Senate Sub-Committee Directs FIA to Probe Rs 1,120 Billion Consumption Certificates of Industries in Tax-Exempted Areas, and Tax Evasion in Tobacco Industry; Reveals Pakistan Tobacco Company and Philip Morris Pakistan Import 95 Percent of Tobacco Industry Raw Materials Consumed in Cigarette Manufacturing
Islamabad, The sub-committee of the Senate Standing Committee on Interior met to review matters relating to smuggling of cigarettes. The meeting was chaired by Senator Saifullah Abro and attended by Senators Talha Mahmood, Dilwar Khan, Bilal Khan and Haji Hidayatullah Khan.
An official handout said the matter of recovery of Rs. 1120 billion against the consumption certificates issued to tobacco industry remained under discussion.
Questioning the leakage of Customs data to private Media outlets, the committee noted that leakage cannot be done without involvement of Customs officials. The committee questioned the conduct of media contrary to code of ethics. FBR informed committee that investigation in leakage matter is also underway. The Convener Sub-Committee directed member FBR to take strict action against the officials involved in data leakage to media and submit report to the committee.
The Convener Sub-Committee also questioned the non-submission of details of consumption certificates issued regarding goods imported for tax exempted areas. It was apprised that Peshawar High Court has ordered audit before issuance of consumption certificates and also barred Pakistan Customs to encash security cheques. However, the Convener urged FBR to challenge the PHC orders in Federal Constitutional Court and submit report.
The Sub-Committee of the Senate Standing Committee on Interior, while reviewing matters relating to tax-exempt industries, consumption certificates, alleged misuse of tax exemptions and corruption in relevant departments, directed the concerned authorities to furnish complete records and take strict action against irregularities.
The chairperson questioned the authorities regarding the persons who had applied for consumption certificates and sought details of the cases pursued by the Department before the constitutional courts. He observed that, under the law, any person refusing to provide the required documents or information would be proceeded against accordingly.
The Federal Investigation Agency (FIA) informed the Sub-Committee that a team had been constituted to investigate the matter.
Senator Talha Mahmood emphasized that FIA could facilitate the issuance of consumption certificates if the matter was taken up seriously. He alleged that certain industrialists were operating two factories or more, one in a tax-exempt area and other in a settled area, and that certain Customs officials facilitated such practices.
Senator Talha Mahmood further recalled that Pakistan Customs had previously introduced tracking chips on containers to monitor their movement and verify whether they reached their declared destinations. He stressed the need for effective monitoring mechanisms to prevent misuse of tax exemptions and smuggling-related irregularities.
Senator Bilal expressed concern that Balochistan remained deprived of adequate industrial development. He also complained that legitimate commodities were sometimes treated as smuggled goods despite the borders of Balochistan being sealed.
The Chairperson directed that letters be issued to all factories operating in tax-exempt areas, requiring them to furnish details of imported material, material consumed, brand names and taxes paid during the last two years. It was informed that Pakistan Customs had issued consumption certificates amounting to Rs. 378 billion. The Chairperson further directed that bank and account details of the companies in whose names the certificates had been issued be furnished to the Sub-Committee.
The FBR representative stated that the Department had undertaken substantial measures to address the issue and strengthen mechanisms for countering such practices.
The Sub-Committee also examined allegations of corruption and theft involving officials. Three investigating officers namely Shahzaib Ali, Fakhar Gondal and Christopher allegedly involved in corruption was presented before the Sub-Committee. It was informed that 22 persons were allegedly involved in the theft incidents, of whom 11 had been apprehended.
The Sub-Committee further directed the concerned authorities to furnish details of assets beyond known means of the accused officials, along with forensic examination reports of their mobile phones. Senator Talha Mahmood recommended that the corruption case be taken up by the main Senate Standing Committee on Interior.
The Sub-Committee appreciated the submission of consumption data for the period 2018–2026 and directed the concerned departments to furnish the corresponding record for the period preceding 2018 as well.
The Sub-Committee was briefed on the consumption of major raw materials imported by tobacco companies. It was informed that approximately 20,002 metric tons of acetate tow had been imported, with 97 percent accounted for by two major companies and the remaining 3 percent by other companies.
Approximately 15,639 metric tons of tobacco paper had also been imported, including 10,840 metric tons by PTC, 3,118 metric tons by Philip Morris and the remaining quantity by other companies.
Regarding filter rods, the Sub-Committee was informed that approximately 533 metric tons had been imported, of which 96 percent was accounted for by two companies and 4 percent by other companies.
The briefing indicated that, in aggregate, PTC and Philip Morris accounted for approximately 94 percent of the imported material consumed, while local companies accounted for the remaining 6 percent. The Chairperson expressed concern that the concerned departments had been unable to provide complete and consolidated details to the Sub-Committee.
It was further briefed that PTC and Philip Morris did not fall within the jurisdiction of RTO Peshawar. PTC was under LTU Islamabad, while Philip Morris fell under LTU Karachi. The Sub-Committee directed the concerned RTOs/LTUs to furnish complete details of taxes collected and imported material relating to the companies.
The Sub-Committee was also informed that four illegal cigarette manufacturing companies operating in Khyber Pakhtunkhwa had recently been sealed. The Sub-Committee directed the authorities to submit complete details of all companies operating under the jurisdiction of RTO Peshawar.
The Convener directed the concerned authorities to furnish the formula used for calculating tax on cigarettes.
Senator Talha Mahmood recommended the formulation of business-friendly policies aimed at encouraging tax compliance while eliminating opportunities for bribery and corruption.
Officials of the National Highways and Motorway Police also attended the meeting. The Convener pointed out a discrepancy in the figures presented before the Sub-Committee regarding persons apprehended in connection with the theft incidents. While one briefing indicated that 22 persons were involved, the Inspector General of the National Highways and Motorway Police reported that 11 persons had been apprehended. The Sub-Committee sought clarification regarding the discrepancy and directed the concerned authorities to provide an accurate and consolidated position.
The Sub-Committee expressed serious concern over the matter and directed that a letter be addressed to the Ministry of Communications regarding the allegedly misleading statement made before the Sub-Committee. The matter was also directed to be referred to the Privileges Committee.
The Sub-Committee reiterated that all relevant departments must ensure transparency, accountability and effective monitoring mechanisms to prevent misuse of tax exemptions, illegal imports, corruption and other irregular practices.