SC declares Rs 417 billion GIDC amount payable Aug 13, 2020

SC declares Rs 417 billion GIDC amount payable Aug 13, 2020

ISLAMABAD- The Supreme Court on Thursday rejected the appeals of the companies and directed them to pay Rs 417 billion Gas Infrastructure Development Cess (GIDC) amount to the government. 

A three-member special bench of the court headed by Justice Mushir Alam and comprising Justice Faisal Arab and Justice Mansoor Ali Shah announced the 78-page verdict on 107 petitions filed by various textile mills, cotton mills, sugar mills, ceramics companies, chemicals, CNG filling stations, match factories, cement companies and aluminium industries regarding the GIDC levy.

         The court had reserved the verdict on February 20, 2020. The bench passed the judgment in favour of the federal government with a 2-1 majority.

Justice Faisal Arab wrote the 47-page judgment while Justice Mansoor Ali Shah wrote a 31-page dissenting note.

The court in its order stated that by majority of two to one (Syed Mansoor Ali Shah, J dissenting), all these appeals and petitions were dismissed.

         In the light of this decision and the directions contained therein all listed applications also stand disposed of.

The judgment authored by Justice Faisal Arab stated, "As a consequence, the amount of GIDC collected over the years should be returned and refunded to the payers in full, unless in some cases, it is impractical to so do. The Federal Government shall constitute a Committee to work out a mechanism for refund of GIDC so that payers of GIDC are fully restituted; be it the gas consumers under the Act or the final consumers (people of Pakistan). Even if the gas consumers have passed on the Fee to its customers, technology may be available to credit such customers, so that there is no unjust enrichment on the part of the state. The amount of GIDC that cannot be refunded after exploring all other avenues, shall remain earmarked and be utilized only for the infrastructure development of the gas sector."

The judgment noted that energy was vital to industry, transport, infrastructure, information technology, agriculture, household users and more. Any nation with a growing economy and improving living standards must secure a robust energy supply, it added.

"The future of economic development hinges on energy security. Shortage of natural gas in the country is still a reality and the Energy Sector is confronted with a demand-supply gap which needs to be filled up. According to the latest Pakistan Economic Survey, 2019-20 the indigenous natural gas contributes around 38% in total primary energy supply mix of the country. Pakistan produces around 4 Billion Cubic Feet Per Day (Bcfd) against an unconstrained demand of 6 (Bcfd); the gas pipeline projects in question are based on bilateral and multilateral international agreements with other countries,” the judgment stated.

“A sum of Rs 295 billion has been collected as GIDC for the last almost 10 years. Keeping these facts in mind, and especially the issue of energy security, in the larger national interest, I allow the Federal Government a period of six months to initiate appropriate legislation in the light of the principles settled in this judgment including a clear description of the services being rendered, provision of a reasonable timeline for the delivery of service (supply) of natural gas) to the gas consumers and a statutory mechanism of obligations and consequences that may arise, if the service is delayed or is not delivered at all. In case the Federal Government fails to do so achieve this during this period, the Federal Government shall refund the amount of GIDC, in the manner mentioned above," it added.

Justice Mansoor Ali said in his dissenting note stated that "as the economy grew, Fee was imposed to render services to a large class of people or specified sector or area as a whole. In such cases, the relationship between the beneficiary and the services rendered became more generic, broad and remote. This is because such a service is to reach a general class of people or a specified sector or a designated area and not to an individual per se and therefore the service may also extend to free riders who are not the payers of Fee, hence the bond of proximity stands diluted.

This shift has also been termed as “remote quid pro quo19” which is used to describe the situation where services target beneficiaries which is a generic class comprising of a certain free riders but inclusive of payers. The shift from proximate to remote quid pro quo overtime does not mean that the service to be rendered to the 

payers of Fee would be any different or in any manner less. The scope and depth of service to be rendered depends on the nature of the service. Like in the instant case, the service of continuous and increased supply of natural gas, inspite of being a generic service, extending to a class of gas consumers including those who are not payers of GIDC, must still reach all the industrial gas consumers paying GIDC (Fee)."