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Govt asks for CED under supervisory scheme

'Mardanwals' paying Rs 220m less than actual liability

TAHIR DHINDSA

ISLAMABAD: The government has asked the group of six cigarette factories of Mardan, popularly known as 'Mardanwals' to pay central excise duty through supervisory scheme after a special committee of the CBR found that they were paying at least Rs 220 million less than their actual tax liability.

The six factories were paying their tax dues through dual taxation system under which they were paying a fixed amount in lieu of CED, whereas, the rest of the industry was paying tax under supervisory scheme.

The government believes that this dual tax structure was hurting the Rs 70 billion-cigarette industry of the country, and it needs to be leveled out with the rest of the industry. The taxation system is encouraging the production of counterfeit cigarettes, it believes.

The cigarette factories, which include Mardan Tobacco, Imperial Tobacco, and Khyber and Excel Tobacco, produce fast rolling brands like Gold Street, Mari Max, and Grip. They also produce Wilson and Belga.

The multinational cigarette producing groups have complained that some of manufacturing units located in Mardan were also involved in the production of counterfeit brands, which was a serious determent to their financial health.

The six factories were jointly paying Rs 32 million a year to the CBR under the fixed tax scheme started in second quarter of the fiscal year 1999-2000. The government received complaints that theses factories were not only paying far less than the actual tax, but were involved in the production of counterfeit brands. The government, at this stage, asked the group to increase the amount, which was renegotiated at Rs 45 million for the interim period, which ended on March 28, 2000.

The Central Board of Revenue constituted a five-member committee comprising two members from the Central Board (CBR) S. A. Alam, Collector Peshawar; Abbasi, Deputy collector; Iqbal Lakhani of Lakson Tobacco Company as expert of industry, and two representatives of Mardanwals including the suspended MNA, Haji Nasim-ur-Rehman.

The committee in its report said, that the group of cigarette factories should pay at least Rs 252 million in lieu of central excise duty. But, at least, they should start paying Rs 135 billion a year. They out rightly rejected the proposal and said that even Rs 90 million was unacceptable to them.

Now the case is pending with the CBR about which any decision would be taken at the time of the next budget.