Bills for recovery of cess arrears: SHC issues notices to petroleum secretary, SSGC, Ogra

ISLAMABAD: The Sindh High Court (SHC) issued notices to the petroleum secretary, the SSGC, and Oil & Gas Regulatory Authority (Ogra) for sending bills for the recovery of arrears of cess under the GIDC Act, 2015, and asked not to take any coercive actions against the plaintiffs for non-payment of bills, showing arrears until 5th October 2020.

Justice Syed Hasan Azhar Rizvi passed the orders on the suits of M/s Ismail Industries Limited, Paracha Textile Mills Ltd (Ghee Unit) and A&A Agro Industries (Private) Ltd, which they have filed through Abid S. Zuberi for declaration, mandatory and permanent injunction.

The plaintiffs have cited federation through the Ministry of Petroleum and Natural Resources secretary, Chief Executive Sui Southern Gas Company Limited (SSGC), Manager Industrial Billing SSGC, and the Oil and Gas Regulatory Authority (Ogra) as respondents.

M/s Ismail Industries Limited is engaged in the business of manufacturing and trading of sugar confectionery items, while Paracha Textile Mills Ltd (Ghee Unit) produces Banaspati ghee and cooking oil, and A&A Agro Industries (Pvt) Ltd does business of crushing of edible oil seeds and manufacturing of cooking oil.

The Supreme Court in its judgment on the GIDC Act, 2015, said, "Every industrial and commercial entity using natural gas for its business activity is entitled to claim the burden of cess as their business expense, being part of the cost of their goods or services rendered, and get it adjusted against their business profits. They have already done so in their books of accounts and the annual returns of their income must have been filed before the Income Tax authorities accordingly. Thus, the cess under the GIDC Act, 2015 has been levied only on those consumers of natural gas who on account of their industrial or commercial dealings pass on its burden to their customers/clients."

The judgment also stated, "As all industrial and commercial entities which consumes gas for their business activities pass on the burden to their customers/clients therefore all arrears of Cess that have become due upto 31-07-2020 and have not been recovered so far shall be recovered by the companies responsible under the GIDC Act, 2015 to recover from their customers. However, as a concession the same be recovered in 24 equal monthly installments starting from 01-08-2020 without the component of late payment surcharge. The late payment surcharge shall only become payable for the delays that may occur in the payment of any of the 24 installments."

Zuberi told the Court that after the Supreme Court's judgment, legal notices were issued to the defendant No 3 (Manager Industrial Billing SSGC) on 13 September 2020, while referring to the orders of the Supreme Court, and it was intimated to the defendant that the plaintiffs fell within the category of gas consumers who had neither collected the GIDC nor passed the same on to their clients/customers through addition in the cost of goods.

He also contended that between 2011 and 2020, where the plaintiffs had not paid GIDC to the SSGC (defendant), on the basis of injunctive orders, and the judgment of the Supreme Court in the case of federation vs Durrani Ceramics and others.

The counsel submitted that a judgment and decrees were passed in favour of M/s Ismail Industries Limited in Suit No 1220/2015, Paracha Textile Mills Ltd (Ghee Unit) in Suit No 1218/2015, and A&A Agro Industries (Pvt) Ltd in suit No 1212/2015.

The counsel apprised the court that the plaintiffs never collected the GIDC from their clients/customers, and nor did they ever pass it on to their clients and customers, which was evident from the regulatory audited income tax returns and books of account.

He urged the SHC that the payment of GIDC installments and calculation of huge GIDC arrears as mentioned in the gas bills issued to the plaintiffs had wrongly been mentioned, which the defendants were not liable to be collected.

The counsel maintained that his clients were ready and willing to pay the current charges as mentioned in the gas bills.

He submitted that in terms of the Supreme Court's judgment on the GIDC Act, the plaintiffs were not entitled to pay the arrears for which separate bills had been issued by the Defendant No 2 (the SSGC).

The bench after hearing the arguments issued notices to the respondents and asked them not to take any coercive actions against the plaintiffs for non-payment of bills, showing arrears, until 5th October 2020.

Copyright Business Recorder, 2020