Mian MEHMOOD-UR-RASHEED VS FEDERATION OF PAKISTAN through Additional Secretary and Ministry of Finance, 2017 PTD-LAHORE-HIGH-COURT-LAHORE 2469 (2017)

Sales Tax Act (VII of 1990) ---

----S.3---Constitution of Pakistan, Arts.77 & 199---Tax to be levied by law only---Nature and effect of Art.77 of the Constitution---Public interest litigation---Petitioners, in public interest, impugned increase in prices of petroleum products, inter alia, on the ground that the Federal Government had encroached upon jurisdiction of Parliament by fixing sales tax on petroleum products under S.3 of the Sales Tax Act, 1990---Validity---Under Art. 77 of the Constitution, no tax could be levied except by or under authority of an Act, which meant that there must exist an Act of Parliament which either levied tax or granted authority to levy tax---Provisions of S.3 of the Sales Tax Act, 1990 authorized Federal Government to impose conditions and restrictions by way of notification on the manner in which sales tax was to be charged, collected and paid and it could specify higher or lower rates of the same in a notification---Impugned S.R.Os. whereby sales tax has been notified on petroleum products had been issued pursuant to S.3 of the Sales Tax Act, 1990 meaning thereby the same were authorized by the Parliament---Levy of tax could not be declared unconstitutional or against public interest if it increased or lowered prices---Constitutional petition was dismissed, in circumstances.

Messrs Mustafa Impex Karachi and others v. The Government of Pakistan through Secretary Finance, Islamabad and others PLD 2016 SC 808 ref.

Sheraz Zaka for Petitioner (in Writ Petitions Nos.4311, 30920 and 36734 of 2016).

Nemo for Petitioner (in Writ Petition No.3829 of 2016).

Mohammad Azhar Siddique, Ali Raza Kabir, M. Rizwan Gujjar, Adeel Hassan, Ms. S.Parveen Mughal, Ms. Mafia Kausar and Mian Shabbir Asmail for Petitioners (in Writ Petition No.3399 of 2016).

Nasar Ahmad, D.A.-G. and Tahir Mehmood Ahmad Khokhar, D.A.-G. along with Atteeq Aslam, Executive Secretary, OGRA for Respondents.

Safraz Ahmad Cheema, Respondent for Federal Board of Revenue.

Date of hearing: 22nd September, 2017.

ORDER

AYESHA A. MALIK, J.---This judgment decides upon the issues raised in W.Ps. Nos.4311/16, 30920/16, 36734/2016, 3829/2016 and 3399/2016 as all the Petitions raise common questions of law and facts. In W.Ps. Nos. 4311/16, 30920/16, 36734/2016, 3829/2016, the Petitioners have impugned SRO 57(I)/2016 dated 29.1.2016 issued by Government of Pakistan, Ministry of Finance, Economic Affairs, Statistics and Revenue (Revenue Division), Islamabad ("SRO"). In W.P. No. 3399/2016, the Petitioners have impugned the S.R.O. and have also called into question increase in petroleum prices in the country and the manner in which petroleum prices are fixed.

2.All the Petitions have been filed in public interest. Writ Petitions Nos. 4311/16, 30920/16, 36734/2016, 3829/2016 only impugn the S.R.O. whereas the Petitioners in W.P. No. 3399/2016 have also impugned through various applications subsequent S.R.Os. dated 29.1.2016, 29.2.2016, 31.3.2016, 29.4.2016, 31.5.2016, 30.6.2016, 31.7.2016, 31.8.2016, 30.9.2016, 31.10.2016, 30.11.2016, 31.12.2016, 15.1.2017, 31.1.2017, 15.2.2017, 28.2.2017, 31.3.2017, 30.4.2017, 31.5.2017, 30.6.2017, 31.7.2017, 5.8.2017 through C.Ms. Nos. 5/2016, 7/2016, 9/16, 11/2016, 13/2016, 15/2016, 2840/2016, 19/2016, 21/2016, 23/2016, 1/2017, 3/2017, 5/2017, 7/2017, 9/2017, 11/2017, 1-3399-16/2017, 3/2017, 5/2017 and 7/2017 issued by the Government of Pakistan, Ministry of Finance, Economic Affairs, Statistics and Revenue (Revenue Division), Islamabad levying the sales tax collected on import and supply of certain petroleum products.

3.With respect to the vires of the S.R.O. and the subsequent S.R.Os., the case of the Petitioners is that the Federal Government has encroached upon the jurisdiction of Parliament by fixing sales tax on petroleum products which is in violation of Section 3 of the Sales Tax Act, 1990 ("Act"). It is their case that the Federal Government does not have jurisdiction to levy or collect sales tax without the approval of Parliament and without the approval of the Cabinet which is in absolute violation of "Messrs Mustafa Impex, Karachi and others v. The Government of Pakistan through Secretary Finance, Islamabad and others" (PLD 2016 SC 808). Counsel for the Petitioners argued that the S.R.Os. were issued without getting the approval of Parliament as required under Articles 77 and 162 of the Constitution of Islamic Republic of Pakistan, 1973 ("Constitution"). Furthermore the Federal Government by issuing various subsequent notifications manipulates the price of petroleum products by increasing them regularly, therefore burdening the public at large with high prices. Counsel argued that the aim behind this unlawful fixation is to extort money from the consumers without lawful justification. It was also argued that this is in absolute disregard of the constitutional mandate, hence all the S.R.Os. should be struck down.

4.Report and parawise comments have been filed on behalf of Respondent Secretary, Finance Division, Government of Pakistan Islamabad, Respondent Secretary, Ministry of Petroleum, Oil Gas and Natural Resources, Government of Pakistan, Islamabad and Respondent Federal Board of Revenue. Learned DAG on behalf of the Ministries argued that the Petitioners have totally misconceived the constitutional mandate and the requirements of the Act. He has relied on Article 77 of the Constitution along with section 3 of the Act to urge that the Federal Government has acted in accordance with law and the Constitution and has not exceeded its jurisdiction in any manner. He further argued that the Petitioners have failed to show how the general public is aggrieved in any manner on the basis of which the instant Petitions have been filed.

5.In W.P. No.3399/2016, the other grounds raised and argued by the Counsel at great length is with reference to petroleum prices and the manner in which they are fixed. Learned counsel for the Petitioners argued that there is no mechanism for the fixation of petroleum products. Further that the Government in an arbitrary manner increases the prices of petroleum products every month under the garb of the impound SROs and illegally levy of the sales tax. He further argued that in doing so the Federal Government has encroached upon the function of the regulator that is Oil and Gas Regulatory Authority ("OGRA") and without following due process, arbitrarily fixes the prices of the petroleum products. Further argued that sales tax is charged up to almost 55% of the value of the taxable supply which is sheer violation of the constitutional mandate as well as Section 3 of the Act. Learned counsel argued that under the garb of sales tax, the price of petroleum products are increased which is unconstitutional as the Federal Government has no authority or jurisdiction to fix the petroleum prices which exclusively lies with OGRA. In this regard, the entire argument of the Petitioners is premised on the levy of sales tax through various SROs which is being presented as fixation of petroleum prices. On the other hand, learned DAG argued that there is nothing arbitrary in the manner in which the price for petroleum products is fixed nor has the Federal Government acted in a manner which is against the mandate of the Constitution or the Act. Learned DAG argued that the Federal Government has acted in accordance with law.

6.Heard and record perused.

7.The basic and common question in all these Petitions is the authority of the Federal Government to issue the impugned SRO as well as SRO No.57(I)/2016 dated 29.1.2016 and SRO No.(I)/2016 29.2.2016 (impugned in CM No.5/2016), SRO No.268(I)/2016 dated 31.3.2016 (impugned in CM No.7/2016), SRO No.369(I)/2016 dated 29.4.2016 (impugned in CM No.9/16), SRO No.(I)/2016 dated 31.5.2016 (impugned in CM No.11/2016), SRO No.490(I)/2016 dated 30.6.2016 (impugned in CM No.13/2016), SRO No.(I)/2016 dated 31.7.2016 (impugned in CM No.15/2016) and SRO No.806(I)/2016 dated 31.8.2016 (impugned in CM No.2840/2016), SRO No.925(I)/2016 dated 30.9.2016 (impugned in CM No.19/2016) and SRO No.1011(I)/2016 dated 31.10.2016 (impugned in CM No.21/2016), SRO No.1127(I)/2016 dated 30.11.2016 (impugned in CM No.23/2016), SRO No. (I)/2016 dated 31.12.2016 (impugned in CM No.1/2017), SRO No.21(I)/2017 dated 15.1.2017 (impugned in CM No.1/2017), SRO No. (I)/2017 dated 31.1.2017 (impugned in CM No.3/2017), SRO No. (I)/2017 dated 15.2.2017 (impugned in CM No.5/2017), SRO No. (I)/2017 dated 28.2.2017 (impugned in CM No.7/2017), SRO No. (I)/2017 dated 31.3.2017 (impugned in CM No.9/2017), SRO No.292(I)/2017 dated 30.4.2017 (impugned in CM No.11/2017), SRO No. (I)/2017 dated 31.5.2017 (impugned in CM No.1-3399-16/2017), SRO No. (I)/2017 dated 30.6.2017 (impugned in CM No.3/2017), SRO No. (I)/2017 dated 31.7.2017 (impugned in CM No.5 /2017) and SRO No. (I)/2017 dated 5.8.2017 (impugned in CM No.7/2017). Article 77 of the Constitution reads as follows:-

"No tax shall be levied for the purposes of the Federation except by or under the authority of Act of Parliament."

In terms of this Article, no tax can be levied except by the authority of the Act of Parliament or under the authority of an Act of Parliament. This means that there must be an Act of Parliament which either levies the tax or grants the authority to levy the tax.

Section 3(1) of the Act provides as under:--

Subject to the provisions of this Act, there shall be charged, levied and paid a tax known as sales tax at the rate of (seventeen) percent of the value of

(a)taxable supplies made by a registered person in the course or furtherance of any (taxable activity) carried on by him; and

(b)goods imported into Pakistan.

Section 3(2)(b) of the Act reads as follows:

the Federal Government may, subject to such conditions and restrictions as it may impose, by notification in the official Gazette, declare that in respect of any taxable goods, the tax shall be charged, collected and paid in such manner and at such higher or lower rate or rates as may be specified in the said notification.

Section 3(6) of the Act reads as follows:

The Federal Government or the (Board) may, in lieu of the tax under subsection (1), by notification in the official Gazette, levy and collect such amount of tax as it may deem fit on any supplies or class of supplies or on any goods or class of goods and may also specify, the mode, manner or time of payment of such amount of lax.

The said provisions authorize the Federal Government to impose conditions and restrictions by way of notification in the official gazette on the manner in which the tax is to be charged, collected and paid and it can also specify higher and lower rates in the notification. The Federal Government is also authorized that in lieu of the tax levied under sub-section (1) of section 3, it may levy and collect such amounts as it may deem fit on any taxable supplies or goods in the manner prescribed by it. The impugned SROs have all been issued pursuant to Section 3(2)(b) read with subsection (6) of the Act wherein the Federal Government has been authorized by the Act means authorized by Parliament to impose conditions and restrictions on the levy and collection of sales tax and to set rates in lieu of sales tax. Hence the argument that the Federal Government has encroached upon the jurisdiction of Parliament is without basis as Parliament, through its Act has authorized the Federal Government and the Federal Board of Revenue to levy such amounts and collect in lieu of sales tax as it may deem fit and to specify the mode and manner and time to collect the amount. It is also noted that the Federal Government issues such notifications periodically, hence SRO No.57(I)/2016 dated 29.1.2016 impugned in W.P. No.4311/2016 was replaced by the subsequent SROs which have been impugned through numerous C.Ms. in W.P. No.3399/2016. Therefore to the extent of the SRO it has become infructuous and even otherwise with respect to the other SROs, there is no merit in the petitions.

8.With reference to the argument that there is no prescribed method for fixing petroleum prices and that they are being increased arbitrarily, there is nothing on the record to establish this point. The Petitioners have relied upon the SROs to show that prices are being increased whereas the SROs show the levy of sales tax or amounts in lieu of sales tax as prescribed under Section 3 of the Act. The power has been delegated through an act of Parliament and the Federal Government can raise or lower the rates. The levy of the tax cannot be declared unconstitutional or against public interest if it increases or lowers the price. Even otherwise it is the Federal Government stance that prices have not been increased and that the Petitioners have attempted to mislead the Court by relating it to the levy of sales tax under the Act.

9.In view of the aforesaid, no case for interference is made out.

All the petitions are dismissed.

KMZ/M-167/L Petition dismissed.