ISLAMABAD: The federal government has requested the Supreme Court to undo its Aug 22 verdict and clarify that the collection of over Rs80 billion under the Gas Development Infrastructure Cess (GIDC) Act is not liable to be refunded to industrial consumers.

In its petition filed through the Ministry of Petroleum and Natural Resources, the government has sought a review of the Aug 22 judgment which had declared the GIDC a fee, and not a tax.

The verdict issued by a bench headed by Chief Justice Nasirul Mulk also stated that such a cess should not have been introduced through a money bill in the National Assembly under Article 73 of the Constitution.

Also read: Gas infrastructure cess

But on Sept 24 the government promulgated an ordinance which legalised the recovery of GIDC from non-domestic consumers, mainly industries.

The judgment had declared the GIDC a fee, and not a tax, that should not have been introduced through a money bill

The GIDC Act was approved by the National Assembly in Dec 2011.

It imposed the cess on gas consumers, other than the domestic sector, to develop infrastructure for a number of projects, including the Iran-Pakistan and the Turkmenistan-Afghanistan-Pakistan-India pipeline projects and a liquefied natural gas project, and for price equalisation of imported alternative fuels, including liquefied petroleum gas.

Later a number of industrial concerns and owners of CNG stations filed petitions in the Peshawar High Court (PHC) challenging the GIDC Act. In December last year, the high court declared imposition and recovery of the cess unconstitutional and directed the government to refund the money within a reasonable time — either in lump sum or by adjusting it in monthly bills.

The federal government challenged the PHC decision in the Supreme Court which upheld the high court’s verdict on Aug 22, but the judgment did not deal with the PHC’s directive to refund the recovered money.

When the case was taken up by a three-judge Supreme Court bench on Monday, Attorney General Salman Aslam Butt argued that the Aug 22 verdict had adversely affected different development projects because the government was facing difficulty in carrying them out.

He said the money collected under the GIDC was meant for gas infrastructure and price equalisation which would eventually benefit the nation and could hardly be considered a payment by the payees (industrial concerns) as a fee for services rendered by the government.

“Thus there exists no quid pro between the payments made and the services, if any, provided by the government.”

The review petition said the GIDC was in fact a tax and not a fee, primarily because the necessary elements required for levy to be a fee were absent and the cess was in the nature of a tax for a special administrative expense or a special object which was evident from the annual budget 2014-15 where the government had treated the GIDC as a tax revenue.

“It is an admitted constitutional position that taxation is an incident of sovereignty and the state can levy any tax for the performance of its sovereign functions,” the petition said.

In response to federation’s review petition, the Supreme Court issued notices to 63 respondents, including the Oil and Gas Regulatory Authority and Sui Northern Gas Pipelines Limited.

The petition further stated that no extra burden was placed on the industrial concerns through the GIDC and, therefore, the respondent companies did not face any impact of the levy.

Thus, the retrospective disbursement of the amount so collected will amount to unjust enrichment.

It argued that if the GIDC Act was struck down under the present circumstances then in view of Section 7 of the Sales Tax Act 1990, the amount so recovered could not be refunded because benefit in respect of the amount had already been taken.

Published in Dawn, November 18th, 2014