PESHAWAR: The Peshawar High Court has issued a stay order stopping the Federal Board of Revenue from charging a local cigarette manufacturing company the excise duty hiked in February.

A bench consisting of Justice Syed M Attique Shah and Justice Syed Arshad Ali directed the FBR chairman, secretary of the Cabinet Division and chief commissioner (Inland Revenue) to respond within a month to the petition of the Sarhad Cigarette Industries Limited against more than 100 per cent increase in the excise duty on its cigarettes as declared by a statutory regulatory order issued by the FBR on Feb 14, 2023.

It also put the attorney general for Pakistan on notice asking him to respond to the petition.

As interim relief, the bench declared that the stocks produced by the petitioner, which was duly registered in the relevant register before Feb 23, when the impugned SRO was included in the supplementary Finance Act, would be cleared as per the statutory rate of duty prescribed in the Federal Excise Act, 2005, prior to the SRO.

Asks FBR, others to respond to petition

It added that the petitioner won’t be asked to pay duty line with the impugned SRO subject to a post-dated cheque to be deposited by the petitioner with the respondents for the differential amount.

Senior advocate Ishtiaq Ahmad appeared for the petitioner and said his client manufactured cigarettes and was registered with authorities for the payment of excise duty under the Federal Excise Act, 2005.

He added that Section 3 of that law provided for the payment of excise duty by the cigarette manufacturer as provided in Schedule I.

The counsel pointed out that according to Schedule I, the rate of duty was Rs2,050 per thousand cigarettes on locally produced cigarettes if their on-pack printed retail price didn’t exceed the bar of Rs6,660 per 1,000 cigarettes.

He said that through the impugned SRO issued on Feb 14, the FBR enhanced the rate of duty from Rs2,050 per 1,000 cigarettes to Rs5,050 per 1,000 cigarettes.

Mr Ishtiaq argued that the FBR had the power to charge the excise duty on any goods in terms of Section 3 of the Act but it wasn’t authorised to amend the rate of duty that had been provided in Schedule I to the Act.

He argued that the impugned SRO, whereby the rate of the duty was enhanced, was contrary to law as the FBR could only exercise delegated power and had no authority to amend, rescind or enhance the statutory duty as provided in Schedule I.

The lawyer contended that though the impugned SRO was later translated into a Finance Act, 2023, which received assent of the president of the country on Feb 23, 2023, the petitioner was not liable to pay any increased excise duty prior to promulgation of the Supplementary Finance Act.

He argued that by enhancing the excise duty through the SRO, the FBR had overstepped its powers.

The counsel sought an interim relief saying the court should direct the FBR to clear the cigarette stock manufactured prior to the enforcement of the Supplementary Finance Act, 2023, as per the rate of the excise duty in vogue before the issuance of the impugned SRO.

Published in Dawn, April 22nd, 2023