The Federal Constitutional Court (FCC) on Tuesday issued notices to respondents regarding the collection of a levy imposed on gas supply to industrial captive power plants (CPPs). A two-member bench, comprising Chief Justice Amin-ud-Din Khan and Justice Aamer Farooq, conducted the hearing of appeals filed by the Petroleum Division against decisions of the Lahore, Sindh, and Islamabad High Courts.
Sindh High Court Ruling on Retrospective Levy
A division bench of the Sindh High Court (SHC) in January this year ruled that the collection of a levy on gas supply to industrial CPPs with retrospective effect was ultra vires (beyond legal authority) of the relevant law. The court also observed that the levy could not take effect immediately upon the promulgation of the law, as the ordinance itself never determined the rate of the levy.
The two-judge bench noted that the levy was to be calculated according to the mechanism envisioned under Section 4 of the Off-Grid Power Plants Levy Act, 2025, and could only become operative after the rate had been calculated and duly notified.
Petitions Against SSGC Bills
The bench made these observations while disposing of 30 identical petitions filed by various industrial units challenging bills issued by Sui Southern Gas Company (SSGC) for the recovery of the levy on CPPs for periods prior to the notification of the applicable rate. In its judgment, the bench noted that statutory notifications could not operate retrospectively in the absence of express authorisation by the legislature, except where they were beneficial or procedural in nature.
It observed that the notifications in question did not provide for retrospective application and that Sections 3 and 4 of the law did not envisage the levy being imposed retrospectively.
Uncertainty Within Ministry of Energy
The court further noted that uncertainty regarding the retrospective application of the levy was evident within the Ministry of Energy itself. It referred to a letter issued on April 11 last year directing agents, including SSGC, to recover the levy for February and March, which was withdrawn through another letter issued the same day.
Subsequently, through a letter dated April 18, 2025, the agents were informed that legal opinion had been sought from the law and justice division and the attorney general’s office on the issue of retrospective application. In May, the agents were then directed to collect the levy at the notified rate, the judgment added.
Court Rejects Retrospective Liability
The court rejected the respondents’ contention that the liability of CPPs to pay the levy arose immediately upon the promulgation of the ordinance, holding that the argument was misconceived since the ordinance itself did not determine the levy rate. The bench declared that the impugned bills issued by SSGC for the recovery of the levy for periods prior to March 7, 2025, were ultra vires Sections 3 and 4 of the Ordinance and the Act.
