The Federal Constitutional Court on Wednesday observed that the government could levy royalty only on minerals and that imposing royalty on a finished product appeared, prima facie, to be equivalent to a tax.
A three-member bench headed by Justice Hassan Azhar Rizvi heard a case relating to the imposition of royalty on cement production. During the proceedings, the court expressed serious concern over the Punjab government's decision regarding the levy.
Court's Observations on Royalty
Justice Hassan Azhar Rizvi remarked that royalty should be charged on minerals rather than on bags of cement, questioning how the government could impose royalty on a finished product. He directed law officers to inform the government that the current method of imposing royalty did not appear appropriate.
The bench also sought details on how much the price of a cement bag would increase as a result of the levy.
Impact on Consumers
During the hearing, Justice Rozi Khan observed that the burden of royalty imposed on cement bags would ultimately be passed on to consumers, as factory owners would recover the additional cost from the public. He noted that such a measure would harm consumers rather than factory owners.
Counsel for the petitioners, Ahsan Bhoon, argued that the government was empowered to collect royalty only on minerals and that royalty on a finished product was, in effect, a tax. He contended that imposing royalty on cement bags amounted to collecting excise duty twice.
Adjournment for Further Instructions
At this stage, the Additional Advocate General Punjab requested time to obtain fresh instructions from the provincial government. The court accepted the request, granted time to the Punjab government for further directions, and adjourned the hearing.
The court's observations highlight the legal distinction between royalty on minerals and taxes on finished goods, with potential implications for the cement industry and consumers.
