FBR Challenges PHC Ruling on Cigarette Units Case

The Federal Board of Revenue (FBR) has filed petitions before the Federal Constitutional Court seeking restoration of its enforcement powers under the Federal Excise Act, 2005, following a ruling by the Peshawar High Court that set aside its actions against certain cigarette manufacturing units, as reported by Business Recorder.

The FBR submitted three petitions requesting leave to appeal against the High Court’s judgment dated December 18, 2025, contending that the ruling raises significant legal questions concerning the scope and application of constitutional jurisdiction.

The matter arises from an enforcement operation conducted on December 12 in Mardan, during which tax authorities, acting on warrants, carried out searches at multiple cigarette manufacturing facilities on suspicion of federal excise duty evasion.

During the operation, approximately 2.75 million kilograms of unprocessed tobacco were recovered from various storage locations, and the premises were subsequently sealed under the provisions of the Federal Excise Act and its associated rules.

The FBR maintained that the action was based on a “reason to believe” that the stock was undeclared and that the facilities were operating in contravention of applicable excise laws.

Following the operation, show-cause notices were issued to initiate proceedings for the determination of tax liability in accordance with the statutory framework.

The affected companies challenged the enforcement measures before the Peshawar High Court, which ruled in their favour, declaring the sealing of the units unlawful while permitting the authorities to continue investigations in accordance with the law.

In its petitions, the FBR argued that the High Court’s intervention was premature, as the matter remained at the show-cause stage and no final adjudication had been reached.

The department further contended that constitutional jurisdiction should not be invoked to circumvent statutory remedies provided under fiscal legislation, citing relevant legal precedents in support of its position.

Additionally, the FBR challenged the High Court’s interpretation of the term “reason to believe,” asserting that such determinations must be assessed based on the material available at the time of action, rather than on conclusive findings reached post-adjudication.

The FBR also submitted that the sealing of the manufacturing units constituted a regulatory and preventive measure aimed at safeguarding revenue interests, rather than a punitive action, and has requested the Federal Constitutional Court to set aside the impugned judgment.