It was late last year that during a routine inspection of edibles at Raja Market in Faizabad that a consumer approached Chaudhry Mohammad Afzal, the assistant director food and price, Islamabad, and complained that he had to pay nine rupees more than the printed price to buy a 500ml bottle of soft drink.

When Mr Afzal visited Sangam Market in Sector I-8/3, he came across a salesman of another beverage company selling products at higher rates as this one.

On the complaint of the Islamabad capital territory administration, separate cases were registered against the sales teams of the companies with the Industrial Area police for violating the Price Act. The law prohibits companies from selling their products at higher rates as compared to price printed on them for the customers. Both cases are now pending in the office of the Assistant Commissioner Imran Ali Sultan.

However, Mr Afzal's investigations have showed that the issue is not merely of overpricing and profiteering but of causing a loss of billions of rupees to the exchequer yearly – in terms of unpaid taxes.

An official of the Federal Board of Revenue on the request of anonymity explained: "Companies pay tax to the government against the price mentioned for the customers. The customer price comprises the retail price – for shopkeeper – and the sales tax. By selling the product at a higher rate to shopkeepers as compared to the price printed for customers, the manufacturer saves tax, which is a crime."

Officials in the Islamabad administration revealed that this was a well-documented practice in such companies. "They have their own sales department and salesmen and the higher price, at which the drinks were sold to the shopkeepers, were registered on their transactions," a local administration officer told Dawn. "This was to ensure that the profit earned this way went to the companies' accounts and not the salesmen."

However, since tax is a federal government issue, the local administration cannot take any action in this regard. "The district administration can only take action against profiteering and hoarding. We have written to the FBR for action against these companies," Mr Afzal informed Dawn .

In another letter, the district administration has asked the FBR to force the companies to either sell the soft drinks against the price printed on the bottles or revise it by printing the correct amount.

Spokesperson of FBR Rifat Shaheen Qazi when asked about the two letters written by the district administration, said: "The FBR cannot bind the companies to avoid profiteering in such manner as this is beyond its jurisdiction. Price controlling is the jurisdiction of provincial governments."

As for tax evasion, she said these allegations would be taken up during the assessment of tax, and the companies would be asked to clarify their positions when they file their tax details with the FBR.

However, sources told Dawn that the cases involved high-profile personalities. "They are avoiding action. The owners in connivance with some officers of the FBR are trying to cover it up," he alleged.

When Dawn contacted the assistant commissioner, he said: "I have imposed a fine on one company but the case against the second company is pending."

That the companies are desperate to see the last of the case is obvious by the fact that while the cases are pending with the Assistant Commissioner Imran Ali Sultan, one company has already challenged it with his superior.

The company defends its position by claiming that soft drinks are not included in the schedule of 53 items, whose prices are controlled by the district administration, and that only aerated (chemically treated) drinks were included in it.

Meanwhile, Nadeem Iqbal, the executive coordinator of The Network Consumer Protection, commented that various manufacturers were involved in this practice due to the weak mechanism of the district administration in Islamabad. "Consumer Protection Act was implemented in Islamabad in 1995 but is yet to be made operational," he said.

He added: "The district administration has no capacity, budget, manpower and officials to stop such illegal activity and curb the practice. There is a need to constitute consumer council which educate the customers and inform them about their rights."