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"), Neelum Jehlum Surcharge ("NJ Surcharge") and Universal Obligations Surcharge ("UO Surcharge") under Section 31(6) 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 counsels 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 eatery 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 Section 31(1),(2),(3) and (4) of the NEPRA Act and liable to be struck down. Similarly, the provisions of Section 31(6) 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 counsels 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 sub-section 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)12014.-In pursuance of sub-section (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 sub-section (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 A1 1 301-.700 Units 1.00 2 Above 700 Units 0.50 For peak load requirement 5 KW& 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 5kw0.50 For peak load requirement 5 KW & above 6 Regular 1.00 7 Time of We (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 & upto 500 KW 21.Cl (c) Time of Use (TOU)-Peak0.50 22.Cl (c) Time of Use (TOU)-Off- Peak1.00 23.C2 (a) Supply at 11 kv 24.C2 (b) Time of Use (TOU)- Peak0.50 25.C2 (b) Time of Use (TOU) Off- Peak1.00 26.C3 Supply above 11 Kv 27.C3 (b) Time of Use (TOU)- Peak0.50 28.C3 (b) Time of Use (TOU)-Off- Peak1.00
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 31 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.