Lahore High Court has barred the Punjab government from levying luxury tax retrospectively on luxurious vehicles over 2000CC registered after June 30, 2005 under the Punjab Finance Act, 2008. Sources told Business Recorder on Monday that provincial government has levied luxury tax through Section 6 of the Punjab Finance Act, 2008. The levy has been challenged on the grounds that such luxury tax could not be collected retrospectively. It was argued that the imposition of luxury tax would result in double taxation in cases where buyers of such big vehicles have already paid motor vehicle registration tax in the past. The purchasers of luxury cars had paid 2 percent motor vehicle prior to this new amendment under Punjab Finance Act 2008. On a writ petition filed by Syed Naveed Andrabi and Talib H Rizvi, advocates Supreme Court of Pakistan, Justice Maulvi Anwar-ul-Haq of Lahore High Court issued notices to the Punjab government to stay the recovery proceedings of the arbitrary and illegal luxury tax on vehicles over 2000CC registered after June 30, 2005 in Punjab. Details of the case revealed that a person purchased a Range Rover, Model 2004 with an engine capacity of 2926CC on June 9, 2008. The vehicle was registered by the provincial motor registration authority on payment of registration fee, motor vehicle tax and fulfilled all other liabilities. However, motor registration authority, excise and taxation department, Lahore issued a notice/challan to the buyer for payment of Rs 200,000 as luxury tax. The petitioner challenged the legality of the tax on different grounds. Firstly, the buyer at the time of registration had paid motor vehicle tax, which was @2 percent of the value of vehicle as the vehicle was placed in a luxury category and therefore tax was collected at double the normal rate. Therefore, the government has no authority to claim another vehicle tax, which would result in illegal double taxation. As motor registration authority has claimed the levy under Punjab Finance Act of 2008 vide Notification dated June 27, 2008 that luxury tax is required to be paid on imported cars registered in Punjab after 30 June 2005. This law in Punjab Finance Act is ultra vires of the Constitution therefore no recovery can be claimed from the buyers of such vehicles. The buyer registered his vehicle and made payments of all amounts due under the fiscal statutes. The question arises that if the imposition of this levy with retrospective effect is allowed, it will have the effect of opening up liability which is barred by time and this will be abuse of authority. The petitioners opined that legislature has the power to make laws with retrospective effect, but this power is always subject to judicial review. In the present case the imposition of additional duties on the imported cars with a retrospective effect is absolutely arbitrary and irrational without any justification. Legislature has held without any basis that the vehicles of certain CC falls within the category of luxury cars if imported after the time fixed by it are liable to pay the duty, both these conditions are unreasonable and without any foundation therefore are in violation of constitutional norms of Article 14 and 19 of the Constitution of Islamic Republic of Pakistan. Moreover, whenever the legislature imposes a tax with retrospective effect then it must be shown by clear unambiguous language that it is based on legal justifications. The amendment seemed to be discriminatory as the buyer being domiciled in Punjab is made to suffer. All vehicles of same classification registered outside Punjab but being plyed in Punjab one beyond the scope of this legislation. The petitioners also raised an issue that the instant liability fails to determine what is the definition of luxury? Therefore, demand for payment of luxury tax on the automobile under the Punjab Finance Act of 2008 may kindly be declared illegal, petitioner added.