Peshawar High Court declares excise duty on hand-stemmed tobacco illegal — Dawn

The Peshawar High Court in Pakistan ruled that federal excise duty cannot be levied on green tobacco leaves and tobacco manually stripped of stems if the products have not been processed at a green leaf threshing (GLT) facility. Dawn reports.

A bench of judges Syed Arshad Ali and Mohammad Faheem Wali heard 14 petitions filed by tobacco growers, tobacco companies and GLT facilities. The petitioners challenged the imposition of excise duty on hand-stemmed tobacco, the sealing of warehouses, and the confiscation of tobacco and equipment.

Court ruling

In its 29-page ruling, the court ordered the authorities to immediately return the seized tobacco, vehicles, equipment and documents, as well as unseal the premises and machinery. The court also set aside notices and decisions on the collection of excise duty on green, hand-stemmed or stemmed tobacco that had not undergone processing at a GLT facility.

At the same time, the authorities may retain specifically identified goods for up to 15 days if they believe the goods were processed at a GLT facility. During this period, the competent authority must hold a hearing involving the interested party and issue a reasoned decision specifying the quantity, description of the goods and grounds for its findings.

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Tobacco consignments

The court ordered the return to Pak Hills Tobacco Company of 3,375 kg of hand-stemmed tobacco and a vehicle, cancelling the demand for excise duty payment. The issue of a possible sales tax on this consignment must be resolved in accordance with the law.

The court also cancelled an excise duty demand of 123.992 million Pakistani rupees issued to Royal Tobacco Company. Its warehouses must be unsealed, and 628,145 kg of hand-stemmed tobacco and 130,000 kg of green tobacco leaves must be returned.

The court concluded that manually stripping tobacco of stems, even with the use of tools or machinery, does not in itself constitute a manufacturing process that provides grounds for collecting federal excise duty. In the bench’s view, the excise duty is linked to the conversion of green tobacco leaves into unmanufactured tobacco as a result of processing at a GLT facility.