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SC declares levy valid
Terence J Sigamony 14 Aug 2020
ISLAMABAD: The Supreme Court on Thursday with a majority of two to one dismissed all the appeals and petitions of industrial and commercial entities, and held levy imposed under Gas Infrastructure Development Cess Act, 2015 is in accordance with the provisions of the Constitution.
Justice Mushir Alam and Justice Faisal Arab agreed that the levy imposed under Gas Infrastructure Development Cess Act, 2015 is in accordance with the Constitution, but Justice Mansoor Ali Shah did not concur with them.
In a separate note, Justice Mansoor wrote; "I do not agree with the reasoning and conclusion of the Majority Judgment. I look at the issue somewhat differently. The principal question that concerns me is whether a fiscal levy imposed for a service to be rendered - a service dependent on the completion of long-term multinational infrastructural projects tied to the vagaries of international politics, exist without a reasonable timeline? Is reasonable time, therefore, an essential constituent of quid pro quo? Can a fee levying legislation, resting on reciprocity, impose a one sided obligation on the gas consumers to pay the levy while providing no timeline nor any consequences for failure to deliver the proposed service?"
Dr Abdul Hafeez Shaikh, Advisor to the PM on Finance, welcomed the judgment.
After its announcement of tweeting, "Welcoming decision of the Supreme Court settling long-standing GIDC case, and enabling the government to recover GIDC stuck-up for last many years."
"I want to appreciate the good work of the government team, especially the office of the Attorney General and the Finance and Petroleum ministries," he added.
A three-member special bench, headed by Justice Mushir Alam, and comprising Justice Faisal Arab and Justice Mansoor Ali Shah after hearing petitions/appeals of various textile mills, cotton mills, sugar mills, ceramics companies, chemicals, CNG filing stations, match factories, cement companies and aluminum industries regarding the GIDC levy for two weeks on February 20, 2020, had reserved the judgment, which announced in the open court on Thursday.
The judgment noted that Rs295 billion has already been collected towards cess-revenue and together with the outstanding amount the total sum by the end of this month (August) would be in the vicinity of 700 billion rupees, which is more than what is the estimated cost of the projects mentioned in Section 4 of the GIDC Act, 2015, therefore directed; "From the date of this judgment (13th August), we restrain the Federal Government from charging Cess which power of the Federal Government shall remain suspended until the Cess-revenue collected and that which is accrued so far but not yet collected is expended on the projects listed in Section 4 of the GIDC Act, 2015.
"In the remaining period of the financial year 2020-21 while considering fixation of sale price of CNG, OGRA shall not take into consideration the element of Cess under GIDC Act, 2015 as one of the cost of sale of GNG.
"As all industrial and commercial entities which consume gas for their business activities pass on the burden to their customers / clients therefore all arrears of 'Cess' that have become due upto 31.07.2020 and have not been recovered so far shall be recovered by the Companies responsible under the GIDC Act, 2015 to recover from their consumers.
"However, as a concession, the same be recovered in twenty-four equal monthly installments starting from 01.08.2020 without the component of late payment surcharge. The late payment surcharge shall only become payable for the delays that may occur in the payment of any of the twenty-four installments.
"The federal government shall take all steps to commence work on the laying of the North-South pipeline within six months and on TAPI pipeline as soon as its laying in Afghanistan reaches the stage where the work of laying pipeline on Pakistan soil can conveniently start and on IP pipeline as soon as the sanctions on Iran are no more an impediment in its laying. In case no work is carried out on North-South pipeline within the prescribed time and for laying any of the two other major pipelines (IP and TAPI) though the political conditions become conducive, the purpose of levying Cess shall be deemed to have been frustrated and the GIDC Act, 2015 would become permanently in-operational and considered dead for all intents and purposes."
The judgment noted that the whole purpose of enacting GIDC Act, 2015 was to facilitate import into the country of natural gas/LNG from nearby countries to meet ever expanding energy needs of the country.
The incidence of the cost involved in doing so falls on the industrial and commercial consumers. The industrial and commercial consumers, who consume more than three-fourth of the total supply of natural gas, apart from being major beneficiaries of the imported gas, would on account of their business activity pass on the burden to their clients/customers being part of the cost of their goods or services, which they sell to their customers/clients.
The judgment said the object in the GIDC Act, 2015 is clearly "purpose based" which is distinctly defined and carries with it an element of quid pro quo, making it a fee-imposing enactment instead of a pure revenue raising measure like taxes in general are imposed with no precondition attached for their spending.
The court held that the imposition of Cess under GIDC Act, 2015 is not a tax-imposing enactment.
It was passed through a bill moved in the Parliament under Article 70 of the Constitution deriving its legislative competence from Entry 54 read with the enabling Entry No 27 of Part-I of the Federal Legislative List contained in the Forth Schedule to the Constitution thereby curing the defect which lead to the invalidation of the GIDC Act, 2011 in Durrani Ceramics case.
The judgment said that the provisions of Section 8 of the Act, which give retrospective effect to the charge and recovery of 'Cess' levied from the year 2011 are also declared to be valid being within the legislative competence of the Parliament.
Exercise of such a power has been recognised by this Court in the Case of Mamukanjan Cotton Factory Vs. Punjab Province (PLD 1975 SC 50).
The levy under GIDC Act, 2011 was challenged before the Peshawar High Court, which in 2013 declared the levy as ultra vires the Constitution and struck down the GIDC Act, 2011.
The Islamabad High Court followed the same course in its judgment in 2014.
As a result of these decisions, the matter came before the Supreme Court in the Durrani Ceramics case.
The apex court upheld the Peshawar High Court verdict and declared the GIDC Act, 2011 as unconstitutional, holding that the levy in question was in fact a fee and not a tax, hence, it could not have been imposed through a money bill.
The case came before this Court again in review, which was dismissed in 2015.
The federal government enacted the GIDC Act, 2015 as a fee imposing enactment.
The constitutional validity of the said Act was also challenged before the High Courts. The Sindh High Court declared the levy unconstitutional vide its judgment dated 26 October 2016, whereas the Peshawar High Court upheld the constitutionality of the new Act vide its judgment dated 31 May 2017.
https://www.brecorder.com/news/40012081/sc-declares-levy-valid
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Terence J Sigamony 14 Aug 2020
ISLAMABAD: The Supreme Court on Thursday with a majority of two to one dismissed all the appeals and petitions of industrial and commercial entities, and held levy imposed under Gas Infrastructure Development Cess Act, 2015 is in accordance with the provisions of the Constitution.
Justice Mushir Alam and Justice Faisal Arab agreed that the levy imposed under Gas Infrastructure Development Cess Act, 2015 is in accordance with the Constitution, but Justice Mansoor Ali Shah did not concur with them.
In a separate note, Justice Mansoor wrote; "I do not agree with the reasoning and conclusion of the Majority Judgment. I look at the issue somewhat differently. The principal question that concerns me is whether a fiscal levy imposed for a service to be rendered - a service dependent on the completion of long-term multinational infrastructural projects tied to the vagaries of international politics, exist without a reasonable timeline? Is reasonable time, therefore, an essential constituent of quid pro quo? Can a fee levying legislation, resting on reciprocity, impose a one sided obligation on the gas consumers to pay the levy while providing no timeline nor any consequences for failure to deliver the proposed service?"
Dr Abdul Hafeez Shaikh, Advisor to the PM on Finance, welcomed the judgment.
After its announcement of tweeting, "Welcoming decision of the Supreme Court settling long-standing GIDC case, and enabling the government to recover GIDC stuck-up for last many years."
"I want to appreciate the good work of the government team, especially the office of the Attorney General and the Finance and Petroleum ministries," he added.
A three-member special bench, headed by Justice Mushir Alam, and comprising Justice Faisal Arab and Justice Mansoor Ali Shah after hearing petitions/appeals of various textile mills, cotton mills, sugar mills, ceramics companies, chemicals, CNG filing stations, match factories, cement companies and aluminum industries regarding the GIDC levy for two weeks on February 20, 2020, had reserved the judgment, which announced in the open court on Thursday.
The judgment noted that Rs295 billion has already been collected towards cess-revenue and together with the outstanding amount the total sum by the end of this month (August) would be in the vicinity of 700 billion rupees, which is more than what is the estimated cost of the projects mentioned in Section 4 of the GIDC Act, 2015, therefore directed; "From the date of this judgment (13th August), we restrain the Federal Government from charging Cess which power of the Federal Government shall remain suspended until the Cess-revenue collected and that which is accrued so far but not yet collected is expended on the projects listed in Section 4 of the GIDC Act, 2015.
"In the remaining period of the financial year 2020-21 while considering fixation of sale price of CNG, OGRA shall not take into consideration the element of Cess under GIDC Act, 2015 as one of the cost of sale of GNG.
"As all industrial and commercial entities which consume gas for their business activities pass on the burden to their customers / clients therefore all arrears of 'Cess' that have become due upto 31.07.2020 and have not been recovered so far shall be recovered by the Companies responsible under the GIDC Act, 2015 to recover from their consumers.
"However, as a concession, the same be recovered in twenty-four equal monthly installments starting from 01.08.2020 without the component of late payment surcharge. The late payment surcharge shall only become payable for the delays that may occur in the payment of any of the twenty-four installments.
"The federal government shall take all steps to commence work on the laying of the North-South pipeline within six months and on TAPI pipeline as soon as its laying in Afghanistan reaches the stage where the work of laying pipeline on Pakistan soil can conveniently start and on IP pipeline as soon as the sanctions on Iran are no more an impediment in its laying. In case no work is carried out on North-South pipeline within the prescribed time and for laying any of the two other major pipelines (IP and TAPI) though the political conditions become conducive, the purpose of levying Cess shall be deemed to have been frustrated and the GIDC Act, 2015 would become permanently in-operational and considered dead for all intents and purposes."
The judgment noted that the whole purpose of enacting GIDC Act, 2015 was to facilitate import into the country of natural gas/LNG from nearby countries to meet ever expanding energy needs of the country.
The incidence of the cost involved in doing so falls on the industrial and commercial consumers. The industrial and commercial consumers, who consume more than three-fourth of the total supply of natural gas, apart from being major beneficiaries of the imported gas, would on account of their business activity pass on the burden to their clients/customers being part of the cost of their goods or services, which they sell to their customers/clients.
The judgment said the object in the GIDC Act, 2015 is clearly "purpose based" which is distinctly defined and carries with it an element of quid pro quo, making it a fee-imposing enactment instead of a pure revenue raising measure like taxes in general are imposed with no precondition attached for their spending.
The court held that the imposition of Cess under GIDC Act, 2015 is not a tax-imposing enactment.
It was passed through a bill moved in the Parliament under Article 70 of the Constitution deriving its legislative competence from Entry 54 read with the enabling Entry No 27 of Part-I of the Federal Legislative List contained in the Forth Schedule to the Constitution thereby curing the defect which lead to the invalidation of the GIDC Act, 2011 in Durrani Ceramics case.
The judgment said that the provisions of Section 8 of the Act, which give retrospective effect to the charge and recovery of 'Cess' levied from the year 2011 are also declared to be valid being within the legislative competence of the Parliament.
Exercise of such a power has been recognised by this Court in the Case of Mamukanjan Cotton Factory Vs. Punjab Province (PLD 1975 SC 50).
The levy under GIDC Act, 2011 was challenged before the Peshawar High Court, which in 2013 declared the levy as ultra vires the Constitution and struck down the GIDC Act, 2011.
The Islamabad High Court followed the same course in its judgment in 2014.
As a result of these decisions, the matter came before the Supreme Court in the Durrani Ceramics case.
The apex court upheld the Peshawar High Court verdict and declared the GIDC Act, 2011 as unconstitutional, holding that the levy in question was in fact a fee and not a tax, hence, it could not have been imposed through a money bill.
The case came before this Court again in review, which was dismissed in 2015.
The federal government enacted the GIDC Act, 2015 as a fee imposing enactment.
The constitutional validity of the said Act was also challenged before the High Courts. The Sindh High Court declared the levy unconstitutional vide its judgment dated 26 October 2016, whereas the Peshawar High Court upheld the constitutionality of the new Act vide its judgment dated 31 May 2017.
https://www.brecorder.com/news/40012081/sc-declares-levy-valid
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