PHC stops Customs Dept from recovering cess from KP industrial units

PESHAWAR: The Peshawar High Court (PHC) has stopped the Customs Department from recovering provincial cess from the industrial units of Khyber Pakhtunkhwa.The restraining order was passed by a division bench comprising Justice Yahya Afridi and Justice Qaiser Rashid Khan in a writ petition.

Six companies, including Cherat Packaging Ltd, Asia Food Products (Pvt) Ltd, Utman Ghee Industry (Pvt) Ltd, Lucky Cement Ltd, Cherat Cement Co. Ltd and Associated Industries Ltd had filed the petition through their counsel Isaac Ali Qazi.

The PHC had issued the stay order some days ago, whose copy is available with The News, directing the Customs authorities not to recover the Provincial Cess from the industrial units of the province till next order of the court.

In order to implement the court’s stay order, the industrial units of the province also sent a letter through lawyer to the Customs authorities. The industrial units asked them to comply with the court’s order, in which the Customs authorities were stopped from recovery of the cess.

The companies had challenged the cess by the Customs authorities. The bench passed the interim order which stated that “The respondents are directed to follow the recovery procedure, as provided under sections-4 and 6 of the Khyber Pakhtunkhwa Collection of Cess for Development and Maintenance of the Infrastructure Rules 2014.”

During hearing, it was specifically brought in the court notice that neither the impugned rules through which cess was imposed nor the Constitution permitted the federal entity to collect a cess.

The industries challenged the cess, which has been imposed through the Khyber Pakhtunkhwa Collection of Cess for Development and Maintenance of Infrastructure Rules, 2014. It was said the collection of the impugned Provincial Cess by the Customs authorities is a violation of Article 147 of the Constitution. Under the KP Finance Act, 2013 and impugned Rules 2014, the provincial government is not allowed to employ or deploy a federal government or its officer for the recovery of the cess.

Under the impugned rules, at the most, the provincial government could engage only the department or agency that is too of the provincial government in assisting capacity rather than to perform or to act on behalf of the provincial government.

It said from perusal of the whole scheme of the law and Constitution, the federal agency like Customs Department cannot be a collecting agency for collection of the impugned Provincial Cess. As per the impugned Rule 2(e) ibid read with Section 2(31) of the Khyber Pakhtunkhwa Finance Act, 2013, only the department under the provincial government should be employed as Collecting Agent, which is Excise and Taxation department.