Exploiting clearance procedure to evade taxes: punitive measures recommended against importer, customs officials

Directorate of Audit of Customs has strongly recommended punitive measures against the importer and customs officials involved in exploiting clearance procedure to evade duty and taxes on myriad import of gold worth Rs 86.63 billion.
According to the audit report, a copy of which is available with Business Recorder, the Directorate detected grave irregularities within the department.
The report said that it was only a tip of iceberg as the Directorate had unearthed various other entities involved either in the submission of fake e-forms thus depriving the economy of much needed foreign exchange or evading duty and taxes to the tune of millions of rupees in every case by misusing the relevant exemptions.
It said that proper procedure had not been prescribed and adopted for the purpose of import clearances by customs and many queries of audit remained unanswered by the concerned Collectorate.
It said that examination reports were not endorsed by the relevant appraisers/examiners with the best reason known to them. Moreover the audit report said that customs authorities did not authenticate the shipping bill for release of one percent margin at the time of imports.
It apprised that concerned Collectorate had allowed gold imports under SRO 266(I) 2001 even after it was rescinded by SRO 760(I) 2013 and added that importer had brought 1145.71 kgs of gold under entrustment scheme in the month of July 2013 and December 2013.
It further said that importer did not re-export 1000.82 kgs of gold however, 1145.71 kgs of gold was imported on irrelevant entitlements. Therefore, customs duty at the rate of Rs 2500/kg, sales tax at the rate of 17 percent in addition to one percent income tax is chargeable with 5 percent penalty for first month and 10 percent for second month. The total recoverable amount is estimated to be Rs 916.52 million from the importer.
Meanwhile, sources said that importer was not registered with any relevant Gems and Jewellers Association, albeit it was mandatory under aforesaid SRO.
They said that although gold worth Rs 86.63 billion was imported under "Entrustment Scheme", it had not re-exported value-added gold products even after the lapse of mandatory period from the date of imports, prescribed under the said SRO.
They said that objective of the Entrustment Scheme was to broaden the base of Pakistani exports to other countries and provide opportunity to Pakistani artisans to sell jewellery abroad.
However, the scheme, which allows 80 percent of the value of jewellery set against duty-free import of gold within prescribed period, was misused with no benefit to the country.
Moreover, sources said that serious irregularities were observed in customs clearance process which included mis-declaration of classification. Sources further said that E-forms submitted by the unscrupulous elements were declared fake by the banks. The records of gold imports for the said period revealed that huge amounts of gold/jewellery was imported without paying normal import tariffs and duties under the said SRO. However, the export data has depicted different picture, showing that no gold exports had been made during the same period, sources maintained.