LEVY OF SPECIAL EXCISE DUTY

LEVY OF SPECIAL EXCISE DUTY <!--[if gte mso 10]> LEVY OF SPECIAL EXCISE DUTY By Muhammad Shahid Baig, LL.M (London), Advocate High Court, Lahore The Federal Government, in exercise of the powers conferred by section 3A and subsection (2) of section 16 of the Federal Excise Act, 2005, levied special excise duty at the rate of one per cent of the value of the goods specified in the First Schedule to the Customs Act, 1969 (IV of 1969) except the goods mentioned in Notification No.S.R.O. 655(I)/2007, dated 29-6-2007, which are, obviously exempt from levy of tax. For the purpose of levy of Special Excise Duty, the value of the imported goods shall be determined in accordance with section 25 of the Custom Act, 1969, and in case of goods produced or manufactured in Pakistan, the value determined under subsection (1) or subsection (4) of section 12 of the Federal Excise Act, 2005, excluding the amount of excise duty levied under section 3 of the said Act. The Special Excise Duty, in case of goods imported, shall be paid in the same manner as the customs duty is paid by the importer under the Customs Act, 1969. Whereas, in case of produced or manufactured, it shall be paid in the same manner as Federal Excise Duty is paid by a producer or manufacturer under the Federal Excise Duty Act, 2005. The amount of Special Excise Duty shall not be the part of the value for the purpose of assessment of Customs Duty, Federal Excise Duty, Sales Tax or advance Income Tax in case of imported or locally manufactured goods. The Special Excise Duty, paid on import or local supply stage on industrial inputs, shall be adjustable against the Special Excise Duty chargeable on the goods manufactured therefrom at local supply stage. No other adjustment of Special Excise duty shall be allowed against any amount of Federal Excise Duty or Sales Tax or any other tax and vice versa. When goods, on which Special Excise Duty has been paid, are exported, the exporter shall be entitled to draw back of such duty in such manner and to such extent, as may be directed by the F.B.R. Above Notification i.e. S.R.O. 655(I)/2007 was issued by the Federal Government on 29th June, 2007, being effective from the 1st of July, 2007. If, we look at the Statute, section 3A is there to empower the Federal Government to levy and collect Special Excise Duty on goods produced or manufactured in Pakistan and imported into Pakistan at the rate of 1% of the value of such goods. The subsection (2) of section 3A provides that special levy under subsection (1) shall be in addition to any duty levied under section 3. The section 3A was inserted in the Statute Book i.e. Federal Excise Act, 2005 by Finance Act, 2007. As reported in monthly Pakistan Tax and Corporate Laws, 2007, Volume XXV, Book No.93, page 274, reported as PTCL 2007 BS 274, the Finance Act, 2007 being the Act of Majlis-e-Shoora (Parliament) received the assent of the President of Pakistan on the 30th June, 2007. As per section 1(3) of the Finance Act, 2007, it shall come into force on the 1st day of July, 2007. As incorporated on page 354BS, section 3A regarding levy of Special Excise Duty was assented to by the President on 30th June, 2007 being constituent of the Finance Act, 2007. As per Article 77 of the Constitution of the Islamic Republic of Pakistan, tax can be levied by law only. This Article provides that no tax shall be levied for the purpose of the Federation except by or under the authority of the Act of Majlis-e-Shoora (Parliament). It is specifically provided in Article 75 of the Constitution that when a Bill is presented to the President of Pakistan for assent, the President shall, within 30 days, assent to the Bill. As per Sub-Article (3), when the President has assented to a Bill, it shall become law and be called the Act of Majlis-e-Shoora (Parliament). If both these Articles are read conjunctively, the n, it would be more than obvious that the Bill becomes the Law, when assented to by the President and the tax can be levied by Law only. If, we examine the relevant provisions of the Federal Excise Act, 2005 in the light of the above Articles, then it would become crystal clear that section 3A along with other provisions of the Finance Act, 2007 attained the status of Law on 30th June, 2007, when the President of Pakistan assented to this Bill. Prior to the assent of the President, this proposed Bill was not holding the status of Law promulgated by the Majlis-e-Shoora (Parliament). It may, however, be added that it is clearly provided in section 5 of the General Clauses Act, 1897 that when any Central Act is not expressed to come into operation on any particular day, then it shall come into operation on the date on which it receives the assent of the President. From the discussion made supra, it is evident that the Federal Government was empowered to levy Special Excise Duty in exercise of the powers conferred upon it by section 3A of the Federal Excise Act, 2005, which attained the status of Law on 30th June, 2007 but it is very interesting to note that the Federal Government levied the Special Excise Duty on 29th June, 2007 through a Notification No.S.R.O. 655(I)/2007. While issuing this Notification, the Federal Government derived powers for levy of Special Excise Duty from section 3A and subsection (2) of section 16 of the Federal Excise Act, 2005. The status of section 3A has been thoroughly discussed above. On 29-7-2007, neither this section was existent nor the Federal Government was otherwise competent to levy, impose and collect any Special Excise Duty whatsoever. Likewise, subsection (2) of section 16 empowers the Federal Government to exempt any goods or class of goods or any services or class of services from the whole or any part of the duty leviable under the Federal Excise Act, 2005. As dilated upon earlier, section 3A was non-existent on 29th June, 2007, so the Federal Government was not competent to charge Special Excise Duty, hence when there was no provision to charge any duty in terms of any of the provision of the Statute, certainly there was no authority vested in the Federal Government to grant any exemption whatsoever. It is more than evident from the above that S.R.O. No.655(I)/2007 dated 29-6-2007 is infructuous in toto as the Federal Government was neither competent to charge Special Excise Duty nor there was any authority to grant any exemption in this regard. Furthermore, there is another established phenomena that the legislature can't delegate its powers to any Executive Authority for levy of any duty or tax. However, powers regarding exemption can be delegated. In view of above discussion, I may opine, that the Federal Government was not competent at all to charge, levy and collect any Special Excise Duty or to grant any exemption, hence the entire exercise being carried out by the Federal Board of Revenue/Federal Government regarding levy and collection of Special Excise Duty throughout Pakistan is infructuous, illegal and illegitimate.