SC dismisses all petitions against GIDC levy | The Express Tribune


ISLAMABAD:

The Supreme Court (SC) on Thursday dismissed all petitions against the Gas Infrastructure Development Cess (GIDC) levy and ruled in favour of the federal government which would collect Rs420 billion from different companies.

A three-member special bench of the apex court, presided by Justice Mushir Alam and comprising Justice Faisal Arab and Justice Mansoor Ali Shah, after hearing 107 petitions/appeals of various textile mills, cotton mills, sugar mills, ceramics companies, chemicals, CNG filling stations, match factories, cement companies and aluminium industries regarding the GIDC levy for two weeks on February 20, 2020, had reserved the judgment.

The bench passed the judgment in favour of the federal government with a 2-1 majority and ordered that as a consequence; the amount of GIDC collected over the years should be returned and refunded to the payers in full unless in some cases, it is impractical to do so.

A 47-page judgment authored by Justice Faisal Arab noted that around 295 billion rupees have already been collected towards Cass-revenue and together with the outstanding amount the total sum by the end of this month would be in the vicinity of Rs700 billion, which is more than what is the estimated cost of the projects in Section 4 of the GIDC Act, 2015.

The apex court held that from the date of this judgment, 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 expanded on the projects listed in Section 4 of the GIDC Act, 2015.

It further held that in the remaining period of the financial year 2020-21 while considering fixation of the sale price of CNG, OGRA shall not take into consideration the element of Cess under GIDC Act,2015 as one of the costs 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 up to July 31 and have not been recovered so far shall be recovered by the Companies responsible under the GIDC Act, 2015 to recover from their consumers,” the judgment stated.

However, as a concession, the same be recovered in 24 equal monthly instalments starting from August 1 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 instalments.

The majority judgment further stated 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 a 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 majority judgment added 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, “ the judgement said.

Justice Mansoor Ali said in his dissenting note that “this is not majority view”.

“The Federal Government shall constitute a Committee to work out a mechanism for a refund of GIDC so that payers of GIDC are fully resituated; be it the gas consumers under the Act or the final consumers (people of Pakistan). Even if the gas consumers have passed on the Fee to its customers, technology may be available to credit such customers, so that there is no unjust enrichment on the part of the State. The amount of GIDC that cannot be refunded after exploring all other avenues shall remain earmarked and be utilized only for the infrastructure development of the gas sector, “Justice Ali said.

It added that energy is vital to industry, transport, infrastructure, information technology, agriculture, household users and more. Any nation with a growing economy and improving living standards must secure a robust energy supply.

“The future of economic development hinges on energy security. Shortage of natural gas in the country is still a reality and the Energy Sector is confronted with a demand-supply gap which needs to be filled up. According to the latest Pakistan Economic Survey, 2019-20 the indigenous natural gas contributes around 38% in total primary energy supply mix of the country. Pakistan produces around 4 Billion Cubic Feet Per Day (Bcfd) against an unconstrained demand of 6 (Bcfd); the gas pipeline projects in question are based on bilateral and multilateral international agreements with other countries,” Justice Ali stated.

“A sum of Rs.295 billion has been collected as GIDC for the last almost 10 years. Keeping these facts in mind, and especially the issue of energy security, in the larger national interest, I allow the Federal Government a period of six months to initiate appropriate legislation in the light of the principles settled in this judgment including a clear description of the services being rendered, provision of a reasonable timeline for the delivery of service (supply) of natural gas to the gas consumers and a statutory mechanism of obligations and consequences that may arise, if the service is delayed or is not delivered at all. In case the Federal Government fails to do so achieve this during this period, the Federal Government shall refund the amount of GIDC, in the manner mentioned above,” it added.

Background

In August last year, President Arif Alvi promulgated the GIDC (Amendment) Ordinance 2019 for an out-of-court settlement of the Rs420 billion dispute with industries.

The ordinance allowed the general industry, fertiliser sector and CNG sector to pay 50pc of their outstanding bills within 90 days in advance and secure 50pc discount on future bills provided they withdrew their court cases.

The government said it expected net receipts of Rs150-Rs160 billion under the proposed amnesty provided all the stakeholders availed the offer. However, the government after receiving strong disapproval from various circles withdrew the ordinance within days of its promulgation.

It then approached the apex court through the attorney general requesting for an early hearing of the GIDC case.

Ministry of Petroleum and Natural Resources informed the apex court in January 2020 that till June 30 2019, a total of Rs752 billion was accrued on account of GIDC.

An amount of Rs295 billion was collected and deposited by the gas companies in accordance with the GIDC Act 2015 into the government exchequer leaving an outstanding balance of Rs457 billion.

The petroleum ministry cited the protracted litigation against the applicability of GIDC and circular debt as a reason for non-recovery of GIDC amount by the gas companies.

Due to various lawsuits filed before the superior courts regarding the imposition of GIDC, a total of Rs420 billion had been pending as on June 30, 2019. The amount held under the circular debt is Rs36 billion.



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