2009 SCMR 1399 (PLP)

IFTIKHAR MUHAMMAD CHAUDHRY, C.J.

The Commission on Oil and Gas Products Pricing Mechanism has submitted its report. The Registrar may supply copy of the same to the petitioners and all the respondents on costs. Similarly, spare copies shall be supplied to the Honourable Members of the Bench for their perusal. The learned counsel appearing for the parties shall come prepared for preliminary consideration of the report on the next date of hearing.

2. Listed C.M.A. No.2080 of 2009 has been filed on behalf of the petitioner in Constitutional Petition No.33 of 2009 with the prayer that the Notification dated 30th June, 2009/1st July, 2009 issued and enforced by the Oil and Gas Regulatory Authority, Islamabad (OGRA) and respondents Nos. 1 and 2 be suspended till the final disposal of the cases.

3. The learned counsel for the applicant contended that carbon tax was imposed in place of Petroleum Development Levy (PDL) in pursuance of the Finance Act, 2009 whereby the Petroleum Products (Petroleum Development Levy) Ordinance, 1961 (Ordinance No.XXV of 1961) was amended. According to the learned counsel, there was neither any statement of objects nor any document was placed on record to show that carbon surcharge in place of PDL was essential. According to him the known object for the imposition of the carbon tax was to provide petroleum products free of carbon dioxide to the citizens so as to minimize the pollution. Therefore, unless the Ministry of Environment had spelt out the objects and purposes for imposing carbon surcharge, the Government could not have issued the notification in question. According to him even if amendment of law had taken place the Government ought to have withheld the notification until it was able to provide petroleum products free of carbon and the consequential pollution free environment. He further stated that while replacing PDL with the carbon tax ex-refinery prices of other components were increased tremendously and sales tax was also being charged on all the components, though there was no such provision in the Sales Tax Act, 1990 which authorized the Customs Department to levy such a tax along with other taxes.

4. On the other hand, Khawaja Saeed-uz-Zafar, Advocate Supreme Court appearing for the OGRA stated that as for as PDL was concerned, it was replaced with the carbon tax and no fresh tax was imposed. As to the increase in prices of other components, the learned counsel stated that it was done in view of the prices of the petroleum products prevailing in the international market. On the Court query, he gave the following break-up of the prices of petrol, diesel and kerosene oil as they stood on 30th June, 2009 and 1st July, 2009:

Comparative Chart of Prices Name of product Prices as on 30-6-2009 Prices as on 1-7-2009 Petrol Ex Refinery price 31.91 36.59 Oil marketing companies margin 01.39 01.60 Petroleum development levy 10.54 -- Dealers margin 01.74 02.00 Sales tax 07.75 08.57 Inland freight 02.88 03.37 Carbon tax

10.00 Total: 56.21 62.13 Diesel Ex Refinery price 34.78 40.94 Oil marketing companies margin 01.35 01.35 Dealers margin 01.50 01.50 Petroleum development levy 08.53 -- Inland freight 01.87 02.22 Carbon tax -- 08.00 Sales tax 07.68 08.64 Total: 55.71 62.65 Kerosene Oil Ex Refinery price 32.77 39.26 Oil marketing companies Margin 01.46 01.74 Dealer margin -- -- Petroleum development levy 06.88 Inland freight '03.61 04.16 Carbon tax -- 06.00 Sales tax 07.15 08.19 Total: 51.87 59.35 A cursory view of the above comparative statement clearly shows that Petroleum Development Levy has been replaced with carbon tax and mainly the ex-refinery price of the petroleum products as well as sales tax thereon has been increased.

5. The learned Attorney-General submitted that he had not received notice of the aforesaid application. However, he stated that the prices of the petroleum products were required to be increased due to many factors, such as the rates prevailing in the international market, the budgetary demands for running the affairs of the country, provision of subsidies on various items, e.g. wheat, etc. He stated that the budget was already deficit.

6. We have heard the learned counsel for the parties as well as the learned Attorney-General and have gone through the above comparative statement. On the pricing mechanism of petroleum products, a Commission has already been constituted by this Court, which has submitted its report. The question raised before us requires deeper consideration in the light of the report of the Commission and the provisions of the Constitution, e.g., Articles 4 and 9 of the Constitution as well as the Preamble of the Constitution, which guarantees social justice.

7. Having gone through the amendment in the Petroleum Products (Petroleum Development Levy) Ordinance, 1961 as introduced by the Finance Act, 2009, prima facie, we are of the view that there was no justification for imposition of carbon surcharge in place of PDL because such a tax could be imposed subject to certain conditions, such as provision of petroleum products free of lead or carbon dioxide and consequential pollution free atmosphere to all citizens. Further, it was also necessary that the Ministry of Environment had demanded funds for the purpose of catering to its requirements of providing pollution free atmosphere to the general public. Such funds would only be used for the purpose of pollution free atmosphere. It was not a new tax because it was in force in other countries but at the same time they were providing pollution free atmosphere. This tax could be imposed upon the price of the components but not upon the total price after adding sales tax, etc.

8. In view of the above facts and circumstances, the operation of the impugned notification to the extent of imposition of carbon tax is hereby suspended pending decision of the petitions before this Court. The OGRA and concerned authorities are directed to issue notification which shall be applicable from 8th July, 2009 this arrangement has been made temporarily. The final decision in this behalf will be taken after hearing of the main petitions and after taking into consideration the report of the Commission as well as other components which have been referred hereinabove.

9. The Secretary, Ministry of Environment, Government of Pakistan is directed to appear in person along with the summary placed before the Cabinet demanding additional funds for carrying out projects to provide pollution free atmosphere or other similar objects on the basis of which request for imposition of carbon surcharge was made. Adjourned to 9th July, 2009. M.H./I-14/SC Order accordingly.