ISLAMABAD - The Supreme Court of Pakistan has ruled that the sugar mills and others, which used private generators of more than 500KW capacity to generate electricity for self use, are not liable to pay the electricity duty on their own self use of the power/energy.
A three-member bench of the apex court headed by Justice Munib Akhtar Tuesday announced the judgment reserved on 29-02-24.
The Punjab government on 25-08-2001 had issued the Punjab Finance Ordinance, 2001 to make changes in Section 13 of the Act that resulted in the application of the levy known as the electricity duty on the respondents.
This levy was challenged in the Lahore High Court by writ petitions on various grounds. The constitutionality of Section 13 was also brought into play. The provincial government took its stand on constitutionality in terms of Article 157(2)(b) of the Constitution.
The single bench of the LHC dismissed the petitions. Consequently, the intra-court appeals were filed before a Division Bench of the High Court, which reversed the judgment. Being aggrieved by this decision, the Punjab provincial government approached the apex court.
The respondents on the other hand claim that when s. 13 is read as a whole (including, in particular, the Fifth Schedule), and the well settled principles of interpreting fiscal statutes applied to it, the respondents were not liable to the payment of the duty notwithstanding the change in the definition of “licensee”.
The Additional Advocate General (AAG) submitted that the taxable event in s. 13 was encapsulated in the following words in subsection (1): “on the units of energy consumed”. The electricity duty was a general levy that was imposed on every person who did not come within the scope of any its exclusions or exemptions, as contained in the provisos to subsections (1) or (2), or the Sixth Schedule. The latter schedule admittedly did not apply to the respondents and the benefit of any exemption in terms of the 1985 notification stood withdrawn because of the 2001 notification. The definition of “licensee” had been altered in such manner that it specifically brought the respondents within its scope. Therefore, they were liable to pay the duty. The AAG submitted that subsection (3) of s. 13 related only to the third stage of taxation, i.e., recovery. The first two stages (i.e., leviability and assessment) stood determined in the case of the respondents in terms of subsection (1) (first stage) and the Fifth Schedule (second stage).
The AAG also contended that the Punjab Electricity Duty Rules, 2012 framed under Section 17 of the 1964 Act repealed and replaced earlier rules framed in 1964 in which it was candidly accepted that there was no provision for “licensees” such as the present respondents, because earlier the definition had been in different form. That was no longer the case after the 2001 substitution, whereby the respondents were precisely and specifically included.
The Court said the taxing event (i.e., leviability or the first stage) comprises the words: “there shall be levied and paid to Government, on the units of energy consumed for the purposes specified in the first column of the Fifth Schedule”. In other words, the taxing event comprises of two elements: (i) the consumption of energy units, (ii) for the purposes specified in the first column of the Fifth Schedule. It is only when these words are taken together that the taxing event can be sensibly gathered from subsection (1). Reading either portion separately and on a standalone basis returns an incomplete and incoherent result.
The judgment noted that Section 13 is not a general levy on electricity consumption. Rather it is on such consumption for a specific (i.e., limited) purpose or class, as contained in the second element. It is this composite that is the taxing event. The second column of the Fifth Schedule, where the rates are specified and which is the referent of the last portion of subsection (1), is relatable to the second stage of the levy, i.e., assessment.
It said that the first column of the Fifth Schedule is a table that comprises of two entries. Both relate to the supply of energy to consumers, the first by a licensee and the second by a person who is not a licensee.
It added that now, this has two aspects. Firstly, it is in the nature of a “supply” that, unless something else is shown in the relevant statutory provisions, it ordinarily relates to two distinct and separate persons, one being the supplier and the other to whom the supply is made. The second aspect is that it is the second person who must be the consumer of the energy. Thus, the taxing event in terms of Section 13(1) is on energy consumed, such consumption resulting from a supply of energy by either a licensee or someone who is not a licensee to a person who is the consumer of the energy, said consumers falling in the various categories or classes set out in the first column of the Fifth Schedule.
The judgment said that the respondents certainly produce energy by means of their generators of more than 500 KW capacity. But this energy is for self use, i.e., consumed by the respondents themselves. Thus, there is no “supply” of the energy. The second element of the taxing event did not apply to them and hence they are not within the levy.
It continued that there can be no doubt that the respondents are within the definition of “licensee” in terms of the substitution made by the 2001 Ordinance. However, that still does not bring them within the scope of the levy. The levy would still require the statutory licensee to supply the energy to some other person, i.e., the consumer in terms of the Fifth Schedule.