The sources said, FBR cited a letter of Ministry of Energy (Power Division) of June 21, 2019 and argued that the cases for exemption of duty for consideration of Economic Coordination Committee (ECC) of the Cabinet are brought by the concerned Ministries/Divisions under Rule 18(1) of Rules of Business, 1973 which in the KE case is Ministry of Energy (Power Division). The same procedure was previously followed by the Ministry while forwarding KE's case for exemptions decided by the ECC on May 19, 1998. FBR's Secretary Tariff( Tariff-II) Farukh Sharif, argued that the Sindh High Court (SHC) while deciding the constitutional petition No.6 Tariff 387/2018 filed by M/s K-Electric in the matter, after discussing in detail the merits of the case, has held in its judgment of April 12, 2019 that " there is no lawful justification for non-payment of long outstanding tax liability, which otherwise, in our humble view, cannot be waived through ECC decision or in any executive order".
According to the FBR, the outstanding liabilities against the petitioner, M/s K-Electric stand recoverable, adding that as informed by the concerned collectorate in its letter of July 13, 2019, M/s KE has preferred to file civil petition number 1555/2019 for leave to appeal before Supreme Court which in its interim order of May 5, 2019 directed the petitioner to deposit 25 per cent of the claimed liability of Rs 321 million which has been deposited to the tune of Rs 80.5 million in government treasury being 25 per cent of the original liability. FBR, in its written comments on a letter of Ministry of Energy, further argued that on April 2, 2013, it did not agree with the proposal in the draft summary for the ECC by the erstwhile Ministry of Water and Power, seeking waiver from customs duties and taxes for KESC in this matter.
The background of the issue is that the summary for exemption of customs duty and sales tax on equipment/materials imported by KESC moved by the Ministry of Water and Power was placed before the ECC on May 19, 1998. The proposal was not approved by the ECC. However, the ECC decided that the goods of the importer lying at the port should be immediately released by customs against appropriate indemnity/ guarantee to the erstwhile CBR. The ECC, in its same decision constituted a committee to be convened by the Secretary Water and Power with the Chairman CBR, among others, as its members. The committee was tasked to "look into the issue of payment of duties and taxes and demurrages". However, it is evident that the ECC did not mandate the committee to consider grant of exemption of customs duty and taxes, as granting exemption of huge amount of government revenue would have been beyond the powers of a committee comprising government functionaries. This contention was also endorsed by Sindh High Court in its impugned judgment of April 12, 2019 and terms of reference of the committee notified by the Water and Power Ministry on September 7, 2000. The petitioner, since the decision of the ECC of the Cabinet, is said to have withheld the government duty and taxes.
"As no exemption from leviable duty and taxes was granted to the petitioner and despite lapse of considerable time period the petitioner failed to pay the arrears, the Board on June 13, 2016 directed the collectorate to proceed for the recovery of government dues amounting to Rs 321.733 million," said Collector, Model Customs Collectorate of Appraisement, West, Custom House Karachi. M/s K-Electric when confronted with the decision, filed a suit (1002/2014) in the SHC and obtained stay on the recovery. The collectorate prayed for deposit of 50 percent of the amount as per orders of the Supreme Court passed in civil appeal on June 27, 2018. M/.s KE when faced with this position withdrew the suit and filed a civil petition before SHC. The collectorate actively pursued the case before SHC which finally dismissed the petition of the power utility with the direction that the liability of Rs 321 million outstanding towards duty and taxes for more than 20 years be paid by KE within four weeks from the date of the order. The department was restrained from taking any action or coercive measures before expiry of the prescribed period.
