The Constitution of Pakistan, 1973 Developed by Zain Sheikh

Per Wajihuddin Ahmed, J.(a) Constitution of Pakistan (1973), Art. 70, 151 & Fourth Sched., Items 43 & 49 in the federal Legislative List—
Taking up, the question of competence of raising taxes on exports, it is to be observed that Article 70 of the Constitution envisages an exclusive Federal Legislative List, as well as a Concurrent Legislative List, also occurring in the Fourth Schedule to the Constitution, with the latter of which we are not concerned here, except that whatever is the residue, beyond those lists, falls within the exclusive legislative powers of the provinces in Pakistan Correspondingly, the Federal Legislative List implies whatever is to be found in such list lies within the exclusive legislative competence of Parliament. This brings us to entries 43 and 49 in the federal Legislative List. In so far as entry elaborated to include export duties. Since such expression of export duties appears in the context of duties of Customs and thus in juxtaposition with import duties, the necessary implication is that export duties contemplated by such entry are duties on export from the country rather than within the country itself. This is more so, as the Customs limits or barriers are necessarily envisaged on a countrywide basis. Taking up entry No. 49, under references, such entry, inter alia, contemplates “Taxes on sales and purchases on goods imported, exported—–“. The germane qualifying clause, accordingly, is “taxes on sales and purchases” and it has a nexus with goods imported and exported etc. Here, too, the word “export” is used side by side of the word “import” and the two are categorized together, leading to similar implications, as above. At any event, what is involved in this entry is a tax such as is covered by the Sales Tax Act, 1951. It follows, therefore, that taxes on sales and purchases of goods, exported as distinguished from those imported and, in fact, much like the same, fall within the exclusive purview of the Federal legislature and the federal Government.

Plainly, the Federal legislature cannot contemplate export of goods within or between the territories comprised in the Federation itself. The referred duties and taxes in entries 43 and 49, above, thus, must pertain to or, may be, incidental upon imports into or exports from Pakistan. Accordingly, we have no hesitation in holding, and to this Mr. K.M. Nadeem A.A.-G concedes, that in so far as Customs duties on exports are concerned, or, for the matter of that, taxes on sales (Sales taxes etc.) on goods imported and exported go, such levying power vests in the Federation alone and cannot be impinged upon by any Provincial or Local authority or Government.

The foregoing conclusion, by necessary exclusion, does not apply to anything that goes by the name of export tax on the inter-provincial movement of goods. Here, as we have found in the case of Mirpur Khas Sugar Mills and others (Constitution Petitions Nos. 523-D of 1985 and 113-D of 1985) the bar is to be found under Article 151(3) of the Constitution of Pakistan, which precludes provincial legislative or executive prohibitions or restrictions on entry into or export from a province goods of any class or description, on imposition of discriminatory taxation in respect of goods produced or manufactured in one province or area as regards goods produced or manufactured in another province or area and it matters little whether the discrimination is in favour of one or the other. Article 151 of the Constitution, generally, is directed to ensure freedom of trade, commerce and intercourse throughout Pakistan and the only exceptions to the rule are contained in Article 151(2), envisaging a limited scope of deviation for Parliament and in Article 151(4), providing a still more limited scope of retraction for an Act of a Provincial Assembly. None of these are attracted in these cases.

Apparently cognizant of such Constitutional embargo, the Government of Sindh, in exercise of powers conferred by rule 23 of the District Councils Export Tax Rules, 1976, exempted from liability to export tax, goods exported outside the province for use or consumption anywhere within Pakistan. Such Notification was published in the Sindh Government Gazette (Extraordinary), dated July 20, 1981, and cane into immediately. On the basis of what we have elaborated below, this exemption would also be attracted in relation to “Rawangi Mehsool”, which has attributes similar to export tax spoken of in the Notification of 1981.

Here, too, though not on the arguments of the petitioners, we have to record favourable findings, by holding that an export tax, of the kind questioned in these proceedings, on inter-provincial movement of goods cannot be levied or enforced, being in contravention of Article 151 of the Constitution of Pakistan. [p. 407, 408] C, D & F.

In the first place, for the reasons partly recorded above, we are of the view that neither Article 70 read with the fourth Schedule to the Constitution nor Article 151 ibid. comes in the way of export taxes on intra-provincial movement of goods and that such taxes, to that extent, cannot be assailed on the basis of those provisions. This view is also supportable on the observations of the Division Bench in the matter of Kotri Association of Trade, above. In such case our learned brother Nasir Aslam Zahid, J., who spoke for the Court, opined as under:–

“Article 151(1) read with the other three sub-Article 151 leads to the conclusion that Article 151(1) does not restrict a provincial legislature to impose restrictions or taxes on movement of goods within the province.”

“In relation to taxes on goods, such view is based on good reason, since the meanings of what is free in Article 151(1) have, apparently, been extended to include a restriction by way of entry or exit, on even by way of discriminatory taxation, which perhaps, may not have been the case but for the prohibition in Article 151(3) of the Constitution.” [p. 409] I, J & K.

In the result, therefore, while Export Tax or “Rawangi Mahsool” on the inter-provincial movement of goods as also on goods exported from Pakistan is found to be unconstitutional, bad and without lawful authority, Export Tax or “Rawangi Mehsool” on intra-provincial of goods is found to be valid.
[p. 412] P.
Order accordingly.

Advocate for the Petitioners:

Khalid Anwar.

Advocate for the Petitioner (in C.P. No. 214-D of 1983).

Rashid Akhund.

Advocate for the Respondents:

K.M. Nadeem, A.A.-G.

Date of hearing: 13th February, 1990.