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KARACHI: Sindh High Court (SHC) Friday upheld the infrastructure levy under Sindh Finance Act, 2017 on import of goods valid by declaring it within competence of provincial legislature.

A division bench of SHC comprised of Justice Muhammad Junaid Ghaffar and Justice Agha Faisal gave the verdict in favour of infrastructure levy under Sindh Finance Act, 2017 in multiple petitions.

Petitioners challenged levy known as infrastructure fee / cess imposed by the province through Sindh Finance Act, 1994 and its subsequent versions including the final version i.e. Sindh Development and Maintenance of Infrastructure Cess Act, 2017, on the ground that it is ultra vires to the constitution and beyond the competence of the provincial legislature.

In a detailed judgment, court observed that it is settled law that there is always a distinction between the object of tax, the incidence of tax and the machinery for the collection of tax.

“The distinction is important and shall always be kept in consideration. Legislative competence is to be determined with reference to the object of the levy and not with reference to its incidence or machinery”, bench stated.

Bench maintained that said levy imposition is on goods which are using the infrastructure of the province after having landed at port from abroad and observed that almost the entire cargo being imported in the country routs through the province of Sindh, and for that the provincial legislature thought it appropriate to impose a certain amount of tax in the form of a cess.

Bench observed that it is though being collected from an importer of goods; but in essence it is not on imports; but for maintenance and development of infrastructure on imported goods. “Since goods using this infrastructure by itself cannot pay; nor can it be so recovered, and has to be recovered from someone i.e. the importers. The importers in this case are then persons having a direct control, connection, possession and nexus with these goods, and therefore, can be called to pay the said levy”, bench ruled.

Bench declared that as far as the first four versions of the law / levy is concerned, the same has no applicability on the petitioners who had earlier challenged the same and were before the court in Sanofi Aventis; as the said judgment has attained finality and is a case of past and closed transaction.

Court held that Sindh Finance Act, 2017, promulgated retrospectively with effect from 1.7.1994 is a valid law, within the competence of the provincial legislature and is applicable retrospectively; however, barring the appellants in Sanofi Aventis case. Bench, however suspended the operation of the judgment for a period of 90 days to allow the release of petitioners’ consignments on the earlier arrangements and terms.

Copyright Business Recorder, 2021

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