RLA/GAS/159 August 17, 2020

The Chief Executive(s)

Industrial & Commercial / Companies
Consumers of Gas.

SUBJECT: Supreme Court Judgment dated 13.8.2020 Regarding GIDC –

Suggested Course of Action

Dear Sir(s)

This is with reference to above referred judgment of the Supreme Court of

Pakistan whereby all the Appeals / Petitions / Applications filed by the consumers
of gas have been dismissed with a direction to all Industrial and Commercial
consumers to pay outstanding arrears of GIDC from 15.12.2011 to 31.7.2020 in 24
equal monthly installments starting from 1.8.2020.

As a large number of members / consumers are contacting us to seek opinion and

certain clarifications regarding the judgment and future course of action, so
through this newsletter we have tried to briefly answer all those questions while
suggesting possible course of action.

BRIEF HISTORY OF GIDC

 On 15.12.2011 the Gas Infrastructure Development Cess was imposed;

 Initially its rate was Rs.13/- per MMBTU on Industrial consumers as by then the
Captive Category was not introduced, Rs.70/- on IPPs, and Rs.197/- on Fertilizer-
Feed Stock;

 On 31.7.2012 the Rates for Industrial including Captive, Fertilizer-Fuel Stock and
IPPs were fixed at Rs.100/- while maintaining the rates for Fertilizer – Feed Stock
at Rs.100/-

 On 7.9.2012 the rates were once again revised and for Industrial including Captive
and Fertilizer Fuel Stock were fixed at Rs.50/-and for IPPs and Fertilizer Feed
Stock were maintained at Rs.197/- and Rs.100/- respectively;

 And finally the rates were fixed at Rs.300/- for Fertilizer-Feed Stock and Rs.100/-
for Industrial including Captive and for IPPs;

 At this stage the petitions pending before the Islamabad High Court and Peshawar
High Court against the imposition of GIDC were finally accepted vide judgments
dated 31.1.2013 and 13.6.2013 whereby both the court set aside the very GIDC
Act, 2011 as ultra vires the Constitution.

 Against the judgment of the Islamabad High Court, the Federal Government filed
ICA wherein the recoveries were not allowed. Against the judgment of the
Peshawar High Court, the Federal Government filed appeals before the Supreme
Court which were finally dismissed on 3.8.2014.

 Immediately after the judgment of the Supreme Court, on 25.9.2014 through an

Ordinance the GIDC was re-imposed with a validation clause setting at naught the
effect of the judgment of the Supreme Court and making the imposition and
 recovery legal from day one i.e,. 15.12.2011. Herein the rates for Industrial
including Fertilizer Fuel-Stock were increased to Rs.150/- for Captive Rs.200/-
and for IPPs Rs.100/-

 Thereafter on 23.5.2015 the GIDC Act, 2015 was promulgated whereby the rates
of Cess for Industrial consumers were again fixed at Rs.100/- and for Captive
Rs.200/- and for Fertilizer Feed at Rs.300/- and for IPPs at Rs.100/-.

 The law was again challenged before various High Courts and the recovery of
Cess was again stayed in the Sindh High Court as well as Peshawar High Court.

 However, as in Punjab the notices for the recovery of arrears were issued so as a
first step so in the first set of petitions only the recovery of arrears was challenged
on the ground that until the determination is made regarding the passing on of the
Cess to the customers, the arrears cannot be recovered and those petitions were
remanded to the High Powered Review Committee of SNGPL while restraining
the recovery of the arrears and to decide whether in view of proviso to S.8 of the
GIDC Act, 2015 the Cess was passed on to the customers by the Textile and
Industrial consumers or not?

 In the meantime a very few petitions were filed before the Lahore High Court
challenging the vires of the GIDC Act, 2015 as well as the current recovery of
CESS. However, the Lahore High Court did not grant any interim order in those.

 On this and keeping in view the fact that the current recovery of GIDC was stayed
by the Sindh High Court, most of the Industrial and Captive Consumers of Punjab
also filed Suits before the Sindh High Court and got interim orders against the
recovery as well.

 The suits filed before the Sindh High Court were decided in favour of the
consumers and the GIDC Act, 2015 was again set aside. Against the said judgment
an appeal was filed before the Sindh High Court wherein the recovery of CESS
during the pendency of appeal(s) was not allowed. The said appeal(s) are still
pending before Sindh High Court.

 During this period on 31.5.2017 the Peshawar High Court dismissed the petitions
challenging the vires of GIDC Act, 2015.

 Against the said judgment only the consumers of KPK filed petitions before the
Supreme Court, which have now been decided finally by the Supreme Court of
Pakistan vide its judgment announced on 13.8.2020.

 It is pertinent to mention that during the pendency of Appeals before the Supreme
Court and fearing that the consumers of Punjab and Sindh may be adversely
affected by the judgment of the Supreme Court many consumers of Sindh and few
consumers of Punjab had also become party to the proceedings. However, a large
number of consumers of Punjab had not joined the proceedings in the Supreme
Court.

After briefly recapitulating all the facts of the GIDC from 2011 to 2020 for
the information of the consumers, we may summarise hereunder the main
points of the judgment of the Supreme Court before embarking upon suggesting
the future course of action:-

Judgment of the Supreme Court of Pakistan announced on 13.8.2020.

a- GIDC Act, 2015 has been validated in totality and thus the petitions
challenging the vires of the GIDC Act, 2015 have been dismissed;

b- Due to above dismissal all the Appeals, Suits, Petitions pending

anywhere in Pakistan would be deemed to have been dismissed as well;

c- However, from the date of the judgment i.e., 13.8.2020 onwards the
Federal Government has been restrained from collecting any further
amount under the head of GIDC except to recover the Arrears only;

d- The judgment has also held that this power of the Federal Government
to charge Cess shall remain suspended till the Cess collected would
have been spent on the projects as mentioned in the GIDC Act, 2015;

e- All the outstanding amounts of Cess from 15.12.2011 till 31.7.2020 shall
be collected in 24 equal monthly installments starting from 1.8.2020;

f- Work on laying the North-South Gas Pipeline within the country and
TAPI and Iran-Pakistan Gas Pipeline shall commence within Six
months otherwise the GIDC Act, 2015 would become a dead and
inoperative law;

FUTURE COURSE OF ACTION

1- Review Petition should be filed against the judgment as being the

judgment of 2:1 ratio is sufficient to file such petitions;

2- The judgment has failed to consider or to decide upon properly the

following points which errors are apparent on the face of it;

MAIN GROUNDS:

i- Once the Government decided to re-impose GIDC as fee through

GIDC Act, 2015 the most important point was the factor of quid pro
quo to be decided by the court in accordance with the latest trends
of jurisprudence. This actually means simultaneous, immediate or
timely provision of promised service. Even if it is to be provided in
future it cannot be remote or indefinite future like the situation is in
the GIDC and this aspect has been totally missed in the judgment;

ii- This judgment denies all the ingredients of the basic principle of
Legitimate Expectation (with regard to the time-frame) which by
now has become a settled principle and it has simply been ignored
in the entire judgment;
iii- Practically, the government has re-imposed the GIDC as a Fee
but the entire complexion and connotations of the levy is that of a
tax (which is a compulsory exaction of money without
corresponding service) as there is no definite and certain time frame
of the provision of service to the consumers;

iv- While rendering the judgment the Supreme Court has failed to
take into consideration the Legislative and Executive failure both in
drafting the law and consequent implementation of the projects,
which are still only in papers and practically beyond the control of
the government of Pakistan and entirely depend on foreign forces
on which the government of Pakistan has no control and thus no
timeframe is possible to be given. In such a situation this fee could
not have been levied at all being contrary to the principles of the
protection of property, business, absoluteness;

v- Taxing statutes must be clear, definite and without any

ambiguity in its language, design and implementation. Vagueness in
any of these basic ingredients makes the law liable to be struck
down and this aspect has not been considered at all;

vi- As it is in the knowledge of everyone that practically the

distinction between Industrial and Captive has already ended in
view of the judgment(s) of the Supreme Court in Gas Tariff
Difference Cases, which says that self-generating units who either
are not selling electricity to third party or sell less than the
threshold quantity of gas cannot be termed as Captive and they are
to be charged as Industrial Consumers. However, on this aspect the
judgment is silent.

vii- A passing remark in the Judgment regarding recovery of

accrued GIDC prior to GIDC Act of 2015 has been made in
paragraph 37 while giving an opinion that Cess paid by the
Industrial or Commercial consumers become part of the cost of the
goods which they sell or the cost of the services they render and
thus is ultimately borne by the buyers of their goods and services
and while stating so such consumers have been tagged with the
CNG consumers. This has been done without hearing any
discussion on the point and without understanding the difference
between the costing of CNG consumers and Industrial and
Commercial Consumers. However, the result of this observation
would be that no Industrial and Commercial Consumer would be
able to get any benefit of S.8 of passing on the Cess to its customers.

viii- The main reliance of the Government to find its legislative

competence to enact GIDC Act 2015 was on Entry No.27 of the
Constitution. This entry simply regulates taxes / fees on trade with
foreign countries etc or inter-provincial trade. However, the GIDC
Act, 2015 is not taxing the trade or import and export or its inter-
provincial trade or commerce. Rather it imposes fee on the laying
 down of the transmission lines which does not fall under Entry
No.27 on the face of it. To request the court to consider this aspect
of the matter in Review would not be asking the court to take
different view but to correct the error which is floating on the
surface as imposition of GIDC simply to lay pipelines etc., has no
connection with international trade or inter provincial trade and in
the entire judgment there is no discussion on this point;

ix- With regard to Rates of Cess to be decided by the Government

under S.3, in our view it is hit by the principle of Excessive
Delegation. Whenever an executive is given the power to fix the rate
by the Parliament / Law it necessarily has to be guided with regard
to Yardsticks on the basis of which or in the guideline of which, it
has to fix the rates. S.3 is absolutely silent on these guidelines as
practically it contains none and it simply give absolute prerogative
to the Federal Government to fix as much rates as it pleases. The
history of rates from 2011 to 2015 given in the opening paragraphs
clearly establishes it as starting from Rs.13/- they are enhancing it
to Rs.Rs.50/-, 150/- and then 100/- and Rs.200/- without providing
any reasons or justification. The judgment is absolutely silent on
this point as well.

3- In this background most asked question from us over the phone or

in e-mails is who to file Review and how to file Review:

a- As everybody knows, petitions of numerous consumers are still

pending adjudication before Lahore High Court and Sindh High
Court, who never became party in the Supreme Court. All those
consumers can directly file Review Petition(s) before the
Supreme Court as they are directly and adversely affected with
the judgment;

b- And all such consumers can file their Review Petitions through
any lawyer of their own choice;

c- However, any consumer who was either directly a party in the

proceedings or who became party during the pendency of the
proceedings is bound to file the Review Petition through the
same lawyer who earlier conducted their case before the
Supreme Court;

d- It is to be noted that time limitation for filing the Review Petition

before Supreme Court is 30 days from the date of the judgment
which in this case is 13.8.2020.
 We have tried to clarify all possible questions which were being asked
from us in large numbers on phones or through e-mails and to briefly
summarize the gist of Judgment as well. However, if anyone still has
any questions, they are welcome to call or mail us with their specific
query.

Thanking you, we remain

Truly yours

Mian Mahmood Rashid

Advocate Supreme Court
Rashid Law Associates
27-Edgerton Road, Ajmal
House, Lahore.
Phones:042-36311425
042-36361425

Mobile:0321-8468922

Mr.Munir-0301-6127125
0345-6127125