ISLAMABAD: The Islamabad High Court (IHC) has sought an explanation from the Federal Board of Revenue’s (FBR) chairman, as well as from the federal government, for not implementing a judgement calling for initiating afresh the process of bidding for award of a contract to install track and trace system for tobacco products.

A division bench, comprising Justice Mohsin Akhtar Kayani and Justice Fiaz Ahmed Anjum Jandran, issued the order on Friday after taking up a petition filed by the National Radio and Telecommunication Corporation (NRTC) and the ministry of law.

The assistant attorney general argued before the court that a single-member bench had erroneously interpreted the law and scrapped the verdict. He requested the court to set aside the judgement.

Justice Kayani enquired of the government’s counsel as to whether the order of the single-member bench had been implemented or not.

When the assistant attorney general replied in the negative, the judge expressed displeasure and sought an explanation from the FBR chairman and the ministry of law and justice.

FBR, law ministry asked for explanation in tobacco track installation case

The court directed the chairman to depute an officer not below the rank of member, and additional secretary in case of the law ministry, to explain the delay in implementing the said judgement.

Further hearing in the matter was adjourned to Dec 21.

The IHC had in May scrapped a multi-billion-dollar licence the FBR had awarded to the National Radio and Telecommunication Corporation for installing a track and trace system for tobacco products in the country and empowered the bureau to initiate the bidding process afresh.

Justice Miangul Hassan Aurangzeb issued the judgement on petitions filed by two companies — the National Institutional Facilitation Technologies (Pvt) (NIFT) and Authentix Inc.

The companies criticised an FBR letter dated Oct 29, 2019, about granting the licence to NRTC at a price of Rs 731 per 1,000 stamps for five years to establish, maintain and operate the entire process of installing a tracking and tracing system for tobacco products.

Pakistan had ratified the Framework Convention on Tobacco Control (FCTC) in 2004 and acceded to the FCTC Protocol to Eliminate Illicit Trade in Tobacco Products on June 29, 2018.

Article 8.2 of the FCTC Protocol requires Pakistan to establish a tracking and tracing system for all tobacco products manufactured in, imported into, or transiting through its territory.

Tackling illicit trade

The country was supposed to embark on the project to meet its national need to monitor and protect its revenues and address the high level of illicit trade in tobacco products within its borders.

In order to prevent the leakage of revenue, under-reporting of production and sale of tobacco products and to ensure proper payment of federal excise duty and sales tax on the manufacture and sale of tobacco products, the FBR was mandated to license the implementation of the track and trace system (TTS).

The system was required to be developed and operated by the licencee for tobacco products manufactured in and imported into Pakistan.

On Aug 6 last year, the FBR brought out an advertisement in newspapers inviting applications for grant of a five-year licence to be issued under the Sales Tax Rules, 2006, for development and operation of a TTS system.

The licence was to be granted to the technically qualified bidder whose financial bid was the lowest. The deadline for submission of bids was extended from Sept 5 to Sept 27.

On Sept 27, 2019, 13 bidders submitted their bids and five of them were declared as “not responsive”. The NIFT quoted a bid for Rs868.36 per 1,000 stamps; M/s Authentix Rs1,250 and NRTC Rs 0.731.

On Oct 15, the bid evaluation report was posted on PPRA’s website, but on Oct 17, the NRTC informed FBR that as a result of an oversight, it had quoted Rs0.731, and that the said unit price, when multiplied by 1,000, came to Rs731 per 1,000 stamps.

The NIFT, through a writ petition, drew the court’s attention to the bid evaluation report dated Oct 14, 2019, and submitted that since the NRTC’s financial bid was Rs0.731 per 1,000 stamps, it did not technically qualify for the process. It requested the court that since the NIFT was the next lowest bidder, it ought to have been granted the licence after the NRTC took the position that it had inadvertently quoted “Rs0.731 per 1,000 stamps”.

In its ruling, the court declared that the process adopted for allowing the NRTC’s request for correction of the mistake in its financial bid suffered from material irregularity and unreasonableness. However, the court said the FBR was empowered to initiate a fresh bidding process.

Published in Dawn, December 19th, 2020