ISLAMABAD: The federal government has asked the Supreme Court to reconsider its Aug 22, 2014 verdict declaring the Gas Development Infrastructure Cess (GIDC) Act 2011 as a fee and not a tax, arguing that the decision has the potential to undermine the state’s authority to collect taxes.

In an additional argument submitted before the apex court, the government has said that the issue of the GIDC levy is still current because the matter is being contested before different courts across the country.

If the verdict declaring the GIDC levy a fee and not a tax attains finality, it will have a binding effect on all courts and thus adversely affect the ability of the federal government to levy taxes, the additional arguments maintain.

The arguments and supporting documents were in addition to an earlier petition, moved by the Ministry of Petroleum and Natural Resources in November last year, seeking to revisit the Aug 22 judgement handed down by a bench headed by Chief Justice Nasirul Mulk.

Govt argues judgement will affect state’s authority to levy, collect taxes

The declaration also entailed refunding industrial consumers of gas a hefty amount of Rs80 billion, which was collected under the GIDC act.

In the Aug 22 judgement, the Supreme Court had also explained that such a cess should not have been introduced through a money bill in the National Assembly under Article 73 of the Constitution.

But soon after the judgement was announced, the government promulgated an ordinance on Sept 24, 2014, legalising the recovery of GIDC from non-domestic consumers, mainly industries.

The GIDC act was approved by the National Assembly in December 2011, imposing a cess on gas consumers, other than the domestic sector, to develop infrastructure for a number of projects including the Iran-Pakistan Pipeline Project, the Turkmenistan-Afghanistan-Pakistan-India (Tapi) Pipeline Project, and the Liquefied Natural Gas (LNG) project and for price equalisation of imported alternative fuels including Liquefied Petroleum Gas (LPG).

Later, a number of industrial concerns as well as the owners of the CNG stations instituted petitions before the Peshawar High Court (PHC) assailing the levy of GIDC. Subsequently, the high court allowed the petitions on Dec 2013 by declaring the levy, imposition and recovery of cess unconstitutional with directions to refund the money collected so far within a reasonable time.

Being the aggrieved party, the federal government challenged the high court judgement before the Supreme Court, which dismissed the appeals and upheld the PHC verdict.

Now, through additional documents, the government has reminded the Supreme Court of the 2011 Pakcom Limited case where the court had held that a tax was a compulsory exaction of money by public authorities for public purposes, enforceable by law and was not a payment for services rendered. The tax is levied as part of a common burden while the fee is a payment for a special benefit or privilege, the Pakcom judgement had stated.

The government has also contended that provisions of Article 73(4) and (5) of the constitution totally escaped the attention of the Supreme Court while determining whether the cess could be levied as a tax.

It is an admitted position that while including the cess in the Finance Act 2011, then National Assembly Speaker Fehmida Mirza had issued a certificate treating GIDC cess as a money bill, which could not be called into question by any superior court, the government emphasised.

Published in Dawn, March 29th, 2015

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