Daily Times

Article 77 of the Constitution of Pakistan categorically says that no tax shall be levied for the purposes of the federation except by or under the authority of the Act of Parliament. The Supreme Court of Pakistan in its landmark judgement, Messers Mustafa Impex, Karachi v Government of Pakistan (2016) 114 Tax 241 (SC Pak), held that “neither a secretary, nor a minister and nor the Prime Minister are the federal government and the exercise, or purported exercise, of a statutory power exercisable by the federal government by any of them, especially, in relation to fiscal matters, is constitutionally invalid and a nullity in the eyes of the law. Similarly, budgetary expenditure or discretionary governmental expenditure can only be authorised by the federal government i.e. the cabinet, and not the prime minister on his own”.

What makes the situation more painful is the fact that members of Parliament also delegated powers to FBR in violation of Constitution

Unfortunately, the ousted Prime Minister and his Finance Minister had been violating the command of the supreme law of the land and dictum of Supreme Court with impunity by levying taxes and varying tax rates through Statutory Regulatory Orders (SROs). Ishaq Dar through Finance Bill, 2017, endorsed blindly by MNAs of PML-N, even tried to nullify the judgement of Supreme Court. The Finance Act 2017 also unconstitutionally empowered Federal Board of Revenue (FBR) to enhance the rate of sales tax with the approval of the ‘minister in charge’. FBR unlawfully exercised this power vide SRO 713(I)/2017 dated July 31, 2017 even without approval of the minister in charge. Through this SRO, high speed diesel is subjected to rate of 40 percent and motor spirit excluding HOBO to 23.5 percent against standard rate of 17 percent under Sales Tax Act, 1990.

Irritated by the landmark judgement of the Supreme Court, wizards sitting in FBR, proposed amendments through Finance Bill 2017 in Customs Act, 1969 (section 221A), Sales Tax Act, 1990 (section 74A), Income Tax Ordinance, 2001 (section 241) and Federal Excise Act, 2005 (section 43A) to nullify the judgement of Supreme Court in Messers Mustafa Impex, Karachi v Government of Pakistan (2016) 114 Tax 241 (SC) and it was approved by parliamentarians in utter disregard of Article 77 of the Constitution. FBR stalwarts have been insisting that words ‘by or under the authority of Act’, as used in Article 77 of the Constitution, authorise ‘taxation by delegation’ through SROs. However, before the Supreme Court in Messers Mustafa Impex, Karachi v Government of Pakistan (2016) 114 Tax 241 (SC), Additional Attorney General submitted that “the levy and exemption of tax is the function of Parliament under Article 77 of the Constitution and power of exemption if given to the executive per se, would amount to the negation of the doctrine of parliamentary supremacy and the doctrine of separation of powers”. This submission was against the view of FBR and was confirmed by the apex court. The ill-advised attempt to nullify this binding judgement under Article 189 of the Constitution by the government of ousted Prime Minister and his cronies proved their disrespect of apex court. Strangely, the then Law Minister and Attorney General of Pakistan, both seasoned lawyers, did not warn the Prime Minister and Finance Minister that validation clauses to nullify the judgement were ultra vires and the only remedy was amendment in Constitution.

It is shocking that after the judgement of Supreme Court in Messers Mustafa Impex, Karachi v Government of Pakistan (2016) 114 Tax 241 (SC) and Engineer Iqbal Zafar Jhagra and Senator Rukhsana Zuberi v Federation of Pakistan and Others ((2013) 108 TAX-I (SC Pak)), the ousted Prime Minister and his Finance Minister kept on imposing new taxes or varying rate of taxes through SROs violating not only Article 77 but also openly defying Article 189 of the Constitution. They were lucky that this aspect was neither considered by the Apex Court nor did the Counsel representing the parties bothered to highlight it for seeking contempt proceedings against them that could make disqualification simpler independent of Panama Leaks case.

The FBR issued SRO 713(I)/2017 “in exercise of the powers conferred by clause (b) of subsection (2) and sub-section (6) of section 3 of the Sales Tax Act, 1990”. Section 3(2)(b) says: “the Board with the approval of the Minister Incharge of the Federal Government may, subject to such conditions and restrictions as it may impose, by notification in the official gazette, declare that in respect of any taxable goods, the tax shall be charged, collected and paid in such manner and at such higher or lower rate or rates as may be specified in the said notification”.

The Supreme Court has already disapproved taxation by Executive in Engineer Iqbal Zafar Jhagra and Senator Rukhsana Zuberi v Federation of Pakistan and Others ((2013) 108 TAX-I (SC)).

It is shocking that even after the unceremonious exit of Nawaz Sharif and his Finance Minister, FBR is violating the supreme law of the land by varying tax rates through SROs. This confirms that not only political elite but its hand-picked bureaucrats have no respect for Constitution as explained by Supreme Court in Messers Mustafa Impex, Karachi v Government of Pakistan (2016) 114 Tax 241 (SC) and Engineer Iqbal Zafar Jhagra and Senator Rukhsana Zuberi v Federation of Pakistan and Others (2013) 108 TAX-I. What makes the situation more painful is the fact that members of Parliament also delegated powers to FBR in violation of Constitution.

The writer is Advocate Supreme Court and Adjunct Faculty at Lahore University of Management Sciences (LUMS). Email: ikram@huzaimaikram.com; Twitter: @drikramulhaq

Published in Daily Times, August 6^th 2017.