Lahore High Court (LHC) has dismissed a petition of cigarette manufacturers/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), within the territorial jurisdiction of Pakistan. Sources told Business Recorder here on Tuesday that the LHC Rawalpindi bench had dismissed the petition of the AJK manufactures and distributors of cigarettes.
According to sources, the LHC has held that the Pakistani tax authorities have legal power to check/inspect and monitor the trade of cigarettes within their jurisdiction and if any movement is against the law, they can seize the non-duty paid cigarettes. It is clear from this order that from now onwards the non-compliant cigarette manufacturers of AJK would not be a threat to the tax complaint sector of Pakistan. Now, Pakistani tax authorities can effectively check the cigarettes manufactured in AJK and brought into territorial jurisdiction of Pakistan.
Details of the case revealed that the 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 cigarette 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. The IR-EN FBR is not empowered to check cigarette manufactured in the AJK, they pleaded. On the other hand, Inland Revenue Enforcement Network opined that the cigarette manufactures of the AJK are involved in 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.
According to the sources, the AJK-based cigarette manufacturers are wilfully involved in illicit cigarette trade in Pakistan by dumping low priced/non-duty paid cigarette.
The Inland Revenue Enforcement Network has done key intelligence gathering to confirm the prices of AJK cigarettes sold in local market.
It was also learnt that all the seized brands of the AJ&K origin were being sold at a retail price which was ever lower than the amount of duty/taxes payable thereon. The minimum price itself constituted the evidence that no duty/taxes have been paid on such supplies; moreover, there is no mechanism for online verification of payment of duty /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 meaning actions has been initiated in this regard.
The Inland Revenue Enforcement Network has taken up the matter with the AJK authorities to jointly take action against non-duty paid cigarettes manufactured in the AJK. However, there was no cooperation from the AJK side, sources said.
From April 21, 2017, Inland Revenue Enforcement Network started seizing trucks of non-duty paid cigarettes of AJK including Intelligence and Investigation (I&I) Multan seized one truck, I&I Faisalabad one truck, RTO-II Lahore three trucks, RTO Sialkot seven trucks, RTO Gujranwala two trucks and RTO Rawalpindi seized six trucks of non-duty paid cigarettes of the AJK.
The investigation made by the Inland Revenue Enforcement Network revealed that the invoices contained in the trucks revealed that the ghost buyers and 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. Practically, a focal person of manufacturing unit remained present in Pakistan who is actual recipient of the AJK cigarettes. The buyers and sellers of these non-duty paid cigarettes are the same. The telephone number of such recipient is available with the driver of the truck carrying NDP cigarette for making contact in Pakistan.
Post-interception probe revealed that ground check reports proved that in all the three cases, the invoiced buyers had fake particulars as declared business premises had no existence on the ground or was being used for some other purposes.
Thus practically sales invoices issued by the AJK cigarette manufacture were only meant to defraud Pakistan tax authorities, the sources added.
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