KARACHI: The Sindh High Court has ruled that the collection of a levy imposed on gas supply to industrial captive power plants (CPPs) with retrospective effect was ultra vires (beyond legal authority) the relevant law.

The court also observed that the levy on CPPs could not take effect immediately upon the promulgation of the law, as the ordinance itself never determined the rate of the levy.

A two-judge bench comprising Justice Adnan Iqbal Chaudhry and Justice Muhammad Jaffer Raza further noted that the levy was to be calculated in accordance with the mechanism envisioned under Section 4 of the Off-Grid Power Plants Levy Act, 2025, and could only become operative after the rate had been calculated and duly notified.

The bench made these observations while disposing of 30 identical petitions filed by various industrial units challenging bills issued by Sui Southern Gas Company (SSGC) for the recovery of the levy on CPPs for periods prior to the notification of the applicable rate.

The petitioners said they were consumers of natural gas and operating CPPs as defined under the Off-Grid (Captive Power Plants) Levy Ordinance, 2025, which was later repealed in July last year after the enactment of the Off-Grid Captive Power Plants Levy Act.

They argued that the levy rate was first notified by the authorities under Section 3 of the Act through a notification issued on March 7, 2025, followed by another notification on July 23 last year. However, the bills issued to them in May, and in some cases August, sought to recover the levy for February and March under the rate notified in these notifications.

In its judgement, the bench noted that statutory notifications could not operate retrospectively in the absence of express authorisation by the legislature, except where they were beneficial or procedural in nature.

It observed that the notifications in question did not provide for retrospective application and that Sections 3 and 4 of the law did not envisage the levy being imposed retrospectively.

The court further noted that uncertainty regarding the retrospective application of the levy was evident within the Ministry of Energy itself. It referred to a letter issued on April 11 last year directing agents, including SSGC, to recover the levy for February and March, which was withdrawn through another letter issued the same day.

Subsequently, through a letter dated April 18, 2025, the agents were informed that legal opinion had been sought from the law and justice division and the attorney general’s office on the issue of retrospective application. In May, the agents were then directed to collect the levy at the notified rate, the judgement added.

The court rejected the respondents’ contention that the liability of CPPs to pay the levy arose immediately upon the promulgation of the ordinance, holding that the argument was misconceived since the ordinance itself did not determine the levy rate.

The bench declared that the impugned bills issued by SSGC for the recovery of the levy for periods prior to March 7, 2025, were ultra vires Sections 3 and 4 of the Ordinance and the Act.