Cess on imported cotton: PHC verdict suspended by Supreme Court

The Supreme Court on on Tuesday suspended the Peshawar High Court verdict that struck down cess on imported cotton, and allowed the appeal of Ministry of Textile Industry. The PHC through its 01-03-2017 order had restrained the federal government from recovery of cess on imported cotton or issuance of any coercive measures against the textiles industries. The Federation aggrieved by the PHC judgment had filed the appeal in the Supreme Court.
A three-judge bench headed by Chief Justice Mian Saqib Nisar, after hearing the arguments of Additional Attorney General Waqar Rana, who represented Ministry of Textile Industry, suspended the PHC judgment. By virtue of Section 6 of Cotton Cess Act, 1923 the textile mills are required to submit their monthly cotton consumption returns to the collector concerned of the district showing complete details of the cotton consumed in the mills during the month on 'Form A.'
The returns submitted on 'Form A' expressly provide for exemption on payments of cess on imported cotton in terms of the note given on 'Form A', which reads; "Cotton imported from outside Pakistan is not liable to the cess. However, the federal government on 29-03-2012 through SRO 307(I) 2012 repealed Cotton Cess Rules, 1950, and through the same notification Cotton Cess Rules, 2012 were brought into force and cess was levied on the imported cotton as well.
M/s Saif Textile Mills Ltd, M/s Mezan Textile Mills Ltd, M/s Rehman Cotton Mills, M/s Gadoon Textile Mills Ltd, M/s Kohat Textile Mills Ltd and M/s A J Textile Mills Ltd, which were operating in various industrial areas of Khyber Pakhtunkhwa challenged the levy of cess on imported cotton and notification in the Peshawar High Court. During the proceedings, AAG Waqar Rana argued that the PHC without deciding the question of vires of the Rules 2012 held that the textile mills were not liable to pay cess on imported cotton. He prayed the top court to declare the judgment of PHC void, without jurisdiction and liable to be set aside in the interest of justice inter alia that the judgment is against the law and facts of the case.
Under the Cotton Cess Act, 1923 the cess had been levied on the export and consumption of all cotton. No exemption was granted on the imported cotton. The Cotton Cess Rules, 2012, replaced and repealed the Cotton Cess Rules, 1950. He contended that under section 16 of the Act, the committee with previous sanction of the federal government, has the powers to frame rules.
He contended that it was not the case of the textile mills that they imported cotton in any particular year on expectation or otherwise and a vested right had been created in their favour. SRO No 307(1)/2012 came into force on 29-03-2012, while the writ petitions were filed in 2015 for the first time.