Import of raw materials: Misuse of tax exemption facility unearthed

Directorate General of Customs Intelligence Peshawar has unearthed massive misuse of tax exemption facility available on the import of raw materials including inks, printing plates, dyes, chemicals and paper imported for printing of the Holy Quran and religious books.
Sources told Business Recorder here on Monday that the said directorate had seized a consignment meant for export to Afghanistan on the charge of unauthorised/ illegal removal and smuggling of raw material from Export Processing Zone. The unit had misused the incentive of exempt regime and evaded duty/ taxes to the rune of Rs 429.13 million which is recoverable from them. The committed offence is in violation of Section 2(s), 18,32,79,80 and 131 of the Customs Act, 1969
The raw material including expensive ink of various types, printing plates, dyes, chemicals and paper, etc, was imported for printing of the Holy Quran, religious and other books and its value was Rs 801 millions while the evasion of duty/taxes in this case comes to Rs 423 million. The contravention report was made and sent to collector adjudication Islamabad for adjudication.
Details of the case revealed that the facts of the case are that the directorate had seized a consignment meant for export to Afghanistan on the charge of unauthorised/ illegal removal and smuggling of raw material from Export Processing Zone, by M/s 4 Brothers International, located at Plot no. B-14-B, Sector-2, Export Processing Zone, Risalpur.
Further investigation into the matter transpired that the unit of EPZ Risalpur is committing the offence of illegal/unauthorised removal and smuggling of raw materials imported under exempt regime since long. The staff of Field Intelligence Unit Mardan on 18.12.2017 visited the premises of the unit in order to probe the matter in depth. During inspection huge quantity of finished goods and imported raw material was found stored in the premises. A few junk printing / cutting machines were found installed and that too in inoperative/idle condition. The installed machines were observed incapable to carryout manufacturing process. Furthermore copies of the Holy Qurans printed by other manufacturing units located in Lahore were also found in the premises of the said unit EPZ, Risalpur.
On the completion of investigation, seizure report in seizure case no.51/2017 dated 20.12.2017 was submitted to the collector of customs (adjudication), Islamabad who decided the case in favour of the department vide order-in-original no.65 of 2018 dated 07.06.2018.
The above pointed out anomalies regarding incapable installed machinery and availability of printed Holy Quran of other manufacturing units confirmed the fact that the unit of the EPZ, Risalpur is disposing of conditionally exempt raw materials in the open market and is exporting copies of the Holy Quran printed/ manufactured by other units.
The matter was further probed and in this regard the Department of Printing & Stationery, KP Peshawar was requested to visit the said unit at the EPZ, Risalpur to examine and analyze the capability of the installed machines. The report/ opinion of the Department of Printing & Stationery, KP Peshawar bearing no.2045
Estt01-02-18-310 dated 29.01.2018 was received.
The crux of the said report revealed that there was no electricity connections to the machines and all installed machinery was found non-functional and 40·50 years old except for only one machine used for paper cutting only. The installed machinery was observed 40-50 years old and the two generators, one with a capacity of 5000W and the other of 50000W were found in the premises; however, the same was not functional. The EPZ staff created obstacle thus they could not take meter reading.
From the opinion of the authority concerned it can safely he concluded that the raw materials imported under exempt regime were not processed/used in manufacturing of goods declared in export GDs rather these raw materials were disposed of in local market as confirmed by the order in original no.65 of 2018 dated 07.06.20I8, wherein the adjudication authority, inter alias has confirmed that "Case of the prosecution regarding misuse of facility for exemption from duty/ taxes and clearance of imported raw material (free of duty/taxes) in the local market under the cover of export stand clearly established". The import data of M/s 4 Brothers International EPZ, Risalpur pertaining to the period from 2014-15 to 2016-17 was retrieved from PRAL which revealed that the said unit imported raw material involving duty/taxes to the tune of Rs 429.13 million. They clandestinely removed the imported raw material in the garb of consignments meant for export to Afghanistan.
From the above facts it is evident that the unit of EPZ, Risalpur along with others have misused the incentive of exempt regime and evaded duty/ taxes to the rune of Rs 429.13 million which is recoverable from them. The committed offence is in violation of Section 2(s), 18,32,79,80 and 131 of the Customs Act, 1969 read with the rules 225 to 236 of the Customs Rules 2001 issued under SRO 450(1)/2001 dated 18.06.2001 further read with section 3(1) of the Import & Export (Control) Act,1950, punishable under section 156 (1),(8),(9),(14),(44),(45),(66),(89) & (90) of the Customs Act, 1969.