Cos producing power from generators: SC reserves judgement in levy of electricity duty case

ISLAMABAD: The Supreme Court reserved judgment in the levy of electricity duty on the companies which produce power from generators but are neither suppliers nor consumers.

A three-judge bench, headed by Justice Ijazul Ahsan and comprising Justice Munib Akhtar and Justice Shahid Waheed, heard an appeal of the Punjab government against the judgment of the Lahore High Court (LHC) regarding the levy of electricity duty on the generation of electric power from generators.

A division bench of the LHC, on 13-01-2011, held the operation of the Punjab government notification dated 25-8-2001 in abeyance.

Levy of electricity duty: Under which law the notification was issued, SC asks Punjab govt

It declared; “levying of tax on production of energy by private generators is not sustainable in the eye of law and instead, the government should encourage and give incentives to the appellants/petitioners as well as others who are participating or intend to participate in the production of energy till the time WAPDA produces energy enough to meet satisfactorily the domestic and industrial needs of the country in the present conditions …”

The Punjab government on August 25, 2001, through NoSO(Power)15-1/85 imposed electricity duty on every person generating electric power from a generator having capacity of more than 500 KWH with effect from 01-07-2001.

In the last hearing, the bench had ordered the advocate general Punjab to explain under which law the notification was issued for the levy of electricity duty on the companies which are neither suppliers nor consumers.

During the proceeding, Additional Advocate General (AAG) Barrister Mumtaz Ali, representing the provincial government, contended that the electricity duty is imposed under Section 13(1) of the West Pakistan Financial Act, 1964. He submitted that there are three categories regarding levy of the electricity duty, firstly declaration of liability, second assessment of facts, and thirdly, method of recovery. He stated the liability does not depend on the assessment if the person does not pay voluntarily.

As per the law, the duty is levied on the units of energy consumed, adding every person is liable to pay the electricity duty who consumes it, he added.

Justice Ijaz said the duty could be levied in case electricity is supplied by the deemed licencees to the consumers, but the question is how the respondents (producers of electricity through generators) are licencees or consumers?

The AAG said they are deemed as licencee under Section 15 of the Act. However, the bench questioned whether the licence is granted to power producers by the National Electric Power Regulatory Authority (NEPRA).

Justice Munib questioned if the petitioners’ assessment cannot be particularized then how they are supposed to pay the tax. Justice Ijaz inquired if the petitioners’ say they do not have money as they are going in losses, then how the government could recover duty from them.

Barrister Mumtazsaid that till 1985 every consumer was liable to pay duty, but in 1985 amendments were made in the 5th and 6th Schedules of the law and some categories were given exemption, and also changed the method of assessment, adding the exemption could be given only through gazette notifications. He further said that the exemption was withdrawn in 2001 and the respondents were paying the duty till 2010, but the LHC judgment they are not paying it now.

The AAG further contended that this is general law, therefore, everyone was covered. He said that under Rules 6 and 7 of the Rules 2012, the Punjab Power Department determines tariff for the power producers.

Justice Ijaz remarked that in 1964 when the law was made there was no concept of self-generation, and noticed that the NEPRA has not determined any tariff for the self-generation of electricity. But it is the stance of the Punjab government that it determines the tariff under its own Rules. Justice Munib inquired from an official of the Punjab Power Department whether they had determined the tariff under Rules 2012. He replied, “no”.

Barrister Mumtaz argued that under Article 157 of the constitution, the provincial government is competent to levy tax on consumption of electricity. Justice Ijaz said the generation and consumption of electricity are two different subjects. He noted that the Punjab government has imposed a duty on the consumption and not on the generation of electricity.

The bench, after hearing the arguments of the petitioners and the respondents, reserved the judgment. The bench members praised the AAG, Barrister Mumtaz, for persuasive arguments.

The contention of the respondents was that they had set up their own mechanism for power generation for more than 500 KWH in their mills. In such capacity, they are neither a licensee nor a generation company as defined under the Punjab Finance Act, 1964, and the Regulations of Generation, Transmission and Distribution of Electric Power Act, 1997.

They submitted that the notification, whereby, electricity duty on the generation of electricity from a generator of capacity of more than 500 KW w.e.f. 1-7-2001 has been levied, is patently ultra vires the West Pakistan Finance Act, 1964, which expressly levies duty on energy consumed and not on energy generated.

They further contended that Article 157 of the Constitution, clearly provides that the person viz the government, federal government or the provincial government have the right to impose tariff on the supply and consumption of electric energy.

However, the said Article does not include a private person generating and consuming the electric energy, which means that no limitation has been imposed on any person who generates energy from his own sources.

Copyright Business Recorder, 2023