Even as the battles in Wanni intensify with scores of combatants from the security forces and the LTTE killed in action, the stage was set for a rousing confrontation in the New Year between the Judiciary and the Executive following the government decision to defy a Supreme Court order on the reduction of fuel prices.

For President Mahinda Rajapakse and his cabinet of ministers, a confrontation with the Judiciary may be a welcome distraction from the battles in Wanni which going by the most optimistic scenarios is not encouraging and none other than the Government’s Defence spokesman, Minister Keheliya Rambukwella was forced to concede it last week.

Having pledged to liberate Kilinochchi by August 23, the government in the run up to the North Central and Sabaragamuwa Provincial polls promised to end the war in December and usher in a new era of peace and prosperity for all the people in the North and South but now in the face of stiff resistance by the Tigers, President Rajapakse has once again revised the timetable and proclaimed 2009 to be the year of finishing off the Tigers.

And for that the government wants the people to bear economic hardships a while longer and not agitate to reduce fuel prices. To do so by the government’s book is to help the terrorists.

Going further, the President even threatened to ban the LTTE if the organization did not allow the trapped civilians in the Wanni to move out, but did not vouchsafe in the people how proscribing the Tigers will help attract the civilians into government territory.

The government’s cause was not helped by the internationally accepted Human Rights Watch report released Tuesday which having earlier castigated the LTTE for harassing the civilians blamed the State for detaining those civilians fleeing LTTE controlled territory.

Mind you, the government was put further on the defensive by the LTTE last week with the organisation’s Political Wing Leader B. Nadesan in an email interview with Reuters vowing to fight on till the end and warning of impending attacks on economic targets.

And almost giving credence to LTTE claims of large scale losses inflicted on the security forces in the Wanni was Minister Rambukwella who said on Wednesday that there will be a delay in capturing Kilinochchi, although spinning it on the need to protect civilian life.

Somewhere along the road in their need to make political capital out of the sacrifices made by the soldiers the government has obviously lost its way because it was none other than Senior Presidential Advisor Basil Rajapakse who not many moons ago claimed publicly there was not a single civilian left in Kilinochchi.

That of course was at a time the government believed the fall of Kilinochchi was imminent and wanted to project to the international community there will be no loss of civilian life in the battle for Kilinochchi.

Thus on Thursday, December 25, Rambukwella was quoted thus in a daily newspaper – "Defence spokesperson Minister Keheliya Rambukwella said that a total of 150,000 civilians still remained trapped by the LTTE in and around Kilinochchi which is why President Mahinda Rajapakse had sent a strong word to capture their target while maintaining a zero civilian casualty."

Needless to say with two more provincial council elections due in February, the government can therefore well do with a distraction from Kilinochchi and it is in that context President Rajapakse setting 2009 as the year for destroying the LTTE, threatening to ban the movement and accusing as traitors those depriving the state of much needed revenue to fight the war become significant.

Mind you the ministers do not show any remorse for the billions splurged on reviving a bankrupt Mihin Air, purchasing a five star hotel to house the Port Authority staff or keeping the over 100 ministers in bread and wine at state expense but when it came to the Supreme Court order on reducing the price of fuel by Rs. 22 per litre all hell broke loose with President Rajapakse seeing it as both an international and local conspiracy to scuttle the elimination of terrorism from Sri Lankan soil.

Hence the confrontation with the Judiciary maybe a welcome distraction from the battlefront woes and economic hardships faced by the people including the oil hedging scandal which is costing the tax payer upwards of Rs. 75 billion.

It is in this overall backdrop the cabinet of ministers met Tuesday, December 23 to consider the Supreme Court order on the reduction of fuel prices, having the previous week taken the position the government was yet to receive the court order.

Of course by Thursday, the court order was dispatched to the relevant parties including Treasury Secretary Sumith Abeysinghe, the CPC and Lanka Indian Oil company but the government opted to adopt a wait and see policy especially considering the Supreme Court going on vacation and Chief Justice Sarath N. Silva himself taking wing to New Zealand.

However, the LIOC having received the court order and acknowledging the same consulted their lawyers and the Treasury and reduced the fuel price to Rs. 100 per litre, soon to be followed by Laugfs.

This in turn created another crisis for the government not only because the LIOC had complied with the Supreme Court order thereby placing the Treasury Secretary and the CPC in an awkward position but also because the people were queuing up at LIOC sheds for their fuel needs, costing the CPC over Rs. 30 million losses every day.

In fact, the previous week, Petroleum Minister A.H.M. Fowzie told the cabinet the government must comply and then complain the Supreme Court order without going for a confrontation but found little support from his ministers.

Instead, the government sent warning signals to the LIOC to increase the price to Rs. 122 or face inevitable consequences when their agreements come up for renewal.

Fowzie was to also tell the President even before the Supreme Court order that together with then CPC Chairman Asantha De Mel, a restructuring programme was to be put in place to minimise the losses, which Central Bank Governor had objected to.

At that time, the President had called a meeting with Cabraal, De Mel and the Minister and having listened to all parties, gone along with the CPC Chairman and directed him together with Cabraal to speak to the banks and sort out the issue.

The President was to also in a one to one meeting with Cabraal call him to account for failing to monitor the situation without blaming everyone else for the crisis.

The President had also told Cabraal, he cannot take credit for the positive aspects of the hedging contracts and pin blame on others for the negatives and added that he should have monitored the progress of the hedging contracts.

Be that as it may, it was now a question of protecting the interest of the government and the President saw in the Supreme Court order to reduce oil prices a dangerous trend and decided to confront the Judiciary head on.

The President initially believed the Supreme Court may respond positively to some subtle pressure and announced publicly days before the court order was due that he will not accept any pricing formula, going so far as to remind the Judiciary of the days judges were impeached and their houses stoned.

Further, unofficial messages were also sent to the Chief Justice not to order the reduction of fuel prices before the judgment day but Sarath Silva was deaf to all such pleadings and proceeded to deliver the court order on December 15.

Furious, the President went on the offensive at the previous week’s cabinet meeting and followed it up with a fiery speech to a cross section of religious, political and business leaders on Monday at the Presidential Secretariat, thereby setting the stage for Tuesday’s special cabinet meeting with the ministers getting a preview of Rajapakse’s thinking on reducing the fuel prices.

Thus, when the ministers met Tuesday, December 23, only Minister Fowzie like the boy who stood on the burning deck, took up the cause of justice, arguing strenuously not to confront the Supreme Court but his was a voice in the wilderness.

At the outset, the President circulated copies of the Supreme Court order and told the Ministers to come up with their views at the next cabinet meeting scheduled for January 7. The timing was such the ministers were to once again consider the order before the Supreme court meets next on January 12.

It is soon after that Minister Fowzie opened up and urged the President not to go for a head on collision with the Chief Justice and the Supreme Court considering the judgment itself being popular with the people.

"Let us comply and complain. Let us reduce the prices and then revise the prices later. Don’t go for a confrontation," Fowzie pleaded.

But the President was defiant. "No, lets not rush it. We will postpone the decision till the ministers study the order and come back," the President said.

Countered Fowzie – "What is there to study? The Supreme Court order is very clear. When you read the judgment, you can easily understand that the Chief Justice has said this is a fundamental rights case. And the Chief Justice has very clearly said the Executive action is arbitrary, illegal and unreasonable. What is there to study in it."

Not stopping at that, Fowzie said the Supreme Court has very clearly stated the people have a right to seek relief in terms of the constitution when there is arbitrary executive action and that it was silly to want time to study such a simple order. Added Fowzie – "The Attorney General appeared on behalf of the President. The Treasury Secretary was present in court and took notice of the order. It is the Treasury Secretary that submitted the formula and the Supreme Court has acted on that formula. Therefore it is we who gave the formula. Now how can we challenge our own formula and say we need time to study it. This is all wrong. Don’t do it."

The President however would hear none of it and insisted on not caving in and coming into support the President was Consumer Affairs Minister Bandula Gunawardene, who said only parliament could determine tax structures and not the judiciary.

Said Gunawardene – "Parliament is supreme and in terms of the constitution, fiscal powers are with the legislature. No one can take that right."

That said Minister Gunawardene quoted from a report submitted to Parliament by former Auditor General S.C. Mayadunne in his capacity as consultant to COPE and said the report clearly states under Article 147 and 152 of the constitution, the financial powers are vested in Parliament.

He said, accordingly, the power to increase, decrease or amend taxes as opposed to prices was exclusively within Parliament.

"It clearly states no institution, or individual can increase, reduce or change taxes except Parliament. Therefore even the President as Finance Minister, cannot do it. Only Parliament can. If the President wants to change the taxes, he must get cabinet approval and come to Parliament. Therefore the Supreme Court also cannot ask taxes to be reduced," Gunewardene said.

The Consumer Affairs Minister went on to explain the problems he had in reducing prices of essential food items in the past due to the tax formula and said finally a new special Commodity Levying Act had to be introduced in Parliament to meet the situation.

Explained Gunawardene, "Mine is a legal argument. Take this example. There are thousands of farmers in the country. Now we have a tax on a kilo of rice imported. That is Rs. 25. It is a deterrent for imports because the price will then be prohibitive. That was done to protect the farmer. Otherwise we can get rice for Rs. 100 from overseas. There are starving people in the country. Now they can go to court and say, because of this tax, they can’t get cheaper rice and as a result their fundamental right to be free of hunger is violated. If that happens the farmers in our country will be finished. Same for potatoes and onions. That is why only Parliament can levy and alter taxes. The Supreme court cannot do it."

The case made out by the Consumer Affairs Minister saw the President nodding his approval despite the inherent flaws in it because the Supreme Court order itself refers to arbitrary Executive action through special Gazette notifications as opposed to legislative action and it took the layman in Fowzie to point that out.

Replied Fowzie – "The Chief Justice and the Supreme Court know the constitution more than you. They are the people who interpret the constitution. That is their role. The Chief Justice knows what powers the Legislature, Judiciary and the Executive have. Are you trying to teach the Chief Justice the law and how to interpret the constitution."

Added Fowzie – "It is with the full knowledge of their powers that the Supreme Court has formulated their order. The Chief Justice has cited specific laws on excise duties and customs levies. The Legislature and the Executive have their own powers but the Executive cannot use those powers arbitrarily. That is what the Supreme Court has said."

However, others disagreed, including Prime Minister Ratnasiri Wickremanayake, Foreign Minister Rohitha Bogallagama, Power Minister John Seneviratne and Health Minister Nimal Siripala de Silva all laywers, who held with Minister Gunawardene and said only Parliament has the power to decide on taxes.

Putting to shame all the lawyers, was Fowzie who gave them a lesson in law, based on the Supreme Court order, while reiterating his earlier position that the interpretations of the constitution was for the Supreme Court and not for individual ministers, learned as they may be in the law.

With that said Fowzie read copiously from the judgment and told the ministers, what the Supreme Court had done was not interfered with the powers of the Legislature but referred to arbitrary executive action, which falls within the fundamental rights jurisdiction of the Supreme Court.

Minister Fowzie then quoted this paragraph from the Supreme Court order to buttress his argument – "According to the report of the Secretary at the Benchmark importation price of 56.05 US$ per barrel, the cost of a litre of refined petrol is Rs. 39.06 and the overhead costs and profit margin of the Ceylon Petroleum Corporation is Rs.9.71 totaling Rs. 48.77. The current selling price of a litre of petrol is Rs. 122. Hence a total of 7 government and fiscal levies amount to Rs. 73.23. Accordingly, when a Consumer purchases a litre of petrol of which the total cost is only Rs. 48.77 he in fact is paying Rs. 73.23 by way of government taxes and levies. Viewed from another perspective government and fiscal levies amount to over 180% of the actual price of petrol. The petitioners have thus established a strong prime facie case that as many as 7 different levies are imposed in an unreasonable and arbitrary manner. These levies are imposed in terms of the applicable law by way of executive orders published as regulations and remain in force unless revoked by Parliament. The impugned executive orders being prima facie unreasonable and arbitrary and deny to the petitioners and the people the equal protection of the law and excessive prices have a serious impact on the cost of living, the petitioners are entitled to the grant of interim relief. Accordingly, we made order on 15.12.2008 that the secretary to the Treasury should prepare a price formula in terms of which at the benchmark referred above, the totality of government and fiscal levies will not exceed 100% of the cost."

Said Fowzie – "It is therefore clear, what the Supreme Court is ruling against is arbitrary executive action."

And to drive home his point, Fowzie, quoted another paragraph from the judgment, which read as follows – "As noted above, the imposition of the Excise Duty in terms of Section 3(1) of Act No. 13 of 1989 and the imposition of customs duties and the grant of partial waivers as stated in Annex ‘A’ in terms of section 10A and 10A of the Customs Ordinance are executive functions that come within the purview of the fundamental rights jurisdiction of the court. The alleged infringements result from illegal, arbitrary and unreasonable executive action. The Secretary being the appropriate functionary and the Attorney General who represents the President in terms of article 35(3) of the Constitution have been heard on the several days this matter was considered. Accordingly we direct that necessary orders be made in terms of the applicable law to give effect to the content of Annex ‘A’ which has been prepared by the secretary to the Treasury."

Asked Fowzie of his ministerial colleagues – "Is this not plain enough for anyone to understand. The Chief Justice and the Supreme Court are talking of executive action and a formula we submitted. Let us implement this order now."

Still unmoved, the President said, all the facts detailed can be considered on January 7 when the Ministers meet which saw Fowzie once again urging for caution.

Said the Petroleum Minister – "The Chief Justice is coming back on January 1. He is not going to keep quiet because we have challenged a judicial order. He will take drastic action. My Chairman is worried. He wants to resign."

Shot back the President – "Then tell him to resign."

Responded Fowzie – "Then I will tell my chairman I took up the matter in cabinet and the cabinet says to wait till January 7th and for him to do what he thinks is correct."

The President however would not budge and insisted there will be no price reduction until the cabinet meets again on January 7 to consider all viewpoints.

And while the President was sticking to his guns, the opposition too was loading theirs and are set to make several moves in the first week of January, which would include moving for contempt of court charges against the CPC Chairman, Treasury Secretary, LIOC and the Attorney General.

A hint of what is in store was given by UNP Colombo District MP Ravi Karunanayake who detailed plans to move for contempt of court charges while the UNP leader is to initiate separate action in Parliament by calling for a Select Committee probe on the Central Bank’s role in the hedging scandal.

Likewise, the JVP is to launch their own agitation campaigns in the coming weeks over the fuel issue and demand the Supreme Court order is implemented.

With the Supreme Court order itself highlighting the fact the hedging scandal can cost the tax payer upwards of Rs.75 billion, the government will certainly have a lot of explaining to do and in characteristic style the President has decided to adopt an ‘offensive is the best form of defence," strategy.

The question however is whether Chief Justice Sarath N. Silva and the Supreme Court will take this insult and contempt shown to the Judiciary and the Justices of the Court meekly?

All indications are, they will not and the stage is thus set for an eye-ball to eye-ball confrontation with the bets on the Executive to blink first.