TUESDAY OCTOBER 25: Bawan Shah GST scam: Sindh NAB summons senior customs officials

ISLAMABAD: The National Accountability Bureau (NAB) has called senior customs officials to record their statements by October 28 in the multi-million rupees Bawan Shah Group of Companies (BSGC) general sales tax (GST) scam-a unique case detected in 2005 but still inconclusive after passage of six years.
Sources told Business Recorder on Monday that the BSCG scam was the biggest tax fraud detected in the history of the Federal Board of Revenue (FBR) where sales tax refunds and customs rebates were fraudulently obtained by the BSGC and duty drawback scheme along with duty and tax remission for export (DTRE) scheme were grossly misused by the group.
The chairman of the group, along with some of his other associates, was allegedly involved in fraudulent/phony exports and misuse of the DTRE scheme. Despite passage of several years, neither the main culprits involved in the scam including Muhammad Zarat were arrested nor the investigation against the involved tax officials reached logical conclusion. As ISAF containers scam was the major focus of media and investigation agencies nowadays, most of the concerned quarters had almost forgotten the mega sales tax scam relating to BSCG.
Sources said that Sindh NAB officials have intensified their efforts for completion of the investigation of the case. NAB Sindh has sought updated information about the biggest sales tax scam from the Federal Board of Revenue (FBR) to record statements of the customs officials regarding the case. NAB Sindh has approached the tax authorities for completion of investigation against Zarat, Chairman ofBSGC.
According to NAB Sindh, an investigation is under process in NAB Sindh against BSCG for the offence committed under section 9 of the National Accountability Ordinance 1999. Keeping this in view, the FBR should direct the concerned customs officials to appear before Kashif Noor, Assistant Director (Investigation) NAB, for recording their plea in the investigation regarding claims and sanctions of sales tax refunds in the name of Bawan Shah Corporation, a unit of BSCG.
Sources said that the NAB Sindh has asked the following customs officials for recording their statements in the said case by October 28, 2011: Tahir Raza Zaidi, Additional Collector; Abdul Rehman Rind, Deputy Collector, Sharla Khan, Deputy Collector; Sayeeda Anjum Mushtaq, Deputy Collector, Javed Sarwar Shah, Deputy Collector, and Zahid Habib Khan, Deputy Collector.
NAB Sindh has sought this information from the customs officials under the provision of section 19 of the National Accountability Ordinance 1999, sources added. Under section 19 of the National Accountability Ordinance, the Chairman of NAB or any authorised officer may, during the course of an inquiry or investigation in connection with contravention of any provision of this Ordinance, call for information from any person for the purpose of satisfying himself whether there has been any contravention of the provisions of this Ordinance or any rule or order made thereunder; require any person to produce or deliver any document or thing useful or relevant to the inquiry or investigation; examine any person acquainted with the facts and circumstances of the case and require any bank or financial institution, notwithstanding anything contained in any other law for the time being in force, to provide any information relating to any person whosoever.
Background of the case is that the criminal side of the case is being investigated by the NAB. However, department is in the process of adjudication and recovery of the evaded amount. The adjudication authorities have already given decision in favour of the tax department and the matter is pending before various appellate fora. The department is also responsible for taking action against the involved officers. Moreover, the Directorate of Intelligence and Investigation and the NAB are in the process of reconciliation of the recoverable amount involved in the scam for submission of report to the Public Accounts Committee.
In the past, Directorate General Intelligence and Investigation FBR had reportedly received an information in December 2005 that Raja Zarat, Chairman of Bawan Shah Group of Companies, Karachi, along with his associates in the crime, is actively involved in claiming inadmissible customs rebate and misuse of DTRE scheme through fraudulent exports of leather jackets and 100 percent polyester printed ladies suits. As a result of vigilance, three containers destined for Bundar Abbas (Iran) and UAE, stated to be carrying leather jackets/garments/coats/ladies suits, were identified for physical verification. Goods physically recovered from the said containers were found to be of poor quality unstitched fabrics.
The Group had allegedly obtained Rs 2.06 billion on account of sales tax refund, customs rebate, DTRE remission and exemption under SRO410(1)/2001 from 2001 to March 2006. The amount included Rs 1.219 billion sales tax during 2001-05, customs rebate Rs 604 million from 2001-06, DTRE remission Rs 156 million from July 2005 to March 2006 and Rs 81 million exemption under the SRO.
As a result of the examination, three FIRs/Seizure Reports were lodged on March 31, 2006. Another container of the same exporter was called back from high seas bound for any foreign destination. As per declaration it was supposed to contain leather jackets worth Rs 49.00 million.
On examination by the staff of Directorate General (I&I), the container was found to contain blended cotton fabrics of inferior quality. The two companies of Bawan Shah Group had been allowed to import 25 million metres of cloth without payment of duties and taxes to the tune of Rs 209.00 million. Out of this quantity, 18.67 million metres of cloth has been imported by Group, availing exemption of duty and taxes amounting to Rs 156.07 million. Out of the imported 18.67 million metres cloth, ladies suits consuming 16.6 million metres cloth involving Rs 139.90 million of duties and taxes had been shown as exported. Reportedly, this cloth had been disposed of in the local market. A part of this, 31621 yards, was seized at Shahdab Goods Transport Co (Regd.), Truck Adda, Bund Road, Lahore on May 30, 2006.
In order to further establish the misuse of DTRE scheme by the said companies, an investigative audit had been initiated. The investigation so far has led to the recoveries of 99026 metres foreign origin cloth/fabrics imported by Early Morning and 'Latest Fashion Stitching' (both Bawan Shah Companies), under DTRE scheme. This cloth was dumped for sale in local market. No documents of legal import or lawful purchase of these items could be produced by representative of the group.
A valuation committee, headed by Director General Valuation and Post Clearance Audit was constituted by the Board to ascertain the description/quality and assess value of the sealed samples dawn from the three seized consignments. The report by the Valuation Committee affirmed mis-declaration of value and description.
In the past, the documents received from UAE customs had confirmed the mis-declaration of goods declared before Dubai customs pertaining to 17 containers exported by Bawan Shah Group of Companies. Uncertified customs documents of another container exported to Uganda had been received from Uganda Revenue Authority which was also found to be grossly mis-declared. The incidence of illegal and unlawful availing of duty remission on the said 18 containers, mentioned above, comes to Rs 16.989 million including Rs 5.592 million as non-levied amount of income tax.
The past events further show that the FBR had handed over mega scams to the NAB and provided the Bureau all necessary documents for completing the investigation and recovery from the tax evaders. NAB, Sindh had constituted two separate teams to investigate the Rs 20 billion tax refund scam. Several references were filed against the company in the various courts of country. Following all the events, the accused, Raja Zarat, was arrested in May 2006 and interrogated. His bail had been rejected by all courts. Later, he fled the country after grant of bail.