitute an unlawful delegation of power by the Federal Legislature. We will deal with these grounds separately.
7. The most important question for consideration in this Writ Petition is whether the Constituent Assembly as the Federal Legislature was competent to amend section 3 of the Cotton Cess Act of 1923 (XIV of 1923) by the Indian Cotton Cess (Amendment) Act, 1948 (XXX of 1948) which received the assent of the Governor‑General on the 11th of January 1949, in respect of Karachi, the then Federal Capital of Pakistan. It is not disputed before us that on the creation of Pakistan the Cotton Cess Act, 1923, as it stood on the 14th of August 1947, continued to remain in operation in Karachi which was then part of the Province of Sind by virtue of section 18(3) of the Indian Indep endence Act, 1947. This is perfectly clear from the above mentioned provision and law reproduced below :‑
"Save as otherwise expressly provided in this Act, the law of British India and of the several parts thereof existing immediate ly before the appointed day shall, so fir as applicable and with the necessary adaptations, continue as the law of each of the new Dominions and the several parts thereof until other provision is made by laws of the Legislature of the Dominion in question or by any other Legislature or other authority having power in that behalf."
It is further not disputed that Karachi was separated from Sind and made the Capital of the Federation on the 23rd of July 1948 under G. G. O. No. 14 of 1948, and G. G. O. No. 15 of 1948. Under the former, which is known as Pakistan Provisional Constitution (Fourth Amendment) Order, 1948, section 290‑A was inserted in the Government of India Act, 1935, and the Governor‑General was authorised to demarcate for the purposes of the Capital of the Federation an area forming part of a Pro vince. Under the second provision of law, which is known as the Pakistan (Establishment of the Federal Capital) Order, 1948, the Governor‑General separated Karachi from the Province of Sind and formed it into an administrative unit and provided that the executive authority of Karachi shall be exercised by the Governor‑General either directly or to such extent as he thinks fit through an Administrator to be appointed by him, and that authority shall also extend to all matters included in List II of the Seventh Schedule to the said Act. Under sub‑clause 6 of the said Order, it was further provided that unless and until other provision is duly made, all enactments and laws etc. which immediately before the date appointed under Article 3 are in force in or prescribed for, any of the areas comprised in Karachi shall continue to be in force and shall have effect in Karachi. It is, therefore, quite clear that the Indian Cotton Cess Act of 1923, continued to remain in operation in Karachi after it was formed into an administrative unit and made the Capital of the Federation.
8. As already stated, a number of amendments were made in the Indian Cotton Cess Act of 1923, by amending Act XXX of 1948, by the Constituent Assembly as Federal Legislature. This Act received the assent of the Governor‑General on the 11th of January 1949. The petitioners' contention is that the Federal Legislature had no power to legislate on this subject as it did not fall in any of the items in List I‑Federal Legislative List mention ed in the Seventh Schedule. Their case is that this item, if at all, would fall in Item No. 20, or Item No. 49 of List II‑Provincial Legislative List. It is contended on their behalf that since Karachi on the material date was not part of any Province, even the Provincial Legislature could not pass any enactment on the subject of cotton cess. After hearing the learned counsel for the parties, the contentions of the petitioners' counsel in this behalf do not appear to us to be well‑founded. Much time of this Court was wasted on the question whether the status of Karachi was that of a Province or an administrative unit administered under the authority of the Central Government. As we will presently show this question is not at all material for the decision of the contentions raised on behalf of the petitioners.
9. Admittedly Karachi was demarcated as an administrative unit and formed into the Capital of the Federation of Pakistan on the 23rd of July 1948. The executive authority of Karachi was to be exercised through the Governor‑General and for all intents and purposes it was a Centrally administered area. This is quite clear from the provisions of G. G. O. No. 15 of 1948, known as the Pakistan (Establishment of the Federal Capital) Order, 1948. The preamble of this order, reproduced below, leaves no doubt on this point
"Whereas, it has been resolved by the Constituent Assembly of Pakistan ‑
(a) that the Capital of Pakistan shall be located at Karachi ;
(b) that all executive and administrative authority in respect of Karachi and such neighbouring area which in the opinion of the Central Government may be required for purposes of the Capital of Pakistan shall vest in and shall be exercised by or on behalf of the Government of Pakistan and the Legislative power shall vest in the Federal Legislature; and
(c) that notwithstanding anything in any law for the time being in force, the Government of Pakistan shall proceed forthwith to take such steps and adopt such measures as may be necessary to give effect to the purposes of this motion. "
So far as the legislative authority in respect of Karachi is concerned, it was vested under section 290‑A of the Government of India Act in the Governor‑General under subsection 2 (c), which is reproduced below
"(2) The Governor‑General may by order make, in respect of the Capital of the Federation, such provisions ‑
(c) with respect to the laws which are to be in force in the area.
The most important subsection in this provision of law is subsection (4) which was added by section 8 of the Government of India (Second Amendment) Act, 1950, with effect from the 22nd of July 1948, which is reproduced below
"The executive authority of the Federation extends to the Capital of the Federation and any order made under this subsection may be controlled or superseded by an Act of the Federal Legislature. "
Thus under this subsection the Federal Legislature was to control all laws which were to be enforced in the Capital of the Federation. In addition to this under section 100(4) of the Government of India Act the Federal Legislature had power to make laws with respect to matters enumerated in the Provincial Legislative List except for a Province or any part thereof. Since Karachi was not a Province or any part thereof, even if the contention of the petitioners is accepted that the subject of cotton cess fell under item No. 20 or 49 of the Provincial Legislative List, the impugned enactment was validly legislated in respect of Karachi.
10. At this stage we would like to dispose of another objection of the petitioners that the Cotton Cess Act of 1923, was only in operation in the Provinces of Pakistan and as Karachi was not a Province it could not have any effect in that area. In 1949, the Governor‑General under section 18(3) of the Indian Independence Act of 1947, promulgated G. G. O. No. 4 of 1949, known as The Adaptation of Central Acts and Ordinances Order, 1949. In clause 4 of this Order it was provided as under
"In all Central Acts and Ordinances, whether specified in the Schedule to this order or not, to the expression all the Provinces', or the expression the Provinces' when it refers to all the Provinces of Pakistan, directed to be substituted by paragraph (2) of the preceding Article, shall be added the words and the Capital of the Federation'."
Under Clause 3 all the Central Acts and Ordinances specified in the Schedule to this Order was, until repealed or altered or amended by a competent Legislature or other competent authority, to have effect and be deemed to have at all Material ties had effect subject to the adaptations directed by that Schedule and by paragraph (2) of this Article. In paragraph (2) of this article the expression "the whole of British India" was substituted by the expression "all the Provinces", and the expression "British India" was substituted by the expression "all the Provinces". This Article was followed by Article 4, which has already been reproduced above. Under it to the expression "all the Provinces" or the expression "the Provinces" the words "and the Capital of the Federation" were added. The Cotton Cess Act of 1923 is one of the enactments referred to in the Schedule at Item No. 169.
11. It is perfectly clear that at the time when the impugned legislation was passed by the Constituent Assembly as the Federal Legislature, the Cotton Cess Act of 1923 under section 1(2) of the said enactment extended not only to alt the Provinces but also to the Capital of the Federation by fiction of law. There can' therefore be no doubt that when in 1949 amendment was made in the above‑mentioned enactment, it was in respect of an enactment which was in force in the Capital of the Federation and will bet effective and operative in Karachi.
12. At any rate in view of the provisions of the Central Laws (Statute Reform) Ordinance, 1960, known as Ordinance XXI of 1960, it cannot be doubted that the Cotton Cess Act of 1923 as amended is effective from October 1955. Mr. Fazlur Rehman, the learned counsel for the respondents, has referred us to section 3 of this Ordinance, which is reproduced below :‑
"Amendments to effect adaptation of Central Acts and Ordinances necessitated by the establishment of West Pakistan. (1) Save as otherwise expressly provided in any Central Act or Ordinance, the Central Acts and Ordinances specified in the Second Schedule shall extend to the whole of Pakistan, and shall be amended in the manner indicated in the fourth column thereof, and shall be deemed to have been so extended and amended on the fourteenth day of October 1955."
In the Second Schedule the Cotton Cess Act of 1923 is also mentioned and the amendments made by it read as under
(1) In section 1, for subsection (2) the following shall be substituted, namely .‑
(2) It extends to the whole of Pakistan.'
(2) In section 2, in clause (a), for the words the Provinces and the Capital of the Federation' the word Pakistan' shall be substituted."
It will be noticed that this Ordinance was passed by the President of Pakistan in 1960, after the abrogation of the late Constitution of Pakistan, 1956. At that time the President of Pakistan had unfettered powers to legislate both in respect of the Federal List, Provincial List, Concurrent List and in respect of those subjects also which did not find place in any of these Lists. In view of this unlimited power the Cotton Cess Act of 1923 as amended is effective from October 1955, in the whole of Pakistan and all the objections raised in respect of the Federal Legislature to legislates on the cotton cess subject on the grounds referred to above are of no avail to the petitioners.
13. In passing, it may be mentioned that in the case of the Chief Commissioner of Karachi v. Jamil Ahmad (PLD 1961 S C 145), Kaikaus, J. has expressed the view that the Chief Commissioner and the Central Government together did constitute the Provincial Government. In another unreported decision re : Noor Muhammad v. Chief Commissioner and others, Civil Petition for Special Leave to Appeal No. K‑15 of 1961 decided on 9‑6‑1961, their Lordships of the Supreme Court of Pakistan reiterated this view and observed as under
"The ground as to the Chief Commissioner not being the Provincial Government was not pressed before the High Court, but even otherwise there is no force in it. The notification under which the Chief Commissioner was exercising his powers granted him all the powers of the Provincial Government of Sind subject to any general or special directions from the Central Government. This would obviously mean that he was to pass all orders subject, of course, to any directions by the Central Government."
In view of these decisions the objections raised in this connection have no force.
14. On merits also it appears to us that the subject of cotton cess clearly falls within Item No. 45 of the Federal List in the Seventh Schedule of the Government of India Act. This Item reads as under :‑
"Duties of excise on tobacco and other goods manufactured or produced in Pakistan except‑
(a) alcoholic liquors for human consumption ;
(b) opium, Indian hemp and other narcotic drugs and narcotics ; non‑narcotic drugs ;
(c) medicinal and toilet preparations containing alcohol, or any substance included in sub‑paragraph (b) of this entry,"
It is admitted in the present case that the cotton purchased by the petitioners is consumed for the manufacture of textile goods in the petitioners' mill. The question arises whether the cess imposed under the impugned enactment, though described as cotton cess, could be held to be a duty on excise. It is a well established rule of law that the Courts are entitled to look at the real substance of the Act imposing it in order to ascertain the true nature of the tax. There has been a great deal of controversy in this sub‑continent about the power of the Federal Legislature to make laws with respect to duties of excise and whether on the true con struction of the enactment conferring the power, the power itself extends to imposing duties on home produce or home manuf actured goods at any stage of consumption or whether it is restricted to imposing duties at the stage of the production or manufacture only. This question was considered by the Federal Court of India in the matter of the Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938, (A I R 1939 F C 1). In that case the Governor‑General made the following reference
"Is the Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938, or any of the provisions thereof, and in what particular or particulars, or to what extent, ultra vires the Legislature of the Central Provinces and Berar "
Under the impugned enactment in that case the Provincial Legislature imposed the tax under section 3 (1) of the Provincial Act in the following terms
"There shall be levied and collected from every retail dealer a tax on the retail sales of motor spirit and lubricants at the rate of five per cent. on the value of such sales."
The question arose before their Lordships whether the tax was in the nature of excise duty. In construing the provisions of this enactment Gwyer, C. J., observed that "the term excise duty' as used in Item No. 45 of the Federal List in its primary and fundamental meaning in English is still that of a tax on articles produced or manufactured in the taxing country and intended for home consumption." His Lordship further observed as under at page 9 of the Report
"In my opinion the power to make laws with respect to duties of excise given by the Constitution Act to the Federal Legislature is to be construed as a power to impose duties of excise upon the manufacturer or producer of the excisable articles, or at least at the stage of, or in connection with, manufacture or production, and that it extends no further. I think that this is an interpretation reasonable in itself, more consonant than any other with the context and. general scheme of the Act, and supported by other considerations to which I shall refer."
His Lordship came to the following conclusion
"Thus, the Central Legislature will have the power to impose duties on excisable articles before they become part of the general stock of the Province, that is to say at the stage of manufacture or production, and the Provincial Legislature an exclusive power to impose a tax on sales thereafter."
15. This view was further approved by the Federal Court in a subsequent decision in the Province of Madras v. Messrs Boddu Paidanna & Sons (A I R 1942 F C 33). Gwyer, C. J., observed that his suggestion in the earlier case that the Central Legislature should be regarded to have the power to impose duties on excisable articles before they become part of the general stock of the Province, that is to say at the stage of manufacture or production and the Provincial Legislature an exclusive power to impose a tax on sales thereafter' meant no more than to suggest a convenient dividing line between the two spheres of jurisdiction. He further observed that he did not mean to elevate the dividing line into a legal principle, the application of which may involve the introduc tion of some original package doctrine and all the refinements and complications which that doctrine had brought in its train in the Courts of America. In Governor‑General‑in‑Council v. Province of Madras (A I R 1945 P C 98) the Judicial Committee of the Privy Council also laid down that in construing the Schedules to the Government of India Act it is not the name of the tax but its real nature, its pith and substance as it has sometimes been said, which must determine into what category it falls. Their Lordships further held that if the legislative powers of the Federal and Provincial Legislatures, which are enumerated in List I and List II of Schedule 7, cannot fairly be reconciled, the latter must give way to the former. Their Lordships explained the meaning of the word "excise" and approved the view of the Federal Court referred to above that the duty of excise is primarily a duty levied upon a manufacturer or producer in respect of the commodity manufactured or produced. It is a tax upon goods not upon sales or the proceeds of sale of goods. Their Lordships further observed that the two taxes, the one levied upon a manufacturer in respect of his goods, the other upon a vendor in respect of his sales, may in one sense overlap. But in law there is no overlapping. The taxes are separate and distinct imposts. If they overlap, that may be because the taxing authority imposing a duty of excise finds it convenient to impose that duty at the moment when the excisable articles leaves the factory or workshop for the first time upon the occasion of its sale. But that method of collecting the tax is an accident of administration, it is not of the essence of the duty of excise which is attracted by the manufacture itself. That this is so is clearly exemplified in those excepted cases in which the Provincial, not the Federal Legislature has power to impose a duty of excise.
16. In the case of Firm Ram Krishna Ramnath Agarwal Kamptee v. The Secretary, Municipal Committee, Kamptee (A I R 1950 S C 11), it was urged that as tobacco became excisable goods under Item No. 9 of Schedule 1 to the Central Excise and Salt Act of 1944 and continued to be so till it got converted into bidis, the Central Government alone was entitled to levy excise duty on it till then. It was further contended that the octroi duty levied under section 66 (1) (e) C. P. and Berar Municipalities Act, 1922, is an excise duty and could not be legislated upon by the Provincial Legislature. This contention was repelled by the Indian Supreme Court. They observed as under :‑
"Octroi duty is a tax levied on the entry of goods within a particular area. Under the Excise Act, tobacco b ‑comes excis able goods within the meaning of Item 9 in the Schedule. The subsequent use of such manufactured goods in making different articles only affects the rate of tax. Therefore, tobacco becomes subject to excise duty when it reaches the stage of manufacture mentioned in Item 9 of the Schedule to the Excise Act. Even before it is converted into bidis or any other article mentioned in the entry it has become excisable goods and liable to pay excise duty. The levy of such duty is therefore not in conflict with the levy of an impost on the entry of the goods within a certain area."
They further observed
"It is wrong to think that two independent imposts arising from two different sets or circumstances were not permitted in law. In our opinion, therefore, there is nothing in the Excise Act to make its provisions contrary to the provisions of section 66 (1) (e), Central Provinces Municipalities Act or to the levy of octroi duty under the same. The appeal therefore fails and is dismissed with costs."
17. In the light of the above discussion it is perfectly clear that the definition of "excise duty" is of very little assistance in determining the legislative power to impose it. As pointed out by the Federal Court and the Judicial Committee it seems to us that subject to the legislative power of the taxing authority a duty on home produced goods can be imposed at any stage at which I the authority will find it most convenient and lucrative. It will be' considered to be an excise duty that is a duty on home produce 'd or home manufactured goods, no matter at what stage it is collected. What is to be seen is that it is to be charged at the stage or in connection with the manufacture or production of , home goods and it extends no further. The mere fact that such taxation can also fall within any of the Items of the Provincial List will not render its legislation as illegal or invalid. They may overlap in some sense but in law it will not be considered asl overlapping and will be disregarded, if the taxes imposed under the different Items are within the exclusive jurisdiction of the) Legislatures concerned. The contention of Mr. Hassan A. Shaikh that excise duty can only be charged after the goods argil manufactured or produced is therefore not well‑founded. It can be imposed at any stage, even on the raw produce required by the manufacturer for his manufacture. We are, therefore, satisfied that the Federal Legislature in this case had ample power to legislate on the cotton cess and no exception can be taken to it.
18. It was urged by Mr. Hassan A. Shaikh that the cotton cess imposed under the above‑mentioned legislation falls under Items 20 and 49 of the Provincial List. Both these Items are reproduced below
"20. Agriculture, including agricultural education and research, protection against pests and prevention of plant diseases ; improvement of stock and prevention of animal diseases ; veterinary training and practice ; pounds and the prevention of cattle trespass.
49. Cesses on the entry of goods into a local area for consumption, use or sale therein."
In our opinion the cotton cess imposed under the impugned legislation has nothing to do with the above‑mentioned items. The incidence of this taxation cannot be considered to be in respect of "agriculture" including agricultural education and research and prevention of pests and protection against plant diseases nor is it a cess on the entry of goods into a local area for consumption, use or sale therein. The object of the impugned legislation is to levy and collect on all cotton ether exported from any Province in Pakistan to any place outside Pakistan or con sumed in any mill in the Provinces of Pakistan a cess with a view to improve the quality and production of cotton and ensuring its development in Pakistan. In order to achieve this object a Pakistan Central Cotton Committee was set up to perform the functions discharged by the Indian Central Cotton Committee in undivided India. It was proposed to finance it from the proceeds of a cess to be levied and collected on all cotton either exported from the Provinces of Pakistan to any place outside Pakistan or consumed in any mill in the Provinces of Pakistan. This object surely cannot be exclusively connected with Item No. 20, which basically refers to cotton pods cultivated in the agricultural field. Similarly it cannot be said to be connected exclusively with the entry of goods into any local area for general consumption, use, or sale therein. There is not the slightest doubt that the cess in question is not on the act of introducing goods in a particular area for consumption but is on the act of production or manu facture of goods in the textile mills of Pakistan. It is charged as a cess on the use of cotton for the manufacture of textile goods.
19. It further appears to us that even if it is accepted that the impugned legislation falls within any of the Items under the Provincial List or is in respect of any matter not enumerated in any of the Lists in the Seventh Schedule to the Government of India Act, the Federal Legislature in certain circumstances had ample power to legislate on such subjects. This power is vested in the Federal Legislature both under sections 102 and 104 of the Government of India Act. In the present case the provisions of section 104 of the Government of India Act are not applicable because the Governor‑General by notification had not empowered the Federal Legislature to enact a law with respect to any matter not enumerated in any of the Lists in the Seventh Schedule to the Government of India Act. But under section 102 of the Govern ment of India Act it is provided that notwithstanding anything in the preceding section of the Government of India Act the Federal Legislature shall if the Governor‑General has declared by proclamation that a grave emergency exists whereby the security or economic life of Pakistan or part thereof is threatened by war or circumstances arising out of mass movement out of or into Pakistan have power to make laws for the Provinces or any part thereof with respect to any matters in the Provincial List or make laws with respect to any matters not enumerated in the Seventh Schedule to this Act. It is not disputed that on the 30th of August 1948, the Governor‑General of Pakistan had dec lared an emergency in pursuance of section 102 of the Government of India Act. The relevant notification is repro duced below
"Whereas the economic life of Pakistan is threatened by circumstances arising out of the mass movement of population from and into Pakistan, the Governor‑General, in pursuance of section 102 of the Government of India Act, 1935, is hereby pleased to declare that a grave emergency has thereby arisen and does exist for the purposes of the said section."
Thus the Federal Legislature after this notification had power to legislate both in respect of any matters enumerated in the Provin cial List and with respect of any matter not enumerated in the List in the Seventh Schedule.
20. It will be however noticed that under the proviso to this section any bill or amendment for the purposes aforesaid could not be introduced or moved without the previous sanction of the Governor‑General, which had to be given only in those cases where it appeared to him that the provisions proposed to be made was a proper provision in view of the nature of the emer gency. It is not the case of the respondents that previous sanction of the Governor‑General was obtained for the introduc tion of the impugned legislation. But Mr. Fazlur Rehman, the learned counsel for the respondents, has referred us to section 109(2) of the Government of India Act, which is reproduced below
"10) (2). No Act of the Federal Legislature or a Provincial Legislature, and no provision in any such Act, shall be invalid by reason only that some previous sanction or recommendation was not given, if assent to that Act was given‑
(a) Where the previous sanction or recommendation required was that of the Governor, either by the Governor, or by the Governor‑General ;
(b) Where the previous sanction or recommendation required was that of the Governor‑General, by the Governor- General."
The learned counsel urged that the impugned legislation was assented to by the Governor‑General and the absence of previous sanction was cured in view of the above‑mentioned constitutional provision of law. In support of his contention the learned counsel relied on a decision of this Court in the case of Muhammad Aslam and another v. Mst. Umar Bibi (PLD 1960 Lah. 312). In that case Shabir Ahmad, J., was faced with a similar situation in respect of the Punjab Tenancy (Amendment) Act (VII of 1952). This legislation could have been introduced as a legislative measure in the then Provincial Legislative Assembly with the previous sanction of the Governor. He held that the defect, if it existed, would not be material on account of the fact that after the Bill was passed by the Legislative Assembly, it received the assent of the Governor of the Province on the 29th of January 1952. He observed that under section 109(2) of the Government of India Act if the formality of the previous sanction of the Governor or Governor‑General with regard to certain legislative measures had not been complied with, the defect would have been deemed to have been cured if the Governor or Governor‑General in cases in which the previous sanction required was that of the Governor, and the Governor‑General in cases in which the previous sanction required was that of the Governor‑General, had after the Legisla ture had passed the Bill given assent to it.
21. Mr. Shaikh has, however, contended that the provisions of section 109(2) of the Government of India Act could be applied only in those cases where only previous sanction was required and not to those cases where the previous sanction was to be given on the satisfaction of the Governor or the Governor‑General. The learned counsel has referred us to the various provisions of the Government of India Act under which in some cases sanction simpliciter is required and in other cases sanction with satisfaction is necessary of the Governor or the Governor‑General. The contention of the learned counsel has not impressed us because under section 109(2) no distinction was made between the cases of sanction simpliciter or previous sanction with satisfaction. It applies to all cases where the sanction of the Governor or the Governor‑General is required. It is therefore absolutely clear that even if any defect is 'found in the impugned legislation, on the contention discussed in the earlier part of the judgment, it is V perfectly valid under section 102 of the Government of India Act, read with section 109(2) of the Government of India Act. The impugned legislation was passed at the time when an emer gency existed and was declared in Pakistan and the Federal Legislature was competent to legislate the impugned legislation even if it is taken to fall in the Items mentioned in the Provincial List or is not taken to be one of those Items enumerated in any of the Lists in the Seventh Schedule of the Government of India Act.
22. Lastly it was contended by Mr. Hassan A. Shaikh that the impugned legislation is in the nature of delegated legislation and is ultra vires as it confers legislative powers on an external authority, i.e., the Central Government. Section 3 of the impugned legislation has been reproduced in the earlier part of the judgment. It provides that there shall be levied and collected on all cotton either exported from the Provinces of Pakistan to any place outside Pakistan or consumed in any mill in the Provinces of Pakistan a cess at such rate as the Central Government may fix by notifica tion in the Official Gazette. Mr. Shaikh contended that the fixation of rate by the Central Government by notification amounts to taxation and it being in the nature of legislative function could not be entrusted to an outside agency. In support of his connection the learned counsel has referred us to the case of Liberty Cinema v. The Commissioner, Corporation of Calcutta and an other (AIR 1959 Cal. 45). In that case the Corporation of Calcutta increased the existing charges in respect of cinemas under section 443 read with section 548(2) of the Calcutta Municipal Act, 1951. It was urged before a single Judge of the Calcutta High Court that there has been an improper delegation by the Legislature to the Corporation of the legislative functions without laying down the principles of formality of policy. In this connection Sinha, J. observed as under
"In Gopal Chandra Mukherjee v. B. C. Das Gupta 93 Cal. L J 304 (D), I have summarised the findings of the Supreme Court in the Delhi Laws Act (1912). In re. A I R 1951 S C 332. Applying those principles, I held that section 229 was bad on the ground of improper delegation. The same reasons would apply to this case. It is unnecessary to repeat the reasoning in great detail in this case, but I may shortly state the fundamental principles that are involved. The power to delegate legislative functions generally is not warranted under the Constitution of India, at any stage. The whole scheme of the Constitution is based on the concept that the legislative function of the Union will be discharged by Parliament and that of the States by the respective State Legislatures and no other body. The essentials of legislative function, vie., the determination of the legislative policy and its formulation as a rule of conduct are in Parliament or the State Legislature as the case may be, and nowhere else. If, however, owing to unusual circumstances and exigency the Legislature does not choose to lay down detailed rules or regulations, that work may be left to another body which is then deemed to have subordi nate legislative power. This is described as subordinate legislation'. The Legislature cannot, however, abdicate its legislative functions and, therefore, while entrusting power to an outside agency, it must see that such agency acts as a subor dinate authority and does not become a parallel Legislature. The essential legislative function consists of the determination or choosing of the legislative policy and of formula enacting that policy into a binding rule of conduct. It is open to the Legislature to formulate the policy as broadly and with as little or as much detail as it thinks proper and it may delegate the rest of the legislative work to a subordinate authority which will work out the detail within the frame work of that policy. So long as a policy is laid down and standard established by Statute, no constitutional delegation of legislative power is involved. It is equally true that where no policy is laid down but arbitrary power is given without limit, then there is a surrender of legislative function, in that no policy has been laid down or indicated. In the case of income‑tax, which may be cited as a well‑known form of taxation, the rate of tax to be levied is indicated each year by the Finance Acts. As I have pointed out in Sarat Chandra Ghatak's case A I R 1959 Cal. 36, it would be strange if the Legislature laid down that income‑tax will be payable at such rate and in such manner as Government or the Commissioner of Income‑tax prescribes. In the present case also, no limit is imposed. Section 548(2) gives unlimited right to the Corporation to lay down the rate. In a way this can be explained, if my decision that the imposition is a fee and not a tax be correct. If it is a fee, then there is an automatic restriction imposed upon the rate, because it cannot exceed the cost, charges and expenses required in connec tion with the services rendered or to be rendered by the Corporation for that particular matter, in respect of which the licence‑fee was being imposed. The ceiling would then be capable of calculation and determination, and the provision of law would be quite valid. Taken as a tax, however, these internal restrictions do not apply. In such a case the Legisla ture must lay down the policy or indicate the same and cannot leave an unlimited discretion to non‑legislative bodies. If this were not so the consequences may be serious. The Corporation may levy a tax in the nature of income‑tax and charge people 15 annas in the rupee upon their profits. I dot not think that such delegation of power without limit to a non‑legislative body can be supported in law."
23. Mr. Shaikh contended that in the present case also the cess is in the nature of tax and the fixation of its rate has been left to the discretion of the Central Government and in view of the observations in the above‑mentioned case the delegation of such power being of a legislative nature, section 3 is ultra vires and cannot be upheld. In support of his contention the learned counsel further referred us to a decision of the Federal Court in the case of Sobho Gyanchandani v. Crown (P L D 1939 P C 36) and In re, Art. 143, Constitution of India (A I R 1951 S C 332). In our opinion the contention of the learned counsel in this respect also is not well‑founded. No doubt the limitations on the delegation of legislative powers to the Executive are well‑known but it is now a well established rule of law that if the policy framework is provided in an Act by the Legislature and the details are to be filled in by the Executive, there is no defect in the legislative power. It is only in case when the Legislature abdicates that the delegation is ultra vires. According to Crawford on Statutory Construction the tendency of modern legislation is to lean more and more to the Executive, for the process of legislation by the Legislature is cumbersome. The learned author in this connection at page 26 stated as under :‑
"More and more, with a social system steadily becoming increasingly complex, the legislature has been obliged, in order to legislate effectively, efficiently and expeditiously, to delegate some of its functions, not purely legislative in character, to other agencies, particularly to administrative officials and boards."
In George Walkem v. L. M. D. P. Board (A I R 1939 P C 36), the Judicial Committee held as under :‑
"The third objection is that it is not within the powers of the Provincial Legislature to delegate so called legislative powers to the Lieutenant‑Governor‑in‑Council, or to give him powers of further delegation. This objection appears to their Lordships subversive of the rights which the Provincial Legislature enjoys while dealing with matters falling within the classes of subjects in relation to which the constitution has granted legislative powers. Within its appointed sphere the Provincial Legislature is as supreme as any other Parliament : and it is unnecessary to try to enumerate the innumerable occasions in which Legisla tures both Provincial and Dominion and Imperial have entrusted various persons and bodies with similar powers to those contained in this Act. Martin, C. J., appears to have disposed of this objection very satisfactorily in his judgment on the reference, and their Lordships find no occasion to add to what he there said. For these reasons the appeal fails and should be dismissed and their Lordships will humbly advise His Majesty accordingly. The appellants must pay the costs of the appeal.
24. It would be further noticed that the view expressed in the Calcutta case cannot be reconciled on certain cardinal principles prevalent in the American System of Government. According to Crawford it has been an immemorial practice for the central authority or general Government to vest some portion of the policy power in subordinate Government branches or municipal corporation for the local self‑Government of such branches or units. Accordingly the delegation of power to levy taxes for local purposes by the Legislature to a municipal corporation does not divest the State of its sovereign right to exercise the power itself or to take it away from the local unit at any time it deems fit.
25. Thus both on the view of the Privy Council and cardinal principles prevalent in America, the view expressed in the Calcutta case cannot be taken as a guide in the present case. On the view of the Judicial Committee m the above‑mentioned case delegation of such power is not ultra vires. In any case in the present case the cess in question is not an imposition for raising general revenue. It is in the nature of cess and has been raised for the raising of funds for a particular purpose namely to raise the quality of cotton produce in this country. Thus it is one of those cases where a quid pro quo exists and there is an automatic restric tion on the rate, because it cannot exceed the cost, charges and expenses required in connection with the services rendered or to be rendered by Pakistan Central Cotton Committee in respect of the duties entrusted to it: In our opinion, from whatever angle the impugned legislation is looked at, it cannot be attacked on this ground, which must fail.
26. Apart from this, the impugned legislation was validated both under Article 224 of the Pakistan Constitution of 1956 and Article 4 of the Laws (Continuance in Force) Order, 1958. On this ground also no objection can be raised about the validity of the legislation under consideration.
27. After careful consideration of all the contentions raised before us, we are satisfied that the impugned legislation is perfect ly valid and the notifications in question have been validly issued under it. The respondents are fully justified in demanding from the petitioners to furnish them the necessary information and to pay the cotton cess at the rate fixed in the impugned notifications.
28. In the result we find no force in the writ petition and dismiss it with costs.
R. B. A./A. H.
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