Authored By: Saman Fiaz
Bahria University Islamabad Campus
CASE NAME:
Messrs MUSTAFA IMPEX, KARACHI and others.
V The GOVERNMENT OF PAKISTAN through Secretary Finance, Islamabad and others
[PLD 2016 Supreme Court 808]
Supreme Court of Pakistan
NAME OF THE JUDGES:
Three-member bench comprised of Mian Saqib Nisar J., Iqbal Hameedur Rehman J. and Maqbool Baqar J.
DATE OF JUDGMENT:
18th August, 2016
PARTIES INVOLVED:
The parties involved were M/s Mustafa Impex and other companies as the petitioner(s)/appellant(s) challenging the validity of government notifications. The respondent(s) were the Government of Pakistan, represented by the Ministry of Finance or Revenue Division and its officials.
FACTS OF THE CASE:
In 2008, the Federal Government granted exemptions from sales tax, through a duly signed notification under the Sales Tax Act, 1990. Certain companies which imported cellular phones and textile items were exempted from sales tax.
In 2013, two subsequent notifications rescinded the 2008 exemption. These notifications were signed by an Additional Secretary of the Finance division who, during the legislation, revealed that approval for the same had been sought from an advisor of the Prime Minister.
A company named as Mustafa Impex, along with other companies, filed petitions in the Islamabad High Court contending that only the ‘Federal Government’ could issue or withdraw such notifications, an Additional Secretary did not have the power to do so. Their challenge was dismissed by the High Court and the Intra-Court Appeal. The companies then approached the Supreme Court.
KEY LEGAL QUESTIONS:
- Whether the notifications issued by the additional secretary revenue division with the approval of advisor to the Prime Minister, have been validly issued and can be considered as issued by the “Federal Government”.
- What is the meaning of the “Federal Government” as per the Constitution, and whether the term “Federal Government” in the Constitution refers only to the Prime Minister or to the collective entity of the Cabinet?
- Whether the executive or a single Minister had validly delegated authority to issue notifications altering taxes, duties, and fiscal policy without collective Cabinet sanction?
ARGUMENTS OF THE PARTIES:
Key contentions raised by the Appellant(s) were that the notifications issued on behalf of the Federal government were invalid as these notifications were not issued by a competent authority. Furthermore, Rules of Business 1973 does not empower any individual to take decisions on behalf of Federal Government in matters pertaining to levy/alteration of tax. Reliance was placed upon Watan Party and another v. Federation of Pakistan and others (PLD 2011 SC 997).
Key contentions raised by the Respondent(s) was that the impugned notifications have been issued lawfully. It was further contented that Article 90 of the Constitution empowers the Prime Minister or a Minister to exercise executive authority. Moreover, Article 99 of the Constitution read with Rules of Business 1973 also provides for the allocation of business. It was also argued that the matter had been conclusively decided on merits previously by the High Court, therefore, not liable to be re-entertained.
JUDGEMENT:
The Court held that the ‘Federal Government’ is composed of the Prime Minister and Cabinet collectively. It further emphasized that treating the Prime Minister as the entire Federal Government would be the against the democracy. The administrative matters pertaining to issuing of rules and notifications should be done as per the procedure provided by the Constitution.
It was further highlighted that the Rules of Business, 1973 are binding in nature and the Government has a duty to ensure its compliance and failure to observe these rules would render an order/notification legally invalid. Rule 16(2) of Rules of Business, 1973 was declared ultra vires to the Constitution, in pursuance of which the impugned notifications were struck down as being ultra-vires. This judgment redefined the conduct of business and decision-making of the government.
ANALYSIS OF THE JUDGMENT:
The requirement of Federal Cabinet approval under Article 90
The Supreme Court interpreted “Federal Government” as the collective body of the Prime Minister along with the Federal Ministers. It was grounded in the text of Article 90, which underscores the Cabinet’s collective responsibility. This ruling invalidated notifications issued by the FBR under instructions that did not reflect the will of the entire Cabinet.
Collective Responsibility: The executive decisions especially those altering or granting tax exemptions must be ratified by the Cabinet. Article 90 of the Constitution states that the executive authority of the Federation shall be exercised in the name of the President by the Federal Government, consisting of the Prime Minister and Federal Ministers. The Court highlighted on procedurally sound Cabinet approvals for decisions of substantial legal or fiscal impact. Relevant case law has been produced titled as ‘Dr. Salman Kazmi vs. Secretary Cabinet Division etc.’ (Writ Petition No. 3685-2012). The Lahore High Court struck down the devolution of the Sheikh Zayed Postgraduate Medical Institute (SZPMI), along with its administrative control, to the provincial government, affected through a 2012 notification issued on the direction of the then Prime Minister. Reason set out in the judgment was that the impugned notification was issued by the Prime Minister, to the exclusion of his Cabinet, therefore did not carry any legal sanction.1
The impact on the powers of the Prime Minister and Federal Ministers:
The judgment has imposed limitation on unilateral decision-making by the Prime Minister. The Prime Minister must secure broader consensus or at least ensure the matter is tabled before the Cabinet. This judgment invalidates the longstanding practice of delegating legislative power through notifications signed by individual ministers. The post-Eighteenth Amendment Article 99 confersthat those functions cannot be delegated to any subordinate authority merely through the Rules of Business. The term ‘businesses’ was interpreted broadly, covering all executive actions, including delegated legislation. Rule 16(2) of the Rules of Business which allowed the Prime Minister to bypass the Cabinet was declared unconstitutional.
Relevant case law ‘Writ Petition Nos.3387, 3724 of 2012 and 582 of 2013’ has been produced. In 2013, the Court barred the Prime Minister, Raja Pervaiz Ashraf, from exercising his discretionary powers in the matter of supplementary grants from the Federal Consolidated Fund.2 The court interpreted Article 84 read with Article 90 of the Constitution and hold that the Prime Minister cannot authorise expenditure on account of supplementary grants without the assent of the Parliament.
LEGAL REASONING:
➢ By clarifying that the “Federal Government” is a collective entity, the Supreme Court placed a constitutional check on potential executive overreach. The judgment has been cited in subsequent legal and administrative matters to question the validity of notifications or directives that did not follow the constitutionally required procedure.
➢ The judgement aligns with the broader objectives of administrative law in Pakistan, which seeks to ensure fairness, reasonableness, and accountability in executive action. It strengthens the concept of collective responsibility, ensuring that individual offices cannot unilaterally implement policies that have not been scrutinized by the Cabinet.
➢ Ratio Decidendi: The procedural checks on administrative actions of government are done by judiciary i-e judicial review of administrative action. Conferring all executive authority on a single individual i-e the Prime Minister would impact the constitutional scheme of checks and balances. Important policy changes must reflect the collective will of the Cabinet. The judgment’s reference to radical restructuring of law raises questions about the scope of executive and legislative powers. The Supreme Court of Pakistan may need to clarify these issues further in future cases. As Lord Denning has commented;
“Properly exercised these powers lead to a welfare State, but abused they lead to a Totalitarian State”
CONCLUSION:
The following judgment clarified the meaning of the term “Federal Government” and redefined the scope of executive power in Pakistan by reinforcing the requirement of collective Cabinet approval. It enhances administrative law by emphasizing procedural regularity, collective responsibility, and checks and balances. Courts continue to invoke Mustafa Impex case when scrutinizing notifications issued without Cabinet authorization in purview of administrative matters. It has been further observed that this landmark judgment also illustrates the significance of the Supreme Court of Pakistan’s capability to ensure the fair standards of governance without being involved in any anti-government rhetoric or by means of judicial outreach.
This judgment posses a great significance in respect of matters concerning tax regime in Pakistan. Imposition and variation of tax rates is usually carried out through Statutory Regulatory Orders (SROs) issued by either the Prime Minister, or the Finance Minister, at the behest of the Federal Board of Revenue officials. Nonetheless, said judgment renders this entire procedure incorrect and unlawful.
Its far-reaching impact is evident in how the Federal Government is trying to evade it by proposing amendments in constitutional and statutory provisions. The Twenty-Sixth Constitutional Amendment Bill aimed to introduce amendment in Article 99 of the Constitution for the purpose of allowing the government to delegate its business/authority to subordinate bodies. Similarly, amendments were made, through Finance Bill 2017, Sales Tax Act, 1990 (section 74A), Income Tax Ordinance, 2001 (section 241), and several other acts in order to nullify the effect of the judgment.
Reference(S):
1 WP No. 3685-2012. (Dr. Salman Kazmi vs. Secretary Cabinet Division etc.)
2 Writ Petition No. 582 of 2013
