The National Assembly standing committee on finance and revenue has expressed serious concern over no punitive action taken against senior tax officials allegedly involved in M/s Bawan Shah Group of Companies (BSGC) mega tax scam.
Responding to the committee reservations, Central Board of Revenue (CBR) chairman Abdullah Yusuf assured the board will definitely take action against any senior official found guilty of the charges.
Whereas Major General Usman Ali Shah (Retd), director-general, Intelligence and Investigation Customs and Excise said the CBR will approach the International Criminal Police organisation (Interpol) for arresting another partner of the M/s BSGC, who is on the ECL and presently residing in Dubai. The chairman of the group and his two partners hold 49 percent shares in a Dubai-based company, M/s Zonda Trading, an importer of goods exported by M/s BSGC from Pakistan. Thus, the two control the complete export and import cycle.
The CBR has approached ambassadors and commercial councillors of Saudi Arabia, UAE, Niger, Iran, Ukraine, Sudan, South Africa and Uganda to obtain information about 600 consignments exported to these countries from Pakistan by the group, he added.
The committee met here on Tuesday wit MNA Chaudhry Anwer Ali Cheema in the chair. Besides committee members, the CBR chairman and other high officials also attended the meeting.
Members questioned the CBR chairman as to why senior officials of the board were not nominated in the FIRs, whereas only 10 lower grade employees were being questioned.
The committee expressed displeasure over not arresting any of the nominated officials so far and demanded of the CBR to put their name in the Exit Control List (ECL) and inform the committee in the next meeting.
Pakistan People's Party Parliamentarians (PPPP) MNA Murtaza Sethi said all nominated officials are belonging to lowers grades, who could not commit massive tax fraud without the backing of high-ups.
PPPP MNA Naveed Qamar said being a serious issue nominated criminals were neither arrested nor their names were placed on the ECL.
Syed Nayyar Bukhari pointed out Raja Zaraat Khan, the managing-director of the company, was formerly working as a UDC in the CBR and compulsorily retired.
PPPP MNA Mujeeb Pirzada said the CBR was protecting officials involved in the scam through delaying tactics, as none of the persons nominated in the FIRs have been arrested so far. He also said the CBR should probe involvement of big fish on whose instructions the lower staff managed to evade this huge amount.
The CBR chairman accepted that board had detected tax evasion by the M/s Bawan Shah Group of Companies but the tax evasion was exaggerated by the press.
He informed the company's managing-director was arrested and his bail was cancelled and his name has been put on the ECL.
He said there were 10 persons involved in the fraud, including two principal appraisers, six appraising officers and two examiner officers. Eight have been suspended and action against the two would be taken soon.
He also said the board would also take punitive action against senior officials if any of them found involved in the fraud.
Major General Usman Ali Shah (Retd) informed the committee that no senior CBR official has been found involved in the Raja Zaraat case. It was detected by the CBR itself. The principal accused in the case, Raja Mohammad Zaraat, is in jail and the CBR has successfully thwarted all attempts towards his release.
According to the directorate's calculations, the fraud of Rs 1.5 billion was committed by the accused under the DTRE scheme.
As per the available record with the directorate, following is the sales tax refund and customs rebate obtained and exemption of duty/taxes availed by M/s Bawan Shah Group of Companies since January 2003: sales tax refund/adjustment, Rs 1219 million in January 2003 to August 2005; customs rebate, Rs 44 million up to June 1, 2006 and exemption under SRO.410(I)/2001 of Rs 81 million and suspected abuse of DTRE involving Rs 156.07 million.
Neither any conclusive figure has so far been determined nor any figures have been released to the press by the investigating agency. The figures of "Rs 20 billion" is totally speculative and misleading, he said.
He said the directorate received an information in December 2005 that Raja Muhammad Zaraat Khan, chairman, Bawan Shah Group of Companies, Karachi along with his associates in 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 slated 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 un-stitched fabrics.
As a result of this examination three FIRs/seizure report were lodged on March 3, 2006. Another container of the same exporter was called back from high seas bound for foreign destination. As per declaration, it was supposed to contain leather jackets worth Rs 49 million.
On examination by the staff of directorate-general (I&I), the container was found to contain blended cotton fabrics of inferior quality.
Major General Usman Ali Shah (Retd) said the two companies of M/s Bawan Shah Group had been allowed to import 25 million meters of cloth without payment of duties and taxes to the tune of Rs 209.00 million.
Out of this quantity, 18.67 million meters of cloth has been imported by the group, availing of exemption of duty and taxes amounting to Rs 156.07 million. Out of the imported 18.67 million meter cloth, ladies suits consuming 16.6 million meter cloth involving Rs 139.90 million of duties and taxes has been shown as exported.
Reportedly this cloth has been disposed of in the local market. A part of which, 31621 yards, was seized at M/s 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 has been initiated. The investigation so far has led to recoveries of 99026 meters foreign-origin cloth/fabric imported by M/s Early Morning and M/s Latest Fashion Stitching (both Bawan Shah Companies), under DTRE scheme. This cloth was dumped for sale in the 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, has been constituted by the board to ascertain the description/quality and assess value of sealed samples drawn from the three seized consignments. The report of the valuation committee affirmed misdeclaration of value and description.
He stated a request has also been lodged with RILO Asia Pacific Beijing as well as commercial counsellors concerned for confirmation of contents of 184 consignments shipped by the said group to various countries, eg, the UAE, Iran, Ukraine, Saudi Arabia, Uganda and Niger.
Documents received from the UAE customs have confirmed misdeclaration of goods declared before Dubai customs pertaining to 17 containers exported by M/s Bawan Shah Group of Companies. Uncertified customs documents of another container exported to Uganda has been received from Uganda Revenue Authority, which was also found to be grossly misdeclared.
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. Besides above, the commercial counsellors of Pakistan at South Africa, Sudan, Niger, Saudi Arabia and Iran were also sent details of containers of M/s Bawan Shah Group of Companies exported during the period July 2005 to March 2006.
The commercial counsellors have been requested to supply certified customs documents from the customs authorities concerned to ascertain the extent/quantum of misdeclaration. The audit/investigation of M/s Bawan Shah Group of Companies is pending finalisation for want of replies/verification from these destinations. The heads of missions are also being contacted through proper channel for necessary help on priority.
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