BAT Kenya, which is part of British American Plc, said in June it had invested in a 2.5 billion shillings ($23 million) oral nicotine production facility to serve the regional export market in East Africa and beyond.
The new factory, which BAT Kenya says is the first of its kind in Africa, is part of the group's plan to follow the changing habits of tobacco consumers.
But in a letter to the country's Pharmacy and Poisons Board, which regulates the sale of the products, health minister Mutahi Kagwe accused it of violating several provisions of the law when it licensed LYFT.
"Market surveillance has revealed that the product is dispensed in automatic vending machines contrary to the law," Kagwe said in the letter seen by Reuters on Wednesday.
The regulator was not immediately available for comment, while BAT Kenya said it would respond to the letter later in the day.
Kagwe demanded the regulator provide the ministry with a "comprehensive report on the criteria used and circumstances leading to the registration and licensing of the product."
($1 = 108.4000 Kenyan shillings)
(Reporting by Duncan Miriri; Editing by Mark Potter)