LHC dismisses AJK cigarette makers, distributors’ petition against FBR raids

LAHORE: Lahore High Court (LHC) has dismissed a petition of cigarette manufacturers and distributors of Azad Jammu and Kashmir (AJK) against the seizures of AJK cigarettes by the Federal Board of Revenue (FBR), Inland Revenue Enforcement Network (IR-EN).

LHC has stated that the Pakistani tax authorities have the legal power to check, inspect and monitor the trade of cigarettes within the jurisdiction and if any movement is against the law, they can seize the non-duty paid cigarettes. Now, Pakistani tax authorities can effectively check the cigarettes manufactured in AJK and brought into the territorial jurisdiction of Pakistan.

According to details available, AJK cigarette manufacturers including Walton Tobacco, Nobel Tobacco and Watan Tobacco filed writ petitions in the LHC taking the plea that the IR-EN FBR is not competent to intercept or check cigarettes manufactured in the AJK. The AJK government has adopted Pakistan’s tax laws and the AJK collect taxes on cigarettes as per their own tax laws applicable in AJK.

On the other hand, Inland Revenue Enforcement Network opined that the cigarette manufacturers of the AJK are involved in the dumping of low quality and non-duty paid cigarettes in Pakistan. The cigarettes manufactured in the AJK are sold at a very cheap price as compared to duty paid cigarettes of compliant manufacturers in Pakistan. AJK-based cigarette manufacturers are willfully involved in illicit cigarette trade in Pakistan by dumping low priced and non-duty paid cigarettes.

It was also learnt that all the seized brands of the AJK origin were being sold at a retail price which was even lower than the amount of duty and taxes payable thereon. The minimum price itself constituted the evidence that no duty and taxes have been paid on such supplies.

Moreover, there is no mechanism for online verification of payment of duty and taxes on cigarettes being manufactured in the AJK and, therefore, for Pakistan tax authorities all AJK tax authorities and AJK council have been repeatedly requested for positive intervention but till date, no meaningful action has been initiated in this regard.

The investigation made by the Inland Revenue Enforcement Network revealed that the invoices contained in the trucks revealed that the ghost non-existent buyers were shown to evade the authorities. The destination declared on the invoice is different from the actual destination meant for the AJK cigarettes in Pakistan. The investigation revealed that a focal person of manufacturing unit remains present in Pakistan who is the actual recipient of the AJK cigarettes. The buyers and sellers of these non-duty paid cigarettes are the same, the investigation concluded.

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