After expiry of Grid Levy Ord: IHC directs AGP to refund levy sums to CPPs

ISLAMABAD: The Islamabad High Court (IHC) has directed the Attorney General for Pakistan (AGP) to refund all amount of levy to the captive power plants after the expiry of Grid (Captive Power Plant) Levy Ordinance, 2025.

According to an order of the IHC issued on Friday, in the event that the impugned Ordinance does not receive Parliamentary approval, all sums collected under its authority shall, upon the Ordinance’s lapse, be forthwith refunded to the petitioners in full, without deduction or delay.

All tax amounts collected from the petitioners under the impugned Ordinance shall be deposited and retained in the Federal Consolidated Fund for the duration of the Ordinance’s validity (i.e., 120 days from its promulgation), and shall not be appropriated, transferred, or expended for any purpose other than the one provided under the impugned ordinance.

The AGP submitted that the interim order has been passed in violation of Article 199 (4)(b);

That Article 89 of the constitution empowers the president to promulgate an ordinance when the National Assembly and Senate are not in session; that the President of Pakistan has a constitutional mandate to promulgate an ordinance, which improperly impugned before this court.

As per entry No 51 of fourth Schedule of the Constitution authorise the Federal Government to impose taxes on the mineral oils and natural gas; that in case the period of Ordinance is expired and the same has not been approved by the Parliament, the Federal Government will be ready to return the amount to the petitioners.

In response, petitioners has submitted that petitioners are captive power plants as defined in Section 2 © off the Grid (Captive Power Plant) Levy Ordinance, 2025 promulgated by the President of Pakistan on January 31, 2025, that captive power plant means an industrial undertaking or unit

Carrying out the activity of power production with or without co-generation for self-consumption or for sale of surplus power to a distribution company or a bulk-power consumer; that the petitioners have been paying sales tax on the supply of natural

Gas under the Sales Tax Act of 1990; that imposing a double tax violates the supreme law of the land, the Constitution.

The learned counsel for the petitioners submits that the levy in question does not constitute a tax. He argues that under the

Constitution, the Federation lacks the authority to impose a tax on the use of natural gas, except in cases involving nuclear energy generation. However, the respondents utilize natural gas solely for electricity generation either for self-consumption or for supplying surplus power to third parties. He further contends that the levy cannot be classified as a fee, as it is not Imposed in exchange for any specific service rendered by the government.

IHC declared that undoubtedly, Article 77 of the Constitution of Pakistan, 1973, establishes the mechanism for imposing taxes, subject to the Federal Legislative List under Schedule IV (Entry 51), through parliamentary legislation.

However, when both the Senate (Upper House) and the National Assembly (Lower House) are not in session, the President of Pakistan is empowered under Article 89(2)(a)(i) to promulgate an Ordinance for a limited period. This constitutes an exercise of the President’s legislative authority, as envisaged by Article 89 of the Constitution.

There appears to be no constitutional or statutory bar preventing the President from imposing a levy via an Ordinance. Entry 51 of Schedule IV explicitly authorises the Federal Government to levy taxes.

Moreover, it is a well-settled legal principle that entries in the legislative list must be interpreted liberally, not in a narrow or overly technical manner. It is also a settled proposition of law that where the validity of an Ordinance has been called into question that it is a bad law, the determination of the vires of the Ordinance can only be determined if it is repugnant to the fundamental rights of the citizens.

At this stage, an interlocutory application has been argued by the learned counsels, the vires of the ordinance shall be determined at the time of final arguments.

Copyright Business Recorder, 2025