LAHORE, March 12: The federal government has opposed the Punjab view that it can tax export of its liquor to other provinces.

Assisting the Supreme Court in adjudication of a Punjab government appeal, Deputy Attorney-General Khwaja Saeeduz Zafar submitted on Tuesday that the Constitution does not normally countenance restrictions on inter-provincial trade and commerce.

The appeal challenges a Lahore High Court judgment setting aside a 1997 notification imposing a tax of one rupee on each litre of liquor exported by Murree Brewery to other provinces under Section 31 of the Punjab Excise Act, 1949. It is being heard by a Supreme Court bench comprising Justices Qazi Muhammad Farooq and Syed Deedar Hussain Shah.

The Punjab government says that a tax may be imposed under Section 31 of the Excise Act at different rates for different places to which any excisable article is removed for consumption or according to the varying strengths and quality of such articles. The imposition of the export tax, it claims, involves no discrimination between the liquor manufactured in the various provinces.

Murree Brewery assailed the notification in the Lahore High Court. The brewery is the only manufacturer of alcoholic drinks in the province of Punjab and exports 70 per cent of its products to other provinces. The Punjab levy effectively raised the prices of its products. The imposition also militates against free inter-provincial trade stipulated by Article 151 of the Constitution.

The brewery plea was accepted by Justice Karamat Nazir Bhandari and his decision is under challenge before the Supreme Court. As the two-member SC bench took up the appeal on Tuesday, DAG Saeeduz Zafar submitted on behalf of the federation that the Punjab plea was violative of the Constitution. However, the LHC judgment was also flawed inasmuch it reached the right conclusion for a wrong reason. The notification is directly hit not by Article 151 (1), which says that ‘trade, commerce and intercourse throughout Pakistan shall be free’, but by Article 151 (3) (b), which reads:

“A provincial assembly or a provincial government shall not have power to impose a tax which, as between goods manufactured or produced in the province and similar goods not so manufactured or produced, discriminates in favour of the former goods or which, in the case of goods manufactured or produced outside the province, discriminates between goods manufactured or produced in any area in Pakistan and similar goods manufactured or produced in any area in Pakistan and similar goods manufactured or produced in any other area in Pakistan.”

In view of the divergence of views between the provincial and federal governments, the bench decided to hear the controversy in detail and decide it expeditiously without an interim order. Both the appellant government and the respondent brewery have already been asked to maintain accounts of the leviable liquor. Brewery counsel Shahid Hamid was asked to submit a concise statement within two weeks. The hearing is likely to resume at the Lahore registry in the first week of April.