Major cement producers Attock Cement Company Limited and DG Khan Cement Company Limited own and operate manufacturing plants in Balochistan. They are entitled under leases granted by the Government of Balochistan (GOB) to extract limestone, shale and sand to use in the manufacturing process in consideration for payment of royalty in accordance with the Balochistan Mineral Rules, 2002 (BMR).
The GOB had earlier sought to levy excise duty on the cement companies through a notification issued under the BMR. We successfully represented the companies in constitutional proceedings before the Balochistan High Court (BHC), challenging such a levy as contrary to the Mines Act, 1923.
Thereafter, through the Balochistan Finance Act of 2020, the Balochistan Assembly amended the Mines Act of 1923 to drastically increase the excise duty rate to 25% of the royalty rate, as specified in the Third Schedule to the BMR. The Chief Inspector of Mines, GOB, issued notices to the companies demanding payment of excise duty under the amended provisions of the Mines Act, 1923.
We represented the companies in separate constitutional proceedings before the BHC challenging such notices on the ground that the amended provisions of section 30-A(d) of the Mines Act, 1923 did not authorise the levy of excise duty in respect of any mineral other than coal and coke. Further, given that the minerals extracted by the companies do not require sub-surface mining, the GOB had no justification for demanding excise duty whose proceeds could only be applied towards safety, rescue stations and training in relation to such mining. By a reasoned judgment handed down recently, the BHC allowed the petitions and set aside the notices, resulting in significant savings for our clients.
Pakistan Partner Omer Soomro led our team for this matter.
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