The Supreme Court on Thursday struck down notification for withdrawing exemption on sales tax to the companies, importing cellular phones and textile goods in the country. Some importers of cellular phones and textile goods who were enjoying certain exemptions from sales tax granted by the Federal government were either withdrawn or the tax rates were modified vide notifications No 280(I)/2013, 460(I)/2013 (both relating to cellular phones) issued pur suant to Sections 3(2)(b), 3(6), 8(1)(b), 13(2)(a) and 71 of the Sales Tax Act, 1990 (the Act), and 682(I)/2013 (relating to textile goods) issued under Sections 4(c), 3(2)(b), 3(6), 8(1)(b) and 71 of the Act dated 4.4.2013, 30.5.2013 and 26.7.2013 respectively.
It is pertinent to mention that SRO 682(I)/2013 had enhanced sales tax from 5 to 17 per cent on supplies of industrial inputs outside five export oriented sectors including textile whereas SRO.No 280 (I)/2013 and 460(I)/2013 had enhanced sales tax on the imported cellular phones. Aggrieved over the withdrawal and/or modification (in the rate) of sales tax, the appellants challenged the same through constitution petitions before the Islamabad High Court (IHC) on the primary ground that such notifications had not been issued by the Federal government in accordance with Section 3 of the Act. However, the IHC dismissed all the petitions to which the appellants invoked the Supreme Court jurisdiction.
Announcing its 80-page reserved judgement in the matter on Thursday, a three member judge bench led by Justice Mian Saqib Nisar declared the impugned notifications ultra vires. Striking down all the notifications, the court ruled that fiscal notifications enhancing the levy of tax issued by the Secretary, Revenue Division, or the Minister, are ultra vires.
Accepting the appeals of the companies importing cellular phones and textile goods against the judgement of IHC, the apex court clarified that in the past it has consistently held that a greater latitude is allowed in relation to beneficial notifications and that principle still applies.
The judgement said, 'The cellular phones and textile goods importers' counsels had argued that the federal government earlier had granted them certain exemptions from sales tax, but subsequently these exemptions were either withdrawn or tax rates modified vide notifications No 280(1)/2013 and 460(1)/2013, which were issued under the provisions of Sales Tax Act, 1990.
The judgement authored by Justice Mian Saqib Nisar ruled that the Prime Minister cannot take decisions by himself, or by supplanting or ignoring the Cabinet because the power to take decisions is vested with the Federal Government ie the Cabinet, and unilateral decisions taken by him would be a usurpation of power.
The court observed that the ordinance making power can only be exercised after a prior consideration by the Cabinet, adding that any ordinance issued without the prior approval of the Cabinet is not valid. Similarly, no bill can be moved in the Parliament on behalf of the Federal Government without having been approved in advance by the Cabinet, says the judgement.
It ruled that the Cabinet has to be given a reasonable opportunity to consider, deliberate on and take decisions in relation to all proposed legislation, including the Finance Bill or Ordinance or Act. Actions by the Prime Minister on his own, in this regard, are not valid and are declared ultra vires.
"Once again, it would be noted that the power has been conferred not on the Prime Minister but the Federal Government ie the Cabinet. Similarly, Article 85 confers power, not even on the Federal Government, but on the National Assembly to make a grant in advance for a period not exceeding 4 months pending completion of the budgetary procedure laid down in Article 82, and Article 86 confers a similar power on the Federal Government but only during the period when the National Assembly stands dissolved. Clause (3) of Article 82 explicitly states that no demand for a grant shall be made except on the recommendation, not of the Prime Minister, but of the federal government ie the cabinet," the court said.
The court said that powers of the Prime Minister in relation to such matters are set out in Article 83 and are confined to a mere authentication of the grants made by signing a schedule setting them out. The court held that these provisions are clearly articulated and must not be violated in any circumstances. The judgement recalled that this court has already dealt with the question of the constitutionality of discretionary spending by the Prime Minister in the case reported as Action against distribution of development funds by Ex-Prime Minister Raja Pervaiz Ashraf (PLD 2014 SC 131).
The court while citing paragraph 52 of the said judgement ruled that the National Assembly, while giving assent to a grant which is to be utilised by the Executive at its discretion, has to follow the procedure provided in Articles 80 to 84 of the Constitution as well as the Rules of Procedure, 2007.
However, such discretionary grant cannot be spent at the absolute discretion of the Executive and the discretion has to be exercised in a structured manner. "The constitution does not permit the use/allocation of funds to MNAs/MPAs/notables at the sole discretion of the Prime Minister or the Chief Minister. If there is any practice of allocation of funds to the MNAs/MPAs/notables at the sole discretion of the Prime Minister/Chief Minister, the same is illegal and unconstitutional. The government is bound to establish procedure/criteria for governing allocation of such funds for this purpose. Though funds can be provided for development schemes by way of supplementary grant but for that purpose procedure provided in Articles 80 to 84 of the Constitution and the rules/instructions noted hereinabove has to be followed strictly," the verdict said.
The court further ruled that the said judgement had also ruled that funds can be allocated by way of re-appropriation but the procedure provided in the Constitution and the rules has to be followed in its true perspective. Similarly no bulk grant can be made in the budget without giving detailed estimates under each grant divided into items and that every item has to be specified.
Likewise, the amounts as approved in the budget passed by the National Assembly have to be utilised for the purpose specified in the budget statement. Any re-appropriation of funds or their utilisation for some other purpose, though within the permissible limits of the budget, are not justified. In such circumstances, the supplementary budget statement has to be place before the Parliament following the procedure provided in Articles 80 to 84 of the Constitution
The court ruled that any discretionary spending at the initiative of the Prime Minister alone is manifestly unconstitutional and contrary to law. This illegality will continue until such time when, at the very least, the procedure set out in paragraph 66 above is adopted and followed. Failure to do so would mean that the Prime Minister would remain personally responsible.
The court while summarising the conclusion of the judgement held that he Rules of Business, 1973 are binding on the Government and a failure to follow them would lead to an order lacking any legal validity. It held that the Federal Government is the collective entity described as the Cabinet constituting the Prime Minister and Federal Ministers.
"Neither a Secretary, nor a Minister and nor the Prime Minister are the Federal Government and the exercise, or purported exercise, of a statutory power exercisable by the Federal Government by any of them, especially, in relation to fiscal matters, is constitutionally invalid and a nullity in the eyes of the law," says the judgement.
"Similarly budgetary expenditure, or discretionary governmental expenditure can only be authorised by the Federal Government ie the Cabinet, and not the Prime Minister on his own, the judgement ruled adding that any Act, or statutory instrument (eg the Telecommunication (Re-Organisation) Act, 1996) purporting to describe any entity or organisation other than the Cabinet as the Federal Government is ultra vires and a nullity." The judgement said.
It said that the ordinance making power can only be exercised after a prior consideration by the Cabinet, adding that an ordinance issued without the prior approval of the Cabinet is not valid. 'Similarly, no bill can be moved in Parliament on behalf of the federal government without having been approved in advance by the Cabinet. The Cabinet has to be given a reasonable opportunity to consider, deliberate on and take decisions in relation to all proposed legislation, including the Finance Bill or Ordinance or Act. Actions by the Prime Minister on his own, in this regard, are not valid and are declared ultra vires," the judgement ruled.