Diesel, used lubricating oil import: FBR finalising probe into mega scam of 2009

The Federal Board of Revenue is in the process of finalising investigation into a mega scam of year 2009 involving an organised gang of importers, which imported diesel and used lubricating oil under the garb of residue of petroleum to evade huge amount of duties and taxes.
Sources told Business Recorder here on Thursday that the FBR has suspended six customs officers of Multan allegedly involved in the scam. The officers of MCC, Multan were placed under suspension in the contravention cases and disciplinary proceedings were initiated against them, in terms of Removal from Service (Special Powers) Ordinance, 2000. On completion of inquiry reports, the department has issued show cause notices to Superintendent (BS-16); Principal Appraiser (BS- 16); Deputy Superintendent (BS- 15); Inspector (BS-14); Inspector (BS-14); In this regard, the final proceedings are under way which are likely to be finalised shortly.
Details of the case revealed that an information was received on March 31, 2009 by the Directorate General of Intelligence and Investigation DG (I&I) that diesel and used lubricating oil, whose import is banned or restricted and which also attract high rate of duty and taxes (if imported by authorised licensees), is being cleared from Dry Port Multan in the garb of 'residue of petroleum' (which is unregulated according to provisions of S.No 2 & 5 of the appendix-B part-II of the Import Policy Order 2008-09). The residue of Petroleum attracts 0 percent Customs duty (16 percent Sales Tax, 2 percent Advance Income Tax), against High Speed Diesel, that attracts 20 percent Customs Duty (16 percent Sales Tax, 2 percent Advance Income Tax, and Petroleum Development of Levy Rs 8 per litre).
As a result of the information, 7 containers allegedly declared as 'residues of petroleum', were detained. Samples retrieved form the containers were forwarded for laboratory test and report to Hydrocarbon Institute at Multan and Lahore. The reports confirmed misdeclaration on part of the importers. The Diesel and used lubricating oil were seized and FIRs were simultaneously launched by DG I&I and the Model Customs Collectorate of Multan. The matter as to which FIR was to prevail was referred to the Board.
The Board examined the issue of parallel FIR and after reviewing arguments from MCC, Multan and DG (I&I), preferred the FIR lodged by MCC, Multan owing to the reason that MCC Multan had primary jurisdiction over the port and powers were vested in the appropriate officer of Customs Collectorate under the relevant provisions of law. The Board's position was corroborated by the FBR Legal Advisor also, and the Board duly conveyed its decision to prefer the FIR lodged by MCC Multan.
Meanwhile, the information resulting in the above seizure was simultaneously passed on to other Customs Collectorates, to pre-empt fraudulent clearance of Diesel Oil under misdeclared PCT. In response to DG (I&I) the Board allowed joint examination to commence at MCC PaCCS vide Board's letter dated 28/4/2009. As a result of the above information, action was initiated in Multan and Karachi. 363 containers were detained at Karachi Port on this basis. Of these, 22 containers were found to have correct declarations and were cleared forthwith.
On the recommendations of preliminary inquiry report, the incumbent Collector of MCC Multan was transferred and the new Collector was made part of a joint inquiry committee-to proceed-with further investigation, sources said. According to the sources, the FIRs were lodged against two importers initially, one clearing agency and four customs officers. Moreover, the FIRs were filed against three importers, by MCC PaCCS Karachi as well, including a unit of Multan. The other importers included a trading company and a lubricant unit. An FIR was also filed by MCC Appraisement Karachi against another unit.
Sources said that the four Customs officers were arrested in Multan and subsequently allowed bail by the Special Judge, to cooperate with the investigation The importers were initially allowed protective bail by the Lahore High Court Multan Bench, to approach the trial court and to join the investigation However, the importers did not cooperate with the investigating agency and instead, pressed ahead with litigation The importers have, now filed CPs before the High Court Sindh, at Karachi. The High Court had directed that the petitioners should not be harassed during the pendency of the consolidated CP No 72/ 2010. The latest hearing of C.P No 72/2010 was held on May 24 2010. The Court has adjourned the hearing until next date (to be intimated), and directed that petitioners are not to be harassed until resolution of the case. Meanwhile, MCC Multan had gone into appeal to the Supreme Court of Pakistan, against order of High Court, praying that the department's point of view had not been acknowledged by the High Court. The Supreme Court has ruled in favour of the department on 24.05.2010, by remanding the case back to High Court for passing of speaking order based on merits of the case. Upon directives of Lahore High Court Multan Bench, 221 containers comprising used waste oil have been cleared on payment of duties and taxes. Of the 90 containers which contained diesel oil, 80 have been auctioned as per rules by the Collectorate of Customs (Appraisement).
As reported by Collector, MCC, Multan, the contravention/seizure cases have been made out against involved importers in the scam. One case was decided vie Order-in-Original No 150/2010 dated 09.12/.2010 by the Additional Collector (Adjudication), Lahore. However, Collector Customs MCC, Lahore reopened the case in terms of Section. 1995 of the Customs Act, 1969 vide Order C.No 57/2009/Adj/Cus/Addl/04 dated 27.01.2011. The case has been again decided vide Order-in-Original No 43/2-011 dated 19.04.2011 wherein the adjudicating officer has ordered to confiscate the goods besides imposition of penalty of Rs 1,500,000 on the importers and a penalty of Rs 1,200,000/- on the clearing agents & permit holders (of the clearing agents).
As regard another case, the same is till under adjudication before the Additional Collector (Adjudication), MCC, Lahore. The requisite criminal proceedings in both the cases stand suspended by the Lahore High Court, Multan, Bench vide its orders dated 29.06.2010 and 27.08.2010 on the grounds that requisite liabilities had to be determined beside the fact that Customs House Multan is not a notified police station. As the same have now been finalised after passage of the aforementioned order in original, the Collectorate is in the process of filing CMA in the said High Court for vacation of stay, sources added.