To avoid adverse order from the Lahore High Court (LHC), the federal government in the Finance Bill 2018 has decided, in principle, to withdraw powers of minister-in-charge and the Economic Coordination Committee (ECC) of Cabinet to issue any notification/Statutory Regulatory Order (SRO). It has also been proposed to revert the powers from federal minister-in-charge to the federal government.
A tax lawyer told Business Recorder here on Saturday that earlier such powers had been granted to the minister in-charge through Finance Act, 2017, which was challenged by a Lahore-based lawyer Waheed Shahzad Butt under constitutional remedy in terms of Article 199 of the Constitution of Pakistan. The LHC has issued notices to the government of Pakistan on the basis of petition filed by Waheed Butt, who has challenged the validation clauses inducted in fiscal laws to validate all previous notifications issued in former Prime Minister Nawaz Sharif regime and powers obtained by Federal Board of Revenue (FBR) to issue any SRO with the approval of minister-in-charge in Customs Act, 1969, Sales Tax Act, 1990, Income Tax Ordinance, 2001 and Federal Excise Act, 2005.
While challenging the powers of FBR/minister in-charge, the petitioner stated, "The petitioner is a taxpayer citizen of Pakistan and a practicing lawyer of the high court. Being an advocate, stakeholder amongst other elements responsible for upholding principles and provisions contained in the Constitution of Pakistan through present petition, the petitioner questions the constitutionality of insertion of validation clauses in various tax code and powers given to the FBR to levy and vary tax rates through any notification with the approval of minister-in-charge.
"Finance Act, 2017 has inserted the provisions in various tax codes, Section 221A of Customs Act, 1969, Section 74A of Sales Tax Act, 1990, Section 241 of Income Tax Ordinance, 2001 and Section 47C of Federal Excise Act, 2005. Finance Act has provided powers to the FBR to issue any notification known as statutory regulatory order [SRO], with the approval of minister-in-charge in Customs Act, 1969, Sales Tax Act, 1990, Income Tax Ordinance, 2001 and Federal Excise Act, 2005.
"Above provisions are in utter violation of the Articles 77 and 162 of the Constitution and are meant to nullify the judgments of Supreme Court in (2016) 114 TAX 241 (SC) and 2013 SCMR 1337. Insertion of validation clauses without amending the Constitution is void ab initio and in utter violation of Articles 4, 8, 18, 25, 77, 162 and 189 of the Constitution. The subordinate legislation ie amendment in various tax codes cannot alter the principles laid down in the Constitution. The principle of "no taxation without representation", embodied in Article 77 read with Article 162 of the Constitution, has perpetually and flagrantly been violated. In the Finance Act 2017, the power is unlawfully delegated to the FBR with the approval of the minister in-charge. It is well-settled proposition that levy of tax for the purpose of the federation is not permissible except by or under the authority of an Act of Majlis-e-Shoora (Parliament)."
The LHC ordered, "Learned counsel states that the amendment provided through Finance Act, 2017 is essential to defeat the spirit and law laid down in the cases cited at (2016) 114 Tax 241 (SC Pak) and 2013 SCMR 1337. Learned counsel states that by virtue of the said amendment, the requirements of the law and Constitution cannot be bypassed.
Issue notices to the respondents to file repot and para-wise comments on or before the said date. A notice shall also be issued to the attorney general for Pakistan."