Praise be to Allah.
The basic principle according to the scholars is that it is not permissible to pay for haraam things, so if someone buys a haraam item, it is not permissible for him to take it or to pay its price.
If the seller has taken the price, he must return it to the purchaser, unless he has already consumed the item or made use of it, in which case the seller should give the price in charity.
If the purchaser has taken the item, he must destroy it, because it is an item that is haraam, and there is no benefit in it according to Islamic teachings. He should not return it to the seller.
This is the basic principle, and it applies to things that are clearly haraam, such as alcohol, pork, dead meat and so on.
Ibn Habeeb said: If a Muslim buys alcohol from another Muslim, so long as the alcohol is still there in the hand of the seller or the purchaser, then the bottle should be broken at the expense of the seller who should return its price if he has already received it from the purchaser. If the alcohol is no longer there, then it is too late to annul the sale, and the price should be taken and given in charity, whether the seller has already taken it or not, and they should both be punished.
End quote from an-Nawaadir wa’z-Ziyaadaat ‘ala ma fi’l-Mudawwanah min ghayriha min al-Ummahaat (6/179).
Shaykh Ibn ‘Uthaymeen (may Allah have mercy on him) was asked about a man who bought alcohol but did not pay for it, then he repented. What should he do?
He said: The price should be taken from him and put in the bayt al-maal (treasury of the Muslims). End quote from al-Kanz ath-Thameen (p. 118).
As for the case mentioned in the question, the best and most prudent option is to pay off the price for the cigarettes that were bought on credit, for several reasons, as follows:
1. Even though the Islamic ruling on tobacco states that it is haraam, there is a well-known difference of opinion among the scholars between those who say that it is makrooh and those who say that it is haraam, and the fact that it is haraam is not widely known and accepted among people, as is the case with the prohibition on alcohol, drugs and so on. Hence people are more lenient regarding the sale and consumption of tobacco, either following the view of those who say that it is permissible, or because they have some uncertainty concerning this issue, or they are not convinced of the reason for the prohibition, which is that it is harmful.
Shaykh al-Islam Ibn Taymiyah said: Regarding what a man may gain of profits through business transactions concerning which there is a difference of scholarly opinion, and he believed that it was permissible according to his understanding, or because he imitated someone else, or because he followed the view of some scholars, or because someone else gave him a fatwa regarding that, and so on,
with regard to these profits that they gained and acquired, they do not have to get rid of them, even if they realized after that that they were wrong and that the one who gave them the fatwa was wrong…
The Muslim who engages in some transaction believing it to be permissible according to the fatwa of some scholars, if money was paid in these transactions, then later on it became clear that the correct view is that it is haraam, then what they have already acquired is not haraam for them, because they acquired it on the grounds that they thought it was permissible.
End quote from Majmoo‘ al-Fataawa (29/443).
2. Not paying off the debt will never be something that is understood or acceptable to the other party, and it will give a negative impression of the person after he repented, as it will seem that straight after he repented, he decided not to pay people’s dues.
3. That may make some people think that this repentance is a trick to avoid paying off what he owes for the cigarettes that he took.
4. Even though the scholars did not regard it as permissible to pay the price for haraam items, they do not allow him to take it back for himself, because that would mean that he will have both the item and the price. Rather they said that he must give the price in charity.
Shaykh al-Islam Ibn Taymiyah said: Whoever accepted money for a haraam item or service has the right to take back the money, such as money paid to a porter who carried alcohol, or to one who made a cross, or to a prostitute, and the like. After he takes it, he should give it in charity and repent from that haraam action, and his giving that money in charity will be an expiation for his action. For it is not permissible to make use of the price that is taken, because it is evil money and cannot be kept by the one who paid it, because he has already taken what he paid for. Hence it must be given in charity, as was stated by some of the scholars, such as Imam Ahmad’s statement regarding the porter who carries alcohol, and the statement of the companions of Maalik and others. End quote from Majmoo‘ al-Fataawa (22/142).
For all the reasons mentioned above, and to avoid any accusation or people thinking ill of you, we think that it is more prudent for you to pay what you owe in full, having the intention that it is charity that you are giving, and charity may be given both to the poor and the rich.
An-Nawawi (may Allah have mercy on him) said: It is permissible to give voluntary charity to the rich, and there is no difference of scholarly opinion concerning that. End quote from al-Majmoo‘ (6/236).
If you explain that to the son of the shopkeeper to whom you are giving what you owe, that is better, and perhaps Allah may make it beneficial for him and make it a cause of him repenting from selling tobacco and so on.
If you think that he will not ask you to pay it back, or that he will not think ill of you, and you give in charity the amount that you owed for the cigarettes, there is nothing wrong with that either, if Allah wills.
We ask Allah, may He be exalted, to accept your repentance.
And Allah knows best.