FBR awaits order for Rs1.6bln recovery from tobacco company

KARACHI: The Federal Board of Revenue (FBR) is waiting for a judgment of the appellate tribunal for the tax recovery of around Rs1.6 billion from a tobacco company, sources in the Large Taxpayers Office Karachi said on Wednesday.

For the last two years, a case of alleged evasion of sales tax and federal excise duty amounting Rs2 billion has been lying pending at the tribunal against Philip Morris (Pakistan) Limited.

The sources said the tax office recovered sales tax amount around Rs400 million out of Rs2 billion.

The sources said there was no progress in the case as the tribunal had summoned the officer who drafted the recovery notice against the company. “The officer who drafted the order has been transferred to another department on deputation,” a LTO Karachi officer said on condition of anonymity.

The tax office issued two orders against Philip Morris (Pakistan) Limited on July 13, 2017 and one order dated October 16, 2017 and demanded an aggregate amount of Rs1.76 billion for alleged evasion of FED and sales tax along with penalties.

However, the company contested the alleged evasion claim of the tax department.

According to official documents, the company filed appeals before the Commissioner Inland Revenue (Appeals), who upheld the demand through an order on January 30, 2019.

On February 8, 2019, the company filed appeals against the orders before the tribunal and also obtained an interim injunction for six months, to prevent the authorities from taking coercive action by paying 15 percent of the federal excise duty demand and 100 percent of the sales tax demand amounting to Rs241.867 million and Rs152.561 million, respectively, according to a company’s document.

On August 7, 2019, the interim injunction expired and the Appellate Tribunal directed the FBR to provide 15 days’ prior notice to the company before initiating any recovery measures.

The appellate tribunal on September 5, 2019, directed the tax office to submit written arguments to rebut the arguments submitted by the company.

Additionally, the tribunal directed the tax office to produce the officer who prepared the report on the basis of which the demands were issued along with the report.

The hearing was adjourned on September 24, 2019 due to unavailability of the officer and tax office’s request for additional time to prepare the written arguments. In the next hearing held on November 27, 2019, the tax office requested for adjournment, which was accepted by the appellate tribunal with the directions to present the author of show cause notice and order along with written rebuttal of the company's arguments in the next hearing.

The hearings fixed on January 22, 2020, March 4, 2020, April 2, 2020 and September 10, 2020 were adjourned and the next date of hearing is yet to be fixed, according the company.