Can't connect right now! retry

add The News to homescreen

tap to bring up your browser menu and select 'Add to homescreen' to pin the The News web app

Got it!

add The News to homescreen

tap to bring up your browser menu and select 'Add to homescreen' to pin the The News web app

Got it!
August 14, 2020

SC dismisses all petitions, appeals against GIDC levy

Top Story

August 14, 2020

ISLAMABAD: The Supreme Court on Thursday held that the whole purpose of enacting Gas Infrastructure Development Cess (GIDC) Act, 2015 was to facilitate import into the country of a very important source of energy i.e. natural gas/LNG from nearby countries in order to meet the ever expanding energy needs of the country as our own resources of energy are fast depleting and the cheapest way to import it is through overland transnational pipelines.

A three-member special bench of the apex court, headed by Justice Mushir Alam and comprising Justice Faisal Arab and Justice Mansoor Ali Shah dismissed all petitions/appeals filed by some 85 various textile mills, cotton mills, sugar mills, ceramics companies, chemicals, CNG filling stations, match factories, cement companies and aluminium industries against the GIDC levy.

The 47 –page, 2-1 majority judgment authored by Justice Faisal Arab held that the levy imposed under Gas Infrastructure Development Cess Act, 2015 is in accordance with the provisions of the Constitution.

However, it ruled that keeping in view the ground realities and the fact that around 295 billion rupees have already been collected towards cess revenue and together with the outstanding amount the total sum by the end of this month would be in the vicinity of seven hundred billion rupees, which is more than what is estimated cost of the projects mentioned in Section 4 of the GIDC Act, 2015.

From what has been discussed, the judgment said, it can be concluded that the whole purpose of enacting GIDC Act, 2015 was to facilitate import into the country of natural gas/LNG from nearby countries.

The court ruled that the supply of imported LNG to various parts of the country after its import on ships through trans-provincial pipeline is also a project of the federal government. “The incidence of the cost involved in doing so falls on the industrial and commercial consumers whose consumption account for more than three-fourth of the total supply of natural gas, which fact was also brought to the notice of this Court in Durrani Ceramics case,” said the judgment, adding that such consumers, 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 court held that the object which the Parliament has promised 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.

“After seeing the purpose of the enactment clearly and the fact that its revenue is duly accounted for and has also not been diverted to any other use, we hold that the imposition of cess under GIDC Act, 2015 is not a tax-imposing enactment,” said the judgment.

The court noted 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.

The court recalled that exercise of such a power has been recognised by it in the case of Mamukanjan Cotton Factory Vs Punjab Province (PLD 1975 SC 50).

“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,” said the judgment, adding however that 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.

The court held that 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 24 equal monthly instalments starting from 01.08.2020 without the component of late payment surcharge.

The court held that late payment surcharge shall only become payable for the delays that may occur in the payment of any of the 24 instalments.

The court held that 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.

Meanwhile, the court dismissed all the appeals and connected petitions.

Justice Mansoor Ali Shah in his dissenting note observed that energy is vital to industry, transport, infrastructure, information technology, agriculture, household users and more. He noted that any nation with a growing economy and improving living standards must secure a robust energy supply. The judge further held that the future of economic development hinges on energy security.