ISLAMABAD: The Federal Constitutional Court (FCC) issued notices to the Attorney General of Pakistan and the Advocate General of Khyber Pakhtunkhwa on the issue of enhancing the rate of KP infrastructure development cess from one to two percent.
A two-judge bench comprising Justice Syed Hasan Azhar Rizvi and Justice Muhammad Karim Khan Agha on Monday heard the petitions of HMB Oil & Ghee Mills (Pvt) Ltd and another.
Isaac Ali Qazi, representing the petitioners, argued that Khyber Pakhtunkhwa Infrastructure Development Cess Act, 2013, was initially imposed under Section 94 of the Khyber Pakhtunkhwa Finance Act, 2013, through Pakhtunkhwa Collection of Cess for Development and Maintenance of Infrastructure Rules, 2014 at the rate of 1 percent of the value of the goods (inclusive of duty and taxes) on entering or leaving the province from or for outside the country.
He stated that Section 94 of the KP Finance Act, 2013, per se, and Rules 2014, were challenged through various writ petitions, which, though, dismissed; however, the Supreme Court granted leave to appeal vide order dated 16-01-2020 recognising the legal and constitutional flaws in the Rules and also granted interim relief to charge 50 percent of the cess from the petitioners.
The cess was later reduced to 0.75 percent by a notification dated 22-09-2016. However; vide notification dated 06-05-2020, the rate of cess was restored to 1 percent. He submitted that the KP finance secretary (respondent), while ignoring altogether the interim relief order dated 16-01-2020, demanded the entire 1 percent from the petitioners, which was challenged before the High Court, and most of the petitions were disposed of in terms of the interim relief order dated 16-01-2020.
Meanwhile, the 2013 Act was repealed by the Khyber Pakhtunkhwa Infrastructure Development Cess Act, 2022. The KP caretaker government enhanced the rate of cess to 2 percent vide notification No. BO(Rev-I) FD/ 12-01-2024 dated 23-02-2024 exercising powers under Section 3 of the Act of 2022.
Isaac stated that this decision was challenged before the Peshawar High Court, which, in line with the interim order, directed the respondent that instead of 2 percent, the petitioner be charged at the rate of 1 percent. However, the KP elected government vide notification no. BO(Rev-II)/FD/3-4/2024 dated 03-04-2024 endorsed the caretaker notification dated 23-02-2024. Vires of notification dated 03-04-2024 were also challenged, wherein the same interim relief was granted.
Thereafter, through Section 14 of the Khyber Pakhtunkhwa Finance Act, 2024, sub-section (1) of Section 3 was substituted, whereby not only the rate of cess was increased to 2 percent but also its scope was widened from imported to export goods as well.
The petitioners filed writ petitions challenging the Khyber Pakhtunkhwa Infrastructure Development Cess Act, 2022, along with amendments made through Section 14 of the Khyber Pakhtunkhwa Finance Act, 2024. He stated that those petitions have been disposed of in light of this Court order dated 16-01-2020 in Civil Petition Leave to Appeal No.2498, 2775, and on vires remained sub-silentio.
Copyright Business Recorder, 2025
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