Govt-Judiciary on collision course as the
war takes its toll
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Mahinda Rajapakse, Sarath N. Silva,
Nivard Cabraal, Nimal Siripala de
Silva, Dinesh Gunawardena and Rajitha
Senaratne |
With the Supreme Court taking the high road
on public interest litigations, the
government decided to take the battle to the
judiciary last week while a resurgent
opposition planned a counter offensive in
the name of safeguarding democracy and the
rule of law, setting the stage thereby for
major confrontations in the days ahead.
Who will blink first in this eye ball to eye
ball confrontation, it is too early to say
but the mood in government when the
ministers met Wednesday night was certainly
ugly, and news from the battlefront did not
make the UPFA administration's burdens any
lighter.
War basket
Having placed all its eggs in the war
basket, the government was totally dependent
on success in the military front to survive
politically, in the face of a crashing
economy due to mismanagement and
extravagance, and the stiff resistance faced
in the Wanni has now placed the Mahinda
Rajapakse administration on a razor's edge.
Just last week, while the military claimed
it killed over 120 Tigers in fierce battles
for Killinochchi, the LTTE Political Wing
Leader B. Nadesan was to tell this column
the security forces suffered very heavy
casualties numbering over 170 dead and some
400 injured, claims the military denies.
Nadesan was to also say that repeated
attempts by the security forces to
breakthrough LTTE's Killinochchi defences
have failed at a heavy cost to the state and
the government will soon realise how costly
the war is going to be both in military and
political terms.
To give credence to LTTE claims, the
organisation posted through Tamilnet
photographs of dead soldiers all lined up
and ready for handing over to the ICRC.
Indicative
The fact also remains the government no
longer talks of liberating Killinochchi
notwithstanding earlier statements on
'kissing distances,' but instead, of taking
Mullaitivu which to the discerning observer
is indicative all is not well on the war
front with the regime compelled to look for
new propaganda targets due to the upcoming
provincial council polls, considering the
economic hardships the people are facing.
Splurge
This mind you, at a time the government
continues to splurge billions of rupees on a
bankrupt Mihin Air and eyeing to buy the
five star Continental Hotel to house the Sri
Lanka Port Authority staff despite the state
of collapse the economy finds itself in with
even Sri Lanka's international credit rating
being downgraded.
It is in this backdrop the Supreme Court
went into the fuel pricing formula submitted
by the Treasury following a public interest
petition filed by Ven. Thiniyawala Palitha
Thero, UNP MP, Ravi Karunanayake and
Attorney Ravi Jayewardena and on Wednesday
directed the Treasury Secretary Sumith
Abeysinghe, Ceylon Petroleum Corporation and
the Lanka Indian Oil Company to sell from
midnight that day a litre of petrol at Rs.
100. In effect reducing the price of a litre
by Rs. 22.
Needless to say more public interest cases
will now be filed calling for reduction of
electricity prices given the fuel
surcharges, and for a state facing virtual
bankruptcy, the revenue losses will be
disastrous and no doubt will send the budget
estimates haywire.
As far as the Supreme Court is concerned it
has acted in the public interest based on
the rule of law, but for a government
already embroiled in a hedging scandal which
is going to cost the tax payer upwards of
US$ 675 million, the revenue loss can be the
death knell and that view was reflected when
the ministers met on Wednesday.
The reduction in fuel prices will cost the
state an estimated Rs.15 billion in revenue
which it can ill afford unless of course the
President scraps Mihin Air, reduces the
number of ministries and other wasteful
expenditure.
The President of course attempted to make a
pre-emptive strike the previous week by
publicly taking a broadside at the judiciary
and stating his government will not
subscribe to a pricing formula, words
Rajapakse may now have to eat unless he
dares the Supreme Court.
It is in this overall backdrop the cabinet
of ministers was to meet Wednesday, December
17 at
6 p.m. but before the official meeting, President Rajapakse
met a kitchen cabinet of sorts to map out
strategy, where some harsh comments were
made on Chief Justice Sarath N. Silva and
the Supreme Court.
Refuge
Interestingly, those who hailed and even
took refuge under Supreme Court judgments on
the de-merger of the north and east, P-TOMS
Agreement, reducing President Chandrika
Kumaratunga's tenure by one year, declaring
the Inland Revenue Authority Bill and the
19th Amendment to the Constitution
unconstitutional, were visibly angry when
the shoe was on the other foot.
At this kitchen cabinet meeting where the
consensus was that the Chief Justice was
acting as a law unto himself, among those
present were, the President, Prime Minister
Ratnasiri Wickremanayake, Ministers Nimal
Siripala De Silva, Maithripala Sirisena,
Susil Premajayanth, G.L. Peiris, Rajitha
Senaratne, Bandula Gunawardena, Faizer
Mustapha, Treasury Secretary Sumith
Abeysinghe, Central Bank Governor Nivard
Cabraal and Justice Ministry Secretary
Suhada Gamlath. Deputy Solicitor General
Sanjay Rajaratnam joined the meeting at the
tail end.
The President started firing at the Supreme
Court from the very start and was ably
supported by other members present, who
opined, there will be no end to such orders
from the judiciary unless pre-emptive action
was taken.
Playing
Said the President referring to the Chief
Justice - "He is playing a political game
and pushing the limits."
Responded Minister Senaratne - "Reducing the
fuel prices is a populist decision, so
without taking up that issue, lets go for
him on other issues such as the withdrawal
of barriers."
Added Senaratne - "If we are going to take
action, let's take a firm decision. At the
same time, explain to the people how much we
are spending on the war without cutting any
subsidies. Also detail the number of jobs
created. Tell the people we will have to
withdraw all welfare facilities if the fuel
prices have to be reduced."
Dangerous
Chipped in Minister Peiris - "The Chief
Justice is in charge of the judiciary but he
has taken over the functions of the
Executive and the Legislature. This is a
dangerous trend."
Not to be outdone, others present weighed in
with their own comments, and Minister Nimal
Siripala De Silva went so far as to hint at
an impeachment motion following which the
President called on Treasury Secretary
Sumith Abeysinghe to explain the state of
play and he proceeded to do so, detailing
the events leading upto the pricing formula.
In an obvious state of irritation, the
President snapped - "Just tell us what
happened today in court."
That, Abeysinghe proceeded to do, stating
though no specific order was given, they
were asked to reduce the price of a litre of
petrol to Rs. 100 in keeping with the
pricing structure.
By this time, DSG Rajaratnam too had walked
in and explained in detail the implications
of the Supreme Court order and the options
open to the government, which saw Central
Bank Governor Cabraal making his own
contribution oblivious to his role in the
hedging scandal, which had pauperised the
government.
Different song
Cabraal who earlier directed the Petroleum
Corporation not to pay the monies due to the
hedging banks was to sing an altogether
different song at the meeting saying it was
the Supreme Court order on the hedging case
that had upset all the good work done by the
government.
He said the government negotiated with the
banks to reach an amicable settlement on the
hedging deals for implementation by January
5 and that it was while all arrangements
were being put in place the Supreme Court
order was given, derailing the entire
process.
Added the Central Bank Governor - "This
judgment is bad for us internationally. It
has an impact on agreements we reach with
banks. We had discussed this issue with the
banks and reached a settlement but the Chief
Justice's order upset everything."
Ironically, what Cabraal sought to do was
now blame the Supreme Court for making a
ruling based on a petition which was a
direct consequence of his own bungling but
with the prevalent mood at the meeting being
against the Chief Justice, no one called
into question the Central Bank Governor's
action that led to the crisis in the first
place.
Be that as it may, the meeting ended with
the ministers present reaching the
conclusion there was a conspiracy afoot to
destabilise the government and that it must
be met with the full might of the
administration.
Following the kitchen cabinet meeting, the
official cabinet pow wow got underway, where
the only subject up for discussion was the
Supreme Court order on the fuel pricing
formula and the President once again started
firing at the Supreme Court from the outset.
Gratitude
In an obvious signal to the ministers that
he wanted to take Sarath Silva and the
Supreme Court head on, the President said it
was he who went to UNP MPs houses when an
impeachment motion was brought against the
Chief Justice in the past to lobby support
against it and the gratitude he gets is in
the form of these court orders. Not stopping
at that the President took some personal
swipes at the Chief Justice alleging he had
enough material on him if it came to a
fight.
The President who just the previous week
said he will respect judgements of the court
by now was obviously not in a mood to do so
but may well have in the process
under-estimated the grit of the Chief
Justice.
Continued the President - "Sarath has been
an old friend. He obviously has a political
agenda and wants to get angry with me by
giving these orders. He must be thinking his
political agenda cannot be pursued by being
friendly with me. This is therefore done for
me to get angry with him so that he can
pursue his political agenda."
So angry was the President that he even
threw some files on the floor at one point
and said Mahinda Rajapakse will never run
away from a fight and would face the
challenge head on.
Attempting to infuse some calm to the
proceedings was Urban Development Minister
Dinesh Gunawardena who said the
justification given for the call to reduce
prices is the wastage and corruption in
government, which issues the Minister noted
should be addressed.
Corruption
Shot back an angry President - "There may be
corruption but not to the extent they are
saying. If you want to talk about
corruption, look at the Urban Development
Authority. I can give you names and details
of what is going on in your ministry. There
is no corruption the way they are saying
with regard to ministers. It is the
officials who are responsible."
Not stopping at that verbal assault, the
President had this to say - "I am conducting
a war. All must rally round me and help in
this task. Once the war is over, I will
start the war on corruption. It took me two
years to finish the war. I will finish the
war on corruption in two months. I know what
to do."
Continuing, the President also hinted at not
giving in to the Supreme Court on the
appointment of the Constitutional Council,
stating he intends to keep all the executive
powers till the war is over.
"Most of these things are happening because
of officials but the ministers get the
blame," Rajapakse added.
Mood
The President then turned to Constitutional
Affairs Minister D.E.W. Gunasekera and asked
- "What do you have to say?"
Gunasekera was in no mood to disagree with
an irate President and said it was true
ministers get blamed for acts of officials
and pointed out that what was at play was an
international conspiracy against the
government which should be met politically.
The Minister also cautioned against fighting
the Supreme Court without having a political
strategy in place, stating it could be
harmful to the government.
With emotions running high, the ministers
who may have been seeing their perks
disappearing before their eyes with the
enforced reductions of fuel prices called
for collective action to face the threat
posed to the government's stability by the
court decisions.
Views
Accordingly, the ministers said they should
decide not to act on the Supreme Court
directive that day, which saw the President
calling on Cabinet Secretary Wijesinghe to
express his views on the matter.
Not overawed by the situation, Wijesinghe
brought his years of experience in the
public service to bear on the crisis and
said the ministers must give thought to the
plight of Treasury Secretary Sumith
Abeysinghe when arriving at such a decision
since he would be helpless before the court
as a public official.
Not responsible
Replied Minister Senaratne - "Then let's
announce that this is a collective cabinet
decision. Then the Treasury Secretary is not
responsible. The Cabinet Secretary must
write and communicate the cabinet decision."
With tempers fraying, Foreign Minister
Rohitha Bogollagama like Cabinet Secretary
Wijesinghe struck a note of caution stating
it would not be prudent to confront the
Supreme Court or its orders since it would
have international repercussions.
Bogollagama also drew attention to the fact,
the Supreme Court order to reduce fuel
prices has struck a chord with the people
and that it would not be in the government's
best interest to challenge it.
Contrary view
Taking a contrary view was Minister Peiris,
who took the view the Chief Justice should
not be allowed to arrogate to himself the
powers of the Executive and the Legislature,
which he said if allowed to go unchecked
will make governance impossible.
Striking an even more defiant note was
Health Minister De Silva who said the
government should not rule out a possible
impeachment against the Chief Justice as a
last resort while Minister Sarath Amunugama
also called for serious action to stem the
tide.
"Lets tell the people we can do what the
Supreme Court has directed by cutting the
subsidies," Minister Amunugama added.
Emotions
By this time, emotions had taken over the
proceedings and the ministers called for the
imposition of curfew to maintain calm on the
streets, alleging Ravi Karunanayake was
planning to burn two petrol sheds to fuel
the crisis by blaming it on the fuel
scarcity while Kurunegala District MP
Dayasiri Jayasekera was accused of
mobilising people on to the streets.
Said Minister Sirisena - "Don't worry. Let
us mobilise the people and bring them on to
the streets. The people are with the
President. We have the people power. Let's
show it. This is a conspiracy."
Added the President - "Yes, Ranil can never
win through elections. He will try to get
there by conspiracies. This is a local and
international conspiracy. Let the whole
cabinet stand together, mobilise the people
and move forward."
Campaign
At this point, Minister Senaratne entered
the fray once again stating they should
launch a campaign against the Chief Justice
not on the fuel price reduction but on other
issues.
He said since the price reduction is popular
with the people, the attack on the judiciary
should come on issues such as the withdrawal
of barriers, which pose a security threat
and undermine the war effort.
"That's the way to go," he said with a
majority of the ministers agreeing, barring
the likes of Bogollagama, John Senaratne,
Dinesh Gunawardena and A.H. M. Fowzie.
Said Fowzie - "You must be careful not to go
against a popular order. People will be
brought to the streets by the opposition and
we will be playing into their hands and be
seen as undermining the independence of the
judiciary."
Continuing, Fowzie said due to the court
order, petrol is not being sold at the sheds
and is causing big problems with people
getting agitated.
"They are wanting to know the price. We have
to make a quick decision so that there can
be stability in the market," Fowzie went on
to say.
But Minister Senaratne who once championed
an impeachment motion against the Chief
Justice would hear none of it, calling
instead for tough action.
Emergency Law
Said Senaratne - "We have Emergency Law.
Just use it. What's the problem? Tell them
their dealerships will be cancelled if they
don't sell petrol. Use the Emergency Law for
the public benefit."
Interestingly, while speaking of the public
benefit, no minister thought it fit to say
that the public benefit would best be met by
complying with the Supreme Court order and
providing them relief through the reduction
of fuel prices.
Instead, Minister S.B. Nawinna who claimed
to be the owner of a petrol shed had his
own formula to resolve the problem and did
not shy away from making his case.
Said Nawinna - "I too have a fuel station.
That is not the issue. Tell all the shed
owners to sell at the price we supply fuel.
If there is a change in price, say the
government will meet the difference."
Finally it was decided that since the
Supreme Court order was not communicated to
the government in writing, they will not act
on it but meet again on Thursday to take
stock of the situation.
That said, the ministers also decided to
launch a campaign against the Chief Justice
and the Supreme Court based on issues other
than the fuel price reduction even as the
opposition too moved in on the action.
Before the meeting ended, there was one
other concern the ministers had and that
related to The Sunday Leader and its
reporting of cabinet meetings which if
leaked they felt may compromise their tough
talk about the judiciary.
Discussed
The ministers said all what was discussed
would be reported in detail on Sunday in the
Leader, which for President Rajapakse
however was not a matter of serious
consequence.
The President told the ministers there maybe
among them some who don't like him and that
if they were prone to provide details of the
discussion, to stick to the facts.
The following day Thursday, when the
ministers met, the same defiant mood
prevailed with the consensus being that the
government will not reduce fuel prices since
the court order was not communicated in
writing.
And to drive home the point, the ministers
decided to take up the issue when the
cabinet next meets after the Christmas
vacation, which is two weeks hence.
The thinking in government was that the
courts will be on vacation from Friday,
December 19 to January 5 and they would have
time till then to map out strategies and
mobilise the people. What they did not
reckon was a determined Supreme Court and a
battle-hardened Chief Justice for whom it
was not so much a personal battle but
preservation of a constitution he headed,
the Judiciary.
For the order was issued in open court and
both the Attorney General and the Secretary,
Treasury took notice of it and for the
government to say they have not received an
order in writing was in effect trifling with
the Supreme Court. And in any event the
order was against the CPC and the Treasury
and not the cabinet.
In fact the very day the Supreme Court
issued order on the fuel pricing formula,
the Chief Justice spoke at a Law College
function where he stressed the importance of
respecting the rule of law.
"We are all persons who have gone through
the institution. If the institution is
functioning well, then the product is good
and finally the rule of law is preserved in
a much better way," he said.
Kept pace
Added the Chief Justice - "I think the legal
field today has a significant place in the
country because we have kept pace with the
momentum of change. We have responded to all
situations that have come up. The situations
that have come up are wide and varied and we
have responded to every one of them in
keeping with the rule of law. All orders are
well considered, heard patiently, and orders
made in keeping with the rule of law."
And the Chief Justice was not done yet.
With the government sticking to the position
the court order was not communicated in
writing, Thursday evening, the Chief Justice
worked late in to the night and had the
order despatched to all the respondents
including the new CPC Chairman, Thoradeniya,
the Attorney General, Treasury Secretary and
the Lanka Indian Oil Company.
Thus, the ball was back in the government's
court Friday with at least one petitioner
set to file a motion in court drawing
attention to the fact the court order has
not been complied with. In other words it
tantamounts to a contempt of court for which
the respondents will be answerable.
Strategy
By Friday, the government was reassessing
its strategy realising the Supreme Court was
not backing down and with the court order
issued to the Treasury Secretary, CPC and
the Lanka Indian Oil Company, there was no
way they could all be protected from
possible contempt of court charges and jail
time and the time had come for the ministers
to partake in some humble pie.
The first signs of that came with the LIOC
announcing Friday that it will sell petrol
at Rs. 100 per litre.
The internal problems for the government
were magnified with Treasury Secretary
Abeysinghe no doubt fully alive to the fate
of his predecessor, informing the President
he will be compelled to resign if the
Supreme Court order is not complied with.
Thus by Friday evening the government was
veering towards implementing the Supreme
Court order having made an unnecessary hash
of the issue but still determined to battle
the judiciary on other grounds such as the
order to withdraw barriers.
This campaign is expected to gather momentum
in the weeks to come even as the Supreme
Court sits in January to consider the
Constitutional Council case.
Consequences
In fact one message that went out Friday was
the fate of the minorities in the country if
the government chose to ignore Supreme Court
orders in the backdrop of earlier eviction
orders and diplomatic circles were abuzz on
the consequences.
For the LTTE too such a move by the
government would be heaven sent since it
could be milked to the maximum in India and
with the international community as a whole
at a time there is a growing call for
intervention.
In the meantime, the UNP too was gearing for
action with a massive public demonstration
planned for January 5, if the government
does not provide relief to the people in
terms of the Supreme Court order.
Opposition Leader Ranil Wickremesinghe
convened a meeting of the party top brass
Thursday and said if the government fails to
reduce the fuel prices, they will launch a
Bangkok style protest campaign until such
time the UPFA administration caves in.
That however may now not come to pass with
the government wilting under pressure
especially due to the refusal by the public
officials to go on a confrontation course
with the Supreme Court.
Knowing President Rajapakse however he will
not go down without a fight, but he surely
has met his match in Chief Justice Sarath
Silva, who unlike Velupillai Pirapaharan is
not living in a jungle hideout or bunker but
dispensing justice openly, even daring to
drive his own car to the wayside boutiques
to buy his stringhoppers and kiri hodi.
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Supreme Court lays down the law
The Supreme Court on Thursday delivered
copies of the Order on the fuel pricing
formula to the Respondents in the case
including Treasury Secretary Sumith
Abeysinghe, CPC, LIOC and the Attorney
General calling for the immediate
implementation of the new fuel prices.
In his hard hitting Order, Chief Justice
Sarath N. Silva with Justices K.
Sripavan and P.A. Ratnayake agreeing has
said the people have not received the
full benefit of the reduction in world
oil prices due to the illegal 'Hedging
Agreements,' "on which over 32 million
US$ had been paid at the time the
Applications were filed with a further
imminent payment of US$ 46 million and a
total payment of US$ 675.72 million for
the operative period of 9 months
calculated at the price of US$ 50 per
barrel and; the arbitrary and irrational
government taxes and levies that have
been imposed."
Following is the full text of the
judgement which the Respondents received
Friday:
Decided on 17th December 2008
Sarath N. Silva C.J.
We have heard these applications filed
in the public interest and made orders
on 28.11.08, 1.12.08 and 15.12.08. The
alleged infringement of fundamental
rights which deny to the People the
equal protection of the law guaranteed
by Article 12(1) of the Constitution
relate to the impugned executive or
administrative action in two respects.
They are:
i) "Hedging Agreements" that had been
entered into by the 3rd Respondent
purportedly on behalf of the Ceylon
Petroleum Corporation (CPC - 2nd
Respondents) and
ii) the price of sale of petroleum
products, in particular, of petrol.
The applications have been filed in the
public interest on the basis that the
price of sale is not commensurate with
world market prices. In that, with the
reduction of the world market prices the
People have not derived the benefit
thereof at the point of sale due to the
illegal "Hedging Agreements" on which
over 32 million US$ had been paid at the
time the Applications were filed with a
further imminent payment of US$ 46
million and a total payment of US$
675.72 million for the operative period
of 9 months calculated at the price of
US$ 50 per barrel; the arbitrary and
irrational government taxes and levies
that have been imposed.
We made an interim order on 28.11.2008
suspending payments on the "Hedging
Agreements" for the several reasons that
were stated. The Monetary Board being
the proper Authority, on whose license
the banks have been operating was
directed to investigate these matters
and to take action according to law.
In the order of 15. 12. 2008 considering
the submission made by the Intervenient
Petitioners supported by documents that
benefits have been provided to the 3rd
Respondent, being the former Chairman of
the CPC by certain banks involved in the
"Hedging Agreements", we directed the
Monetary Board to investigate these
matters with the assistance of the
Criminal Investigation Department of the
Police.
The Monetary Board is now directed to
refer the results of the investigations
to the Commission to Investigate Bribery
and Corruption.
The next aspect of the alleged
infringement relates to prices.
Considering the evidence adduced of the
price of petrol in particular being
highly excessive, it was decided to lay
down a pricing formula to be addressed
as a national issue above party politics
and the 2nd Petitioner being a Member of
Parliament in the Opposition agreed to
co-operate in such exercise. Accordingly
the Secretary to the Treasury who was
present in Court was directed to submit
a report on the taxes and levies with
the suggested pricing formula.
A copy of the order was sent to the
Secretary to His Excellency the
President. In the order 1.12.2008, we
set out the 3 components of the pricing
formula be considered only with regard
to petrol. In the Order of 15.12.2008
having considered the report submitted
by the Secretary to the Treasury and
submissions of parties we directed that
the benchmark figure should be taken at
US$56.05 per barrel of imported refined
petrol. The Secretary was directed to
compute a formula on the basis of this
benchmark price on the premise that the
revenue component would not exceed 100%
of the price per litre of imported
refined petroleum and of overhead costs.
According to the report of the Secretary
at the benchmark importation price of
56.05 US$ 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 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 is in fact 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 prima 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
(i.e. cost of import plus overheads and
handling charges).
There has been a downward trend of the
prices of petroleum products. In view of
the submission of the Secretary to the
Treasury that there is a revenue
expectation from the sale of petrol and
that the formula should not diminish the
revenue expectation, we made an order
that where the price descends below US$
56.05 per barrel the reduced amounts be
absorbed by way of a customs duty adding
to the volume of revenue. On the same
basis that where there is an increase of
the price from US$ 56.05 upto US$ 100
per barrel, there should be a decrease
in government levies coming down to a
minimum 75%.
Based on the aforesaid directions the
Secretary to the Treasury has now
tendered two options for the formula to
be adopted.
Having considered the submissions of
counsel we are of the view that option
No. 1 which is annexed marked "A" to
this order would be just and equitable
and assure to the People the equal
protection of the law.
The Secretary has recommended that
Government fiscal levies be reduced to
three instead of the previously
applicable six. On the basis of the
formula only following Government and
fiscal levies would be imposed:
i) Excise duty Rs. 40 per litre which
would remain constant;
ii) An effective customs duty of Rs. 30
per litre which would be adjusted by
waivers being granted depending on the
imported cost of a barrel of petrol
taking the benchmark at US$ 56.05 per
barrel.
Annex "A" sets out the particulars of
the price formula that would be
applicable.
Secretary to the Treasury submitted that
there would be an undue reduction in
Government revenue as a result of this
formula. On the other hand the
Petitioners contend that since
Government revenue would not descend
below 75% when the cost per barrel goes
up to 100 dollars the price per litre
would be as high as Rs. 142 per litre.
We are of the view what whilst there is
some degree of merit in both contentions
the formula at annex "A" adequately
meets the requirements and would be
reasonable as well as equitable
considering the interest of revenue as
well as the aspect of the consumer.
The Secretary's submission that there
has been a high expectation of revenue
from sale of petroleum is not well
founded. According to the chart given in
page 6 of his Report the percentage of
taxes in relation to the 'total
petroleum bills is as follows:
2003 - 39.23%, 2004 - 27.58%, 2005 -
19.52%, 2006 - 14.11%
2007 - 13.89%, 2008 till September 8.7%
Hence the Estimates for the year 2009
could not have been prepared on a
revenue estimate significantly higher
than 8.7. The presently applicable rate
of 180% on the sale of petrol would have
been way beyond any reasonable
expectation. That has become possible
only because of the downward trend of
world prices and most importantly due to
the interim relief staying the prime
facie illegal "Hedging Agreements" being
the executive action which infringed the
fundamental rights of the People.
Hence it is just and equitable that the
People should derive the benefit of the
interim order they secured from Court.
In the circumstances we make a direction
that the price of petrol be adjusted on
the basis of the formula in Annex "A"
and that the selling price of petrol be
reduced to Rs. 100 per litre with effect
from midnight on 17.12.2008. An
adjustment of the Excise Duty, Customs
Duty, Prot and Aviation Levy (P.AL)
being an increase, should be effected in
terms of Annex "A" in the manner
suggested by the Secretary.
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 19A 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 represent 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.
A submission was made that the
difference in price between the superior
grades of petrol that is 95 octane and
other superior grades and the ordinary
rate of petrol is unreasonable.
The Secretary is authorised to obtain
the necessary particulars from the CPC
and LIOC and to make a suitable
direction as regards the difference in
the prices he levies in the aspect of
the superior grades of petrol. Once that
direction is made it should be notified
to the CPC and the LIOC who would be
bound to comply with it and adjust
prices accordingly.
The Executive is also authorised to
adjust the custom duty so as to prevent
an undue gain by LIOC resulting from
lower overhead charges and any subsidies
that have been derived from the
Government in the course of the
privatisation exercise, to which
reference has been made in the order
15.12.2008.
This order is to be communicated by the
Registrar to the Secretary to the
Treasury who is present and takes
notice, the Chairman of the Ceylon
Petroleum Corporation, the Chief
Executive Officer of LIOC. They are
directed to comply with the price
formula on Annex "A" from midnight of
17.12.2008 and to ensure that sales take
place without undue interruption. The
Petitioners or any affected person may
file papers in this court in respect of
any infringement of this directive.
A submission was also made when the
percentage of tax operative at 100% goes
up due to lowering of prices from the
benchmark price the excess revenue
beyond 100% should be credited to a
Stabilization Fund. We are of the view
that this is a suggestion to which the
Secretary to the Treasury was in
agreement is reasonable since such funds
would be a useful source to meet
Government expenditure where assistance
is required for different aspects of the
economy.
Accordingly the Secretary is directed to
make the necessary arrangements to have
such amounts credited to a Stabilization
Fund to be used on the basis of the
direction given by Government.
Objections may be filed by any of the
Respondents, if necessary, within three
weeks. Counter affidavits within two
weeks thereafter and this matter is to
be listed before the same Bench on
16.02.2009, together with SC FR 566/08,
567/08 and 577/08
Direction stated above will be in
operation till the final determination
of this application.
Sgd/ Chief Justice.
Sripavan J,
I agree
Sgd./Judge of the Supreme Court
Ratnayake J,
I agree
Sgd./Judge of the Supreme Court |
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