PESHAWAR: A Peshawar High Court bench on Thursday gave the Federal Board of Revenue director general and three federal secretaries seven days to file comments on a petition challenging an amendment to the Federal Excise Act, which had reduced the prices of the locally-manufactured cigarettes.

Chief Justice Yahya Afridi and Justice Mohammad Ghazanfar Khan fixed Feb 7 for hearing into the petition and asked the petitioner’s lawyer, Babar Khan Yousafzai, if he might file a rejoinder after comments were filed by the respondents.

The petition is filed by a resident of Swabi, Hameed Khan, who challenged that provision on multiple grounds.

He claims that through the introduction of a new tier of taxation for low-priced cigarettes, the prices of locally manufactured cigarettes had reduced manifold thus causing increase in its consumption.

Swabi resident challenged reduction in prices of local cigarettes

During the last hearing, a high court bench had suspended action on the amendments to the law.

However, on Thursday, the bench observed that as a substantive law had been challenged, it would be appropriate to decide the petition at the earliest rather than suspend the law.

The respondents in the petition are the Federal Board of Revenue director general, federal finance secretary, the secretary of ministry of national health services and federal law secretary. They are now directed to file comments within seven days.

Advocate Babar Khan Yousafzai said worldwide the prices of cigarettes had been enhanced through taxation to curtail their use but in Pakistan, through the introduction of the impugned provision, amendments were made to the Federal Excise Act, 2005, to reduce price of cigarettes.

He said the sales of the locally manufactured cigarettes had increased to their low rates.

The lawyer said traditionally, the excise duty on cigarettes had been levied in two tiers with the first being for cigarettes, which were expensive and used by the members of the upper and upper middle classes, and the second for cigarettes consumed by the middle and lower classes.

He said the multinational cigarette manufacturers had started lobbying through influential quarters including the British High Commission for reduction of prices of cigarettes through introduction of a third tier for purpose of levy of excise duty.

He said 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 lawyer said amendment was made despite the national health services ministry’s proposed increase in all taxes and rejected the proposal of a third tier.

He said another controversial change was about the introduction of a restriction on lowering or bringing a change of price from one tier to another but due to the mala fide intentions, that 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.

Published in Dawn, January 19th, 2018