IHC voids licence given to NRTC to track tobacco products

Updated May 07 2020

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FBR empowered to initiate fresh bidding process. — AFP/File
FBR empowered to initiate fresh bidding process. — AFP/File

ISLAMABAD: The Islamabad High Court (IHC) on Wednesday scrapped the multi-million-dollar licence the Federal Board of Revenue (FBR) had awarded to M/s National Radio & Telecommunication Corporation (NRTC) for installing a track and trace system for tobacco products in the country and empowered FBR to initiate the bidding process afresh.

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

The companies criticised the FBR letter dated Oct 29, 2019, of granting the licence to NRTC at a price of Rs731 per 1,000 stamps for five years to establish, maintain and operate the entire process of installing a tracking and tracing system of tobacco products in the country subject to terms and conditions stipulated in the Licencing Rules, 2019, Invitation for Licencing (IFL) and other relevant laws.

On Nov 3, 2004, Pakistan ratified the Framework Convention on Tobacco Control (FCTC) and on June 29, 2018, acceded to the FCTC Protocol to Eliminate Illicit Trade in Tobacco Products.

FBR empowered to initiate fresh bidding process

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

Pakistan had to embark on the project to meet its national need to monitor and protect its revenues and address the high level of illicit trade of tobacco products within its borders and to meet its international obligations under the FCTC.

The track and trace system was to form part of a regional and international track and trace regime for tobacco products.

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 licence the implementation of the track and trace system, which was required to be developed, operated and maintained by the licencee for tobacco products manufactured in and imported into Pakistan.

On Aug 6, 2019, the FBR published an advertisement inviting applications for the grant of the five-year licence to be issued under the Sales Tax Rules, 2006, for the development, maintenance and operation of a track and trace system in accordance with provisions of the Rules and the IFL issued by the FBR. The procedure for the bidding was provided in the IFL as prescribed by the Pakistan Procurement Rules Authority (PPRA).

The bidding was to be done through a single-stage, two envelope procedure and sealed applications were required to be delivered within 30 days of the publication of the advertisement.

The licencee was to be responsible for end-to-end installation and operation of the track and trace system connecting cigarette manufacturing sites and import stations to the FBR and law-enforcement officials.

The track and trace system was to include provision of tax stamps and integrated codes to enable the real-time electronic monitoring of the cigarette supply chain across the country.

The licence was to be granted to the technically qualified bidder whose financial bid was the lowest. The deadline for the submission of the bids was extended from Sept 5, 2019, to Sept 27.

On Sept 27, 13 bidders submitted their bids for the award of the licence and five of them were declared as “not responsive”. The NIFT quoted the bid for Rs868.36 per 1,000 stamps; M/s Authentix Rs1,250 per 1,000 stamps and NRTC Rs0.731 per 1,000 stamps.

On October 15, 2019, the bid evaluation report was posted on PPRA’s website, but on Oct 17, the NRTC informed the 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.

Furthermore, the NRTC requested the FBR to amend the bid evaluation report so that its quoted price is Rs731 per 1,000 stamps.

The NIFT, in a writ petition drew the attention of the court to the bid evaluation report dated Oct 14, 2019, and submitted that the NIFT was one of the bidders technically qualified and that its financial bid was Rs868.36 per 1,000 stamps and since the NRTC’s financial bid was Rs0.731 per 1,000 stamps, it did not technically qualified for the bidding 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 quoted Rs0.731 per 1,000 stamps as a result of an oversight or mistake.

Giving its ruling on the matter, 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 that the FBR was empowered to initiate a fresh bidding process strictly in accordance with the law.

Published in Dawn, May 7th, 2020