PESHAWAR: A Peshawar High Court bench has stopped the federal government from acting on an amendment made in Federal Excise Act, which had resulted into reduction of prices of locally manufactured cigarettes.

The bench comprising Justice Mohammad Nasir Mehfooz and Justice Shakil Ahmad directed that operation over the impugned provision of the Finance Act, 2017, should remain suspended till January 18, the next date of hearing of a writ petition filed by a resident of Swabi, Hameed Khan.

The petitioner has challenged the said provision on multiple grounds including health factors.

The bench directed that the respondents including the Federal Board of Revenue director general, federal finance secretary, the secretary of ministry of national health services and federal law secretary should submit written replies before the next date.

Advocate Babar Khan Yousafzai, appearing for the petitioner, argued that worldwide the prices of cigarettes had been enhanced through taxation so as to curtail its use, but in Pakistan through the introduction of the impugned provision amendments were made in the Federal Excise Act, 2005, to reduce price of cigarettes.

Suspends operation on controversial amendment

He argued that due to cheap availability of locally manufactured cigarettes, its sale had further enhanced. He said that traditionally excise duty on cigarettes had been levied in two tiers. He added that the first tier was for the cigarettes, which were expensive and usually consumed by upper and upper-middle class of people, while the second tier was applied on cigarettes, which were consumed by the middle class and below.

Mr Yousafzai said that Finance Act, 2017 was introduced in the National Assembly through a money bill. He alleged that the multi-national cigarettes manufacturers had started lobbying through influential quarters including the British government for reduction of prices of cigarettes through introduction of a third tier for purpose of levy of excise duty.

He stated that through Section 9 (A) (i) of Finance Act amendment was made in the Federal Excise Act, 2005, and a new Column 10-A was included in Table 1 of the First Schedule. He added a third tier was introduced which provided that cigarettes with on-pack retail price of less than Rs58.5, an excise duty at rate of Rs16 per pack, shall be levied.

The counsel claimed that the amendment was made despite the ministry of national health services proposed increase on all taxes and rejected the proposal of a third tier.

Another controversial change, he stated, was that the government also introduced a restriction on lowering or bringing a change of price from one tier to another, but due to malafide intentions the said restriction was only applicable to the cigarettes falling in the first tier and not the second tier.

In practice, he said, multinational companies were given free hand to reduce the on-pack price of its brand to bring it in the third tier from the second one, so that lesser excise duty should be levied on it.

Mr Yousafzai claimed that the introduction of the third tier was also aimed at wiping out competition from local market so that the international companies should have full control on the market.

He said that around 108,800 persons died annually because of cigarette consumption-related diseases including cancer, heart ailments, etc.

He stated that Australian government had announced to raise taxes on tobacco by 12.5 per cent every year from 2017 to 2020. He said that with the introduction of the third tier of taxation in the cigarette manufacturing industry, the multinationals were able to make their cigarettes cheap and widely available in the market thus increasing its consumption.

The counsel requested the bench to issue directives to the government to amend the said restriction by also including the cigarettes falling in second tier so that prices could not be reduced to bring it in the third tier.

Published in Dawn, December 27th, 2017