Law: Constitution of Pakistan, 1973

Section: 77,70,154,153

Law: Finance Act, 2008

Section: 31(5),31(4)

Law: Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997

Section: 31(8)

REMARKS

No doubt NEPRA does not determine the surcharge; however, it is a statutory function of the Federal Government to impose the levy, which later becomes part of the tariff. Therefore, as held by the Apex Court in the case of Gadoon Textile Mills (supra), it cannot be treated as tax. At this juncture, we will take the first objection of the petitioner that since section 31 (5) of the NEPRA Act was introduced through Finance Act, 2008, therefore, it is constitutionally invalid legislation. We need not to delve in the legal discussion as to whether surcharge could be imposed through Finance Act or otherwise because, through section 51 of the NEPRA Act, the said levy through section 31(5) ibid was validated. The vires of section 51 of the NEPRA Act is not before us. Indeed, it is settled law that, while examining the constitutionality of a statute, a court must exercise restraint, and efforts should be made to save the statute instead of destroying it. A similar issue arose before the Apex Court in the case of Khurshid Soap, 3 wherein the Apex Court was dealing with the legality of Gas Infrastructure Development Cess Act, 2015 (\"Act of 2015\"), which, inter alia, was an Act being re-enacted pursuant to the judgment of the Apex Court in the case of Durrani Ceramics, 4 holding the Gas Infrastructure Development Cess Act, 2011 ultra vires to the Constitution having been passed through a money bill. The Act of 20 15 retrospectively validated the levy of a cess/fee. The Apex Court, in the case of Khurshid Soap (supra), has approved the said validation by observing that:
Keeping in mind the above legal infirmity with which the legislative process suffered in the legislation of GIDC Act, 2011 which led this Court in Durrani Ceramics Case to declare it invalid, the legislature introduced the bill of GIDC Act, 2015 under Article 70 of the Constitution which was passed by both the houses of the Parliament as a fee levying enactment. By recasting the GIDC Act, 2015 as a fee-levying instead of tax-levying enactment the constitutional requirements that lacked in the GIDC Act, 20 11 were met. This Court in several cases has recognized the right of the legislature to re-enact a law on the same subject, which on account of legal infirmities in its enactment process had been declared invalid by a Court of law, by removing the causes that led to its invalidity. The legislature is also competent to make the re-enacted law applicable retrospectively in order to bind even the past transactions that had been declared invalid. In the case of Molasses Trading and Export (Pvt.) Limited v. Federation of Pakistan (1993 SCMR 1905) this Court at page 1920 held as follows:-
\"Before considering this question it would be appropriate to make certain general observations with regard to the power of validation possessed by the legislature in the domain of taxing statute. It has been held that when a legislature intend to validate a tax declared by a Court to be illegally collected under an invalid law, the cause for ineffectiveness or invalidity must be removed before the validation can be said to take place effectively. It will not be sufficient merely to pronounce in the statute by means of a non-obstinate clause that the decision of the Court shall not bind the authority, because that will amount to reversing a judicial decision rendered in exercise of the judicial power, which is not within the domain of the Legislature. It is therefore necessary that the conditions on which the decision of the Court intended to be avoided is based, must be altered so fundamentally, that the decision would not any longer be applicable to the altered circumstances. One of the accepted modes of achieving this object by the Legislature is to re-enact retrospectively a valid and legal taxing provision, and adopting the fiction to make the tax already collected to stand under the re-enacted law. The Legislature can even give its own meaning and interpretation of the law under which the tax was collected and by \'legislative fiat\' make the new meaning biding upon Court. It is in one of these ways that the Legislature can neutralize the earlier decision of the Court. The Legislature has within the bound of the Constitutional Limitation the power to make such a law and give it retrospective effect so as to bind even past transaction. In ultimate analysis therefore a primary test of validating piece of legislation is whether the new provision removes the defect, which the Court had found in the existing law, and whether adequate provisions in the validating law for a valid imposition of tax were made.
In view of the foregoing discussion, it becomes evident that the legislative competence of the Parliament to validate a levy retrospectively, particularly where procedural or constitutional infirmities have been identified by a court, has consistently been upheld, provided that the defect in the original enactment is effectively addressed through substantive legislative measures. The mechanism of re-enactment or retrospective validation has been judicially recognized as a legitimate tool of legislative correction, enabling the State to preserve fiscal measures and statutory levies that may otherwise fall due to procedural lapses. In the present case, although section 31(5) of the NEPRA Act was introduced through the Finance Act, 2008, the subsequent validation of 31(5) and all acts and notifications under the same through section 51 of the NEPRA Act reflects the express legislative intent to cure any legal defect and affirm the continued enforceability of the surcharge. It is also a well-settled principle that when the vires of a validating provision is not under challenge, a strong presumption of constitutionality attaches to such enactment. Therefore, in the light of the settled jurisprudence on legislative validation and in the absence of any direct challenge to section 51, the argument that the surcharge is constitutionally invalid due to its initial mode of introduction does not hold any ground. Accordingly, the objection raised by the learned counsel for the petitioners is found to be untenable and is hereby overruled.
Article 77 of the Constitution expressly provides that no tax shall be levied for the purposes of the Federation except by or under the authority of Act of Majlis-e-Shoora (Parliament). Therefore, it is settled that levy of tax for the purpose of Federation is not permissible except by or under the authority of Act of Majlis-e-Shoora (Parliament). Such legislative powers could not be delegated to the executive authorities; parliament alone, and not the government/ executive, is empowered to levy tax. Delegation of such powers to the government/ executive was for the purpose of implementation of such laws which is to be done by framing rules or issuing notification etc.
The imposition of a surcharge does not constitute a legislative function of the Parliament in the same manner as the imposition of taxes under Article 77 of the Constitution. Rather, it attracts all the attributes of a fee. We are also fortified by the ratio laid down in Gadoon Textile Mills (supra) approving the imposition of surcharge under the delegated powers by the Executive/ Authority pursuant to section 25(2) of the WAPDA Act, 1958. In our considered view, this plea of the petitioners that the imposition of surcharge by the Federal Government pursuant to section 31 (8) being excessive delegation, is not tenable.
Moreover, the fmancial structure of the electricity sector is heavily regulated under the NEPRA Act, with NEPRA playing a central role in tariff determination and adjustments. If the surcharge mechanism 1s left undefined, it would create a bypass mechanism, allowing the executive to impose fmancial burdens on consumers without the structured oversight required under the NEPRA Act. This undermines the fundamental regulatory safeguards embedded within the NEPRA Act and contradicts its objective of ensuring a transparent and balanced electricity market.

ORDER