The Federal Board of Revenue (FBR) has challenged in the Supreme Court the Sindh High Court (SHC) judgment of striking down the federal excise duty (FED) of 75 paisas on every phone call of over the five-minute duration and declaring the levy against the Constitution.
The FBR through Hafiz Ahsaan Ahmad Khokhar Advocate has challenged the October 18 judgment on the grounds that imposition of FED on telecom companies was legal through the Finance Act 2021-22 and parliament/Federation/federal government is competent and has been authorised constitutionally under Article 73 read with entry No 44 of Part 1 of the 4th Schedule of the Constitution to legislate as the federal legislative subject on FED on telecom sector/mobile companies (by imposing federal excise duty at the rate of 75 paisas per call if it exceeds five minutes) by inserting Clause 6A in Table 11 of the 1st Schedule of the Federal Excise Act 2005 through the finance act.
Earlier, three telecom companies challenged the imposition of FED through constitutional petitions before the SHC which was levied on the telecom sector through insertion of Serial No 6A in Table 11 of First Schedule of the Federal Excise Act, 2005 (FED Act) vide Finance Act, 2021 (FA 2021).
On these petitions, the SHC declared that the impugned legislation as FED through entry 6A of First Schedule of the Federal Excise Act, 2005 on mobile phone call services was ultra vires of the Constitution.
The FBR’s petition in the Supreme Court stated that the SHC while passing the impugned judgment has misconceived that the exception added through the 18th Constitutional Amendment in entry no 49 is altogether different from the context and spirit of entry No 44 of Part 1 of the 4th Schedule of the Constitution which clearly authorised parliament/federation/federal government to levy FED on services as federal subject of legislation that Federal Excise Act 2005 has been specifically legislated by parliament with reference to entry No 44 of the 4th Schedule of the Constitution for specific services being mentioned in the 1st Schedule of Excise Act and the method of imposition and collection of duties and excise has also been discussed in various judgments of this august court.
The petition further stated that the SHC had failed to appreciate that this was not the case of the application of prospective situation of taxation arising after the 18th Constitutional Amendment but it is a case where the FED has been levied on the telecom sector being federal subject by parliament under Article 73 of the Constitution read with entry No 44 Part 1 of the 4th Schedule of the Constitution, thus the SHC had misconceived and narrowed down the scope and spirit of entry No 44 (duties of excise) of Part 1 of the 4th Schedule of the Constitution while passing the impugned judgment, resultantly the judgment impugned lacked legal backing.
It further stated that the SHC had failed to appreciate that FED under the Federal Excise Act 2005 and Sales Tax Act 1990 are species of different nature and genus emanating from different legislative field and they have been independently prescribed as entry No 44 and entry No 49 of Part 1 of the 4th Schedule of the Constitution and power relating to levy FED vested with parliament and the federal government both before and after the 18th Constitutional Amendment.