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Petitioner: KHAZANA SUGAR MILLS (PVT.) LIMITED VS Respondent: FEDERATION OF PAKISTAN through Secretary, Ministry of Water and Power, IslamabadHonorable Justice Syed Arshad AliShumail Ahmad Butt, Isaac Ali Qazi, Iqbal Akhtar Khan, Abdur Rahim Khan Jadoon,Sanaullah
P L D 2026 Peshawar 60 Before Syed Arshad Ali and Wiqar Ahmad, JJ KHAZANA SUGAR MILLS (PVT.) LIMITED through General Manager and others---Petitioners Versus FEDERATION OF PAKISTAN through Secretary, Ministry of Water and Power, Islamabad and others---Respondents Writ Petition No. 3876-P of 2014 (and other connected petitions), decided on 17th April, 2025. (a) Regulation of Generation, Transmission and Distribution of Electric Power Act (XL of 1997)--- ----Preamble---National Electric Power Regulator Authority---Object, purpose and scope---National Electric Power Regulator Authority provides a comprehensive framework for regulating power sector in Pakistan, promoting efficiency, transparency and fairness---Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997 has a broad scope that encompasses various aspects of power sector in Pakistan inter alia, including regulation of power sector; issues of licenses to power generation, transmission and distribution companies; tariff determination for power generation, transmission and distribution; ensuring fair and transparent prices; market operation; consumer protection, etc. (b) Regulation of Generation, Transmission and Distribution of Electric Power Act (XL of 1997)--- ----Ss. 31 & 51---Constitution of Pakistan, Arts. 77, 142 & 199---Constitutional petition---Surcharge, levy of---Jurisdiction of Federal Government--- Scope--- Petitioners/companies assailed different surcharges imposed under S. 31(5) of Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997---Plea raised by petitioners/companies was that this was the authority of Legislature and not the Executive---Validity---National Electric Power Regulator Authority does not determine surcharge---This is a statutory function of Federal Government to impose the levy which later becomes part of tariff and it cannot be treated as tax---Vires of validating provision was not under challenge, therefore a strong presumption of Constitutionality was attached to such enactment---Surcharge was Constitutionally not invalid due to its initial mode of introduction---In its current form, S. 31(8)(a) of Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997 had granted excessive discretion to the Executive and was inconsistent with the object and purpose of Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997---High Court declared to read down provision of S. 31(8)(a) of Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997, to restrict its application solely to public sector projects that directly pertained to generation, transmission and distribution of electricity---High Court directed Federal Government that in exercise of its powers under S. 31(8)(a) of Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997, it should ensure that any surcharge levied was strictly confined to projects within the electricity sector---High Court further declared that any imposition of surcharges beyond such scope would be deemed ultra vires Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997---High Court advised the relevant authorities to review and amend the provision to explicitly reflect such limitation, ensuring compliance with statutory framework governing power sector---Constitutional petition was disposed of accordingly. Messrs Gadoon Textile Mills and 814 others v. WAPDA and others 1997 SCMR 641; Jurists Foundation through Chairman v. Federal Government through Secretary, Ministry of Defence and others PLD 2020 SC 01; Pakistan Tobacco Company Ltd. and others v. Government of N.W.F.P. through Secretary Law and others PLD 2002 SC 460; Shahtaj Sugar Mills Ltd. and others v. Government of Pakistan through Secretary Finance and others 2024 SCMR 1656 and Province of Punjab through Secretary Agriculture Department, Lahore v. Saleem Ijaz and others 2023 SCMR 774 rel. (c) Interpretation of statutes--- ----Fiscal statute---Validating a levy retrospectively---Principle---Legislative competence of the Parliament to validate a levy retrospectively, 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---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. Baz Muhammad Kakar and others v. Federation of Pakistan through Ministry of Law and Justice and others PLD 2012 SC 923; Engineer Iqbal Zafar Jhagra and another v. Federation of Pakistan and others 2013 SCMR 1337; Messrs Khurshid Soap and Chemical Industries (Pvt.) Ltd. through Sheikh Muhammad Ilyas and others v. Federation of Pakistan through Ministry of Petroleum and Natural Resources and others PLD 2020 SC 641 and Federation of Pakistan through Secretary Ministry of Petroleum and Natural Resources and another v. Durrani Ceramics and others 2014 SCMR 1630 rel. (d) Interpretation of Constitution--- ----Trichotomy of powers---Scope---Constitution is based on the principle of trichotomy of powers---Legislature makes laws, the Executive executes it, while the Judicature is entrusted with duty to interpret it---Constitution identifies and explains authority of the Parliament to exclusively make laws with respect to any matter in the Federal legislative list---All such matters pertaining to such areas in the Federation are not included in any Province. (e) Constitution of Pakistan--- ----Arts. 77 & 142---Levy of tax---Delegation of powers---Scope---Levy of tax for the purposes of Federation is not permissible except by or under the authority of an Act of Majlis-e-Shoora (Parliament)---Such legislative powers cannot be delegated to executive authorities---Parliament alone and not the Government/Executive is empowered to levy tax---Delegation of such powers to Government Executive is for the purpose of implementation of such laws, which is to be done by framing rules or issuing notifications etc. Cyanamid Pakistan Ltd. and another v. Collector of Customs (Appraisement), through Assistant Collector Customs House, Karachi and others PLD 2005 SC 495 rel. (f) Interpretation of statutes--- ----Reading in and reading down a provision---Object, purpose and scope---When open ended or closed ended legislative provisions come for scrutiny before Courts, the same may be examined while applying principles of reading in and reading down ---Court must exercise restraint to save the statute instead of destroying it---Appropriate course is to interpret the statute in such a manner to align it with its object and purpose---Principles of reading down and reading in serve as essential tools in statutory interpretation, allowing Courts to uphold legislative intent while ensuring conformity with Constitutional mandates--- Reading down is employed to preserve validity of a statute by construing its provisions in a manner that aligns with the Constitutional principles, thus preventing the need for striking down the legislation---This approach is particularly useful when a provision appears overly broad or ambiguous but can be interpreted in a restricted manner to maintain its legality and effectiveness---Courts apply such principle to avoid declaring statues unconstitutional unless absolutely necessary, favoring an interpretation that keeps the law functional within the permissible framework---Conversely, reading in is used when a legislative omission results in ambiguity or unintended consequences---In such cases, Courts may infer and incorporate language that aligns with the legislative intent while ensuring that the statue remains coherent and effective---Such principle is applied cautiously, ensuring that judicial intervention does not amount to unauthorized legislation but rather serves to give effect to the true purpose of law. Schacter v. Canada [1992] 2 SCR 679; AAM Log Itehad and another v. The Election Commission of Pakistan and others PLD 2022 SC 39; Province of Sindh through Chief Secretary and others v. M.Q.M. through Deputy Convener and others PLD 2014 SC 531; Arshad Mehmood v. Commissioner/Delimitation Authority, Gujranwala and others PLD 2014 Lah. 221; Syed Mukhtar Hussain Shah v. Mst. Saba Imtiaz PLD 2011 SC 260; Sundew Properties Limited v. Telangana State Electricity Regulatory Commission and others AIR 2024 SC 3155 and Introduction to the Interpretation of Statutes by Dr. Avtar Singh and Dr. Harpreet Kaur (Third Edition, 2009, pp. 238, 239) rel. Shumail Ahmad Butt, Isaac Ali Qazi, Iqbal Akhtar Khan, Abdur Rahim Khan Jadoon and Muhammad Yasir Khattak for Petitioners. Sanaullah, Additional Attorney General, Asad Jan, Malik Sajjad Manzoor, Saeed Khan Akhoonzada, Farhad Ali, Ms. Zainab Iftikhar, Junior of Abdur Rauf Rohaila, along with Muhammad Tofeeq, Liaison Officer, Amir Nawaz, Chief Law Officer, PESCO/TESCO, Zafar Khan, Senior Law Officer, MOE and Muhammad Farooq Afridi for NEPRA for Respondents. Dates of hearing: 22nd, 23rd and 24th January, 2025. JUDGMENT SYED ARSHAD ALI, J.---We intend to dispose of the instant petition, along with the connected petitions in schedule "A" and "B", through this common judgment, as they involve similar questions of law and fact. The petitioners' case is mainly premised on two core grounds: first, that Section 31(5) of the Generation, Transmission and Distribution of Electric Power Act 1997, inserted through the Finance Act, 2008, is ultra vires the Constitution; and second, that the impugned notifications issued by the Federal Government lack legal authority and are beyond the scope of the NEPRA Act. A. Facts of the Case 2. The petitioner being engaged with manufacturing of sugar mills/products through its authorized person has filed the instant constitutional petition, challenging the vires of Section 31(5) of the Generation, Transmission and Distribution of Electric Power Act, 1997 ("NEPRA Act") and the impugned notifications issued by the respondent, Federal Government regarding levy of surcharge. The petitioner primarily contends that the imposition of Debt Servicing Surcharge ("DS Surcharge"), Tariff Rationalization Surcharge ("TR Surcharge"), NeelumJehium Surcharge ("NJ Surcharge") and Universal Obligations Surcharge ("UO Surcharge") under section 31(5) of the NEPRA Act is in conflict with the mandatory provisions of section 31(4) as it only relates to the determination of tariff by the National Electric Power Regulatory Authority ("NEPRA"), and no other authority including the government can notify additional tariff in the garb of surcharge. Rather, in order to determine the tariff, it cannot be undertook without having prior recourse to the NEPRA. Moreover, the NEPRA is under obligation to protect consumer from monopolistic and oligopolistic prices in view of section 31(2) of the NEPRA Act, which has laid down the standard and guidelines and in view of these provisions surcharge is not allowed. Whereas, the NEPRA being the authority was required to struck down the surcharge but instead of doing so the NEPRA has acted as agent of the Federal Government and not as regulatory body. Moreover, section 31(5) of the NEPRA Act has provided a naked weapon to the Federal Government to levy 'any surcharge' in 'any name'. On the contrary, levy of any tax, tariff, charge or surcharge is the sole authority of legislature and not the executive. In the present matter the powers of Federal Government to levy and notify surcharge comes within the ambit of excessive delegation, which is not only bad in the eyes of law but also amounts to encroachment upon the powers of legislature, thus, the arrangement under section 31(5) of the NEPRA Act is violative of the constitutional scheme of separation of powers. In all these connected petitions in Schedule "A", the petitioners have jointly challenged the vires of section 31(5) of the NEPRA Act and the notifications issued by the Federal Government. 3. In the petitions in Schedule "B", the petitioners have challenged the vires of section 31(8) of the NEPRA Act almost on the same grounds to that of the petitions in Schedule "A". The petitioners contends that the issuance of the impugned notification by the Federal Government with respect of levy of Financial Cost Surcharge ("FC Surcharge") is ultra vires the law and Constitution of Pakistan, 1973 ("Constitution"), and against the constitutional scheme of separation of powers. In this way, conferring of this legislative function over executive is hit by the well-established doctrine of excessive delegation of legislative powers. B. Arguments of the Parties 4. The learned counsel for the petitioners, while referring to Section 3 of the NEPRA Act, have contended that NEPRA is a statutory entity created under the NEPRA Act. They argue that, in accordance with Section 31 of the said Act, only NEPRA can charge any tariff, charge, rate or surcharge. Thus, the imposition of tax under the garb of surcharge by the Federal Government is against the scheme of the Constitution and law. Article 154 of the Constitution read with entery in Part II of Fourth Schedule requires that imposition of any such levy in relating to electricity shall be routed through Council of Common Interest ("CCI") established under Article 153. They further contend that the impugned notifications issued under section 31(5) whereby the Federal Government has imposed DS Surcharges and FC Surcharges amounts to taking away the statutory authority of the NEPRA and conferring it on the sub-legislative executive authority, thus, these are ultra vires the section 7(3)(a), section 7(6) and sections 31(1), (2), (3) and (4) of the NEPRA Act and liable to be struck down. Similarly, the provisions of section 31(5) itself constitute excessive delegation and are against the spirit and scheme of the Constitution as well as the NEPRA Act, therefore, these provisions are too liable to be declared ultra vires. 5. Conversely, learned counsel for the respondents argue that section 31(5) is a validly promulgated law introduced through Finance Act, 2008, which confers powers and jurisdiction on the Federal Government to notify the NEPRA's approved tariff, rates, charges and other terms and conditions for the supply of electric power services by the generation, transmission and distribution companies upon intimation by NEPRA. Section 31 of the NEPRA Act elaborately lay down a procedure for the determination of tariff, rates, charges, and terms and conditions for power sales to consumers by licensee, however, the NEPRA is required to recommend it to the Federal Government for notification. Furthermore, the Federal Government enjoy vast powers to levy surcharge in addition to the tariff determined by the NEPRA, as these powers does not encroach upon the powers and functions of NEPRA in any manner under the Act. In neither way, the Surcharges levied by the Federal Government are in conflict with the Constitution, nor does it come within the purview of excessive delegation. Rather, this power of the Federal Government originates from Section 31(5) that is a validly enacted law by the Legislature. C. Issues for determination 6. We have anxiously considered the arguments of learned counsel for the parties and thoroughly examined the record and material placed before us. Before delving into the respective contentions of the parties, it is imperative, for ease of reference, to delineate the core legal issues that emerged during the course of arguments and which lie at the heart of the present controversy. These issues are pivotal for the adjudication of the matter at hand. The principal questions requiring determination are as follows: (i) Whether the insertion of Section 31(5) of the NEPRA Act through the Finance Act, 2008 renders it constitutionally invalid?; (ii) Whether the imposition of the impugned surcharge by the Federal Government, without recourse to the Council of Common Interests (CCI) under Article 154 of the Constitution, violates the constitutional scheme, particularly in view of electricity being a subject in Part II of the Federal Legislative List?; (iii) Whether the delegation of power to impose surcharges under Section 31(8) constitutes excessive delegation?; and (iv) Whether Section 31(8) confers unfettered and unchecked authority upon the Federal Government, enabling the imposition of surcharges for any public sector project, thereby necessitating judicial scrutiny under the doctrines of "reading down" and "reading in" to preserve the constitutionality of the provision? 7. It is relevant to mention that after the filing of the instant petition and other connected petitions, this Court, through an interim order dated 22.01.2015, suspended the recovery of the impugned levy. However, following the suspension of the judgment of the Divisional Bench of the Lahore High Court by the Apex Court involving adjudication of a similar issue; this Court subsequently vacated the interim order on 23.07.2015, allowing the recovery of the levy under the impugned notifications. Nonetheless, the collection of the stayed amount was deferred until the final adjudication of the main petitions. On 18.02.2021, all connected petitions were adjourned sine die, as the issue concerning the levy of surcharge under Section 31(5) was pending before the Hon'ble Supreme Court of Pakistan. Subsequently, through its order dated 23.11.2023 in C.P. No. 1136 of 2015 and C.M.As 2794 and 2795 of 2015, the Apex Court revived these connected petitions and remanded the matters for disposal on merits. (i) Whether the insertion of Section 31(5) of the NEPRA Act through the Finance Act, 2008 renders it constitutionally invalid? 8. A central issue in the present controversy pertains to the Federal Government's authority to levy a surcharge. Through Section 31(5) of the NEPRA Act introduced through Finance Act, 2008, the Federal Government is empowered to levy and notify a surcharge, while the distribution companies are obligated to pay the imposed surcharge. For a comprehensive analysis, the verbatim text of Section 31(5) is reproduced below. (5) Each distribution company shall pay to the Federal Government such surcharge as the Federal Government, from time to time, notify in respect of each unit of electric power sold to the consumers and any amount paid under this subsection shall be considered as a cost incurred by the distribution company to be included in the tariff determined by the Authority. 9. Pursuant to the powers conferred by parliament upon the Federal Government, the Federal Government has issued the following notifications which are impugned through this as well as the connected petitions: GOVERNMENT OF PAKISTAN Ministry of Water and Power Islamabad, the October 03, 2014 NOTIFICATION S.R.O. 908(I)/2014.---In pursuance of subsection (5) of section 31 of the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997 (XL of 1997), the Federal Government is pleased to notify the surcharge at the rate of Rs.0.30/KMh on account of recovering the debt servicing applicable to all the consumer categories on per unit consumption in respect of Ex-WAPDA Distribution Companies (XWDISCOs), namely:- Sd/--- (Syed Mateen Ahmed) Section Officer (Tariff) GOVERNMENT OF PAKISTAN Ministry of Water and Power Islamabad, the November 01st, 2014 NOTIFICATION S.R.O.982(I)/2014.---In pursuance of subsection (5) of section 31 of the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997 (XL of 1997), and in supersession of its Notification No.S.R.O.911(I)/2013, dated the 11th October, 2013, the Federal Government is pleased to notify that there shall be levied a surcharge at the rate mentioned against the categories, specified in the Schedule below, of electricity consumers for electricity sold by Quetta Electric Supply Company (QESCO), during each of the billing month, for maintaining uniform rates of electricity across the country for each of the consumer category in accordance with Federal Government Policy with effect from 1st October, 2014, namely:- SCHEDULE
#
Tariff Category/Particular
Rate (Rs./ KWh)
Residential Al
1.
301-700 Units
1.00
2.
Above 700 Units
0.50
For peak load requirement 5 KW and above
--
3.
Time of Use (TOU) - Peak
0.50
4.
Time of Use (TOU) - Off-Peak
1.00
Commercial A2
5.
For peak load requirement less than 5kw
0.50
For peak load requirement 5 KW and above
6.
Regular
1.00
7.
Time of Use (TOU)-Peak
0.50
8.
Time of Use (TOU) - Off-Peak
1.00
Industrial B
9
BI
10.
B1 (Peak)
0.50
11.
B1 (Off Peak)
1.00
12.
B2
-‑
13.
B2 - TOU (Peak)
0.50
14.
B2 - TOU (Off-Peak)
1.00
15.
B3 - TOU (Peak)
0.50
16.
B3 - TOU (Off-Peak)
1.00
17.
B4 - TOU (Peak)
0.50
18.
B4 - TOU (Off-Peak)
1.00
Single Point Supply for further distribution
19.
Cl (a) Supply at 400 Volts-less than 5 KW
20.
Cl (b) Supply at 400 Volts-5Kw and upto 500 KW
21.
Cl (c) Time of Use (TOU) -Peak
0.50
22.
Cl (c) Time of Use (TOU) -Off-Peak
1.00
23.
C2 (a) Supply at 11 kv
24.
C2 (b) Time of Use (TOU) -Peak
0.50
25.
C2 (b) Time of Use (TOU) Off-Peak
1.00
26.
C3 Supply above 11 Kv
27.
C3 (b) Time of Use (TOU) - Peak
0.50
28.
C3 (b) Time of Use (TOU) - Off-Peak
1.00
2. Quetta Electric Supply Company (QESCO) shall deposit the amount of this surcharge in a Fund called the "Universal Obligation Fund" to be kept in the Escrow Account maintained at Central Power Purchasing Agency for exclusive use for discharging the liabilities of power producers and surcharge paid under this notification shall be considered as a cost incurred by the distribution company to be included in the tariff determined by NEPRA. 3. Provided further that there shall be levied till the 31st December, 2015, an additional charge at the rate of Rs.0.10/kwh on the consumption of electricity of every category of electricity consumer except the lifeline domestic consumers of the category "Residential A-1 and such additional charges? (a) Shall not form a part while calculating the difference between the relevant rates of NEPRA determined tariff and GoP notified rate; and. (b) Shall be deposited in a Fund called the "Neelum-Jhelum Hydro Power Development Fund" to be kept in the Escrow Account of the Neelum-Jhelum Company for exclusive use for the Neelum-Jhelum Hydro Power Project. 4. The Order of the Authority is placed at Annex-I, Fuel Price Adjustment mechanism at Annex-II, QESCO power Purchase Price at Annex-III and the Terms and Conditions at Annex-IV to this notification. GOVERNMENT OF PAKISTAN Ministry of Water and Power Islamabad, the November 01st, 2014 NOTIFICATION S.R.O.983(I)/2014.---In pursuance of subsection (5) of section 31 of the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997 (XL of 1997), and in supersession of its Notification No.S.R.O.912(I)/2013, dated the 11th October, 2013, the Federal Government is pleased to notify that there shall be levied a surcharge at the rate mentioned against the categories, specified in the Schedule below, of electricity consumers for electricity sold by Hyderabad Electric Supply Company (HESCO), during each of the billing month, for maintaining uniform rates of electricity across the country for each of the consumer category in accordance with Federal Government Policy with effect from 1st October, 2014, namely:- SCHEDULE
#
Tariff Category/Particular
Rate (Rs./KWh)
Residential Al
1
301-700 Units
0.50
2
Above 700 Units
0.50
For peak load requirement 5 KW and above
--
3
Time of Use (TOU) Peak
0.50
4
Time of Use (TOU) Off-Peak
1,00
Commercial A2
5
For peak load requirement less than 5kw
0.50
For peak load requirement 5 KW and above
6
Regular
1.00
7
Time of Use (TOU)-Peak
0.50
8
Time of Use (TOU) - Off-Peak
1.00
Industrial B
9.
B1
10.
B1 (Peak)
0.50
11.
B1 (Off Peak)
1.00
12.
B2
-‑
13.
B2 - TOU (Peak)
0.50
14.
B2 - TOU (Off-Peak)
1.00
15.
B3 - TOU (Peak)
0.50
16.
B3 - TOU (Off-Peak)
1.00
17.
B4 - TOU (Peak)
0.50
18.
B4 - TOU (Off-Peak)
1.00
Single Point Supply for further distribution
19.
Cl (a) Supply at 400 Volts-less than 5 KW
20.
Cl (b) Supply at 400 Volts-5Kw and upto 500 KW
21.
Cl (c) Time of Use (TOU) -Peak
0.50
22.
Cl (c) Time of Use (TOU) -Off-Peak
1.00
23.
C2 (a) Supply at 11 kv
24.
C2 (b) Time of Use (TOU) -Peak
0.50
25.
C2 (b) Time of Use (TOU) Off-Peak
1.00
26.
C3 Supply above 11 Kv
27.
C3 (b) Time of Use (TOU) - Peak
0.50
28.
C3 (b) Time of Use (TOU) - Off-Peak
1.00
2. Hyderabad Electric Supply Company (HESCO) shall deposit the amount of this surcharge in a Fund called the "Universal…
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