GIDC: The legal battle

The Honourable Supreme Court of Pakistan (SC) will take up as many as 107 pending petitions regarding the infamous Gas Infrastructure Development Cess (GIDC) later this week. The Federation of Pakistan has found herself on the receiving ends of all judgments in lieu of the GIDC, be it the Peshawar High court (PHC), Sindh High Court (SHC) or the Supreme Court (SC). The GIDC Act(s) have been found to be in violation of the constitution for reason or another, carrying way too many legal loopholes requiring to be fixed.

So what has changed that should offer the government hope this time that the case will be in her favour? For that, let us jog down the history lane of the judicial aspects of GIDC and how the government risks being on the receiving end for the umpteenth, and possibly, the final time.

The PHC judgment of 2013, commonly referred as the “Durrani Ceramics v State” case laid down eight grounds for striking down GIDC. The leave to appeal was later granted to the State to examine five of those, which are summarized as under. 1) Whether the Act could have been introduced as Money Bill? 2) Whether there was excessive delegation of legislative powers 3) Whether there was discrimination In rates applied to different consumers 4) Whether GIDC was ultra vires of the Constitution on account of failure to be produced in front of the Council of Common Interest (CCI), and 5) Whether cess can only be imposed on services provided.

The SC declared GIDC as a fee and not a tax. It also mentioned that even if it were a tax, it is not covered by any part of the federal Legislative List, and therefore cannot be introduced through a money bill. This remains about the only concern that was addressed in the subsequent GIDC Act of 2015, being passed through the parliament.

In a later SHC judgment in October 2016, penned by Justice Mohammed Shafi Siddiqui, it was observed that since the GIDC is mentioned in the budget statements as tax revenue, it is “apparently fatal as far as the entries in the ….Constitution is concerned”. The latest budget document, which is a “constitutional document, and not merely a statement of account” also shows the GIDC under the head of “other taxes”, which would again likely prove to be a hurdle for the State.

Then there is the contentions issue of going to the CCI, which the PHC had maintained as one of the eight basis of the decision to declare the GIDC ultra vires of the Constitution. The SC in its 2014 judgment had observed: “True that such an advice or opinion or non-reference of the matter to the Council of Common Interest would not render the levy illegal or invalid, nevertheless it would have been appropriate had the federating units been taken into confidence…”

Interestingly, the 2016 SHC judgment maintained that the CCI is a cornerstone of the Constitution, further observing that “cornerstone of a building is equated with one without which entire edifice collapses”. What is of note is that the SHC sees the PHC’s decision as being merged with that of the SC. “The points raised and decided by Peshawar High Court were not disturbed by Hon’ble Supreme Court and all such defects were not rectified or corrected in a subsequent legislation, hence the observation of the Hon’ble Supreme Court and that of Peshawar High Court so long these were not reversed would continue to bind the courts,” reads Justice Siddiqui’s judgment. The judgment goes on to note that all the basis provided to invalidate…are now part of the order of the SC, as a result of the merger of the two decisions.

Facts are that the GIDC Act was neither presented before the Cabinet, nor did the CCI meet for the same purpose. Apart from the money bill, all other concerns, including the disparity in rates, exist as of now. If the SHC judgment is indeed binding on all courts, there is little room for the State to get a decision in its favour, with the current scheme of things.

The CCI has not met for ages. The government should consider addressing the concerns if it is serious in collecting the dues on account of GIDC. Surely, there is not much in it for the provinces, since the GIDC receipts are not part of the divisible pool. The legal team could instead weigh options, as regards the merits of making it part of the divisible pool. Settling 50 percent of the amount out of courts did not work – sharing the same with provinces may work. The government can ill afford to refund, the amount of which runs over Rs250 billion. But it also ill affords the consequences of facing the courts merely hoping against hope, without addressing the very basis of earlier decisions. The battle is all legal.