Imports/exports of gold: FTO directs FIA to conduct inquiry against concerned departments, agencies

Federal Tax Ombudsman (FTO) has directed Federal Investigation Agency (FIA) to conduct inquiry against all concerned departments/agencies and initiate criminal proceedings against those found involved in massive misuse of import-cum-export facility in respect of gold and other precious metals, causing huge loss to the national kitty.
In this regard, the FTO has issued an order and recommended the Federal Board of Revenue (FBR) to direct the chief collectors North, Central and (Enforcement) South to initiate departmental enquiry to ascertain the officers/officials responsible and take disciplinary action against those found involved in illegal and inadmissible imports/exports in violation of SRO 266(1)/2001and SRO 760(1)/2013.
The FTO further directed the FBR to ask the collectors concerned to initiate recovery proceedings in accordance with law to recover the adjudged amount and request Ministry of Commerce to constitute a committee comprising representatives from SBP, FBR and TDAP to review SRO 760(1)2013 dated 02.09.2013 and proposed amendments to plug in the loopholes in the procedure to obviate chances of misuse and abuse in future; and submit compliance report within 45 days.
The FTO has recommended the Ministry of Commerce to get a study conducted to measure impact analysis of the incentive scheme as provided for under the Import and Export of Gold, Gold Jewellery and Gemstones Order, 2001 and Import and Export of Precious Metals Jewellery and Gemstones Order, 2013; examine the proposal to prescribe bank guarantee against import value of precious metal instead of one percent cash margin and make necessary amendment in the Import and Export of Precious Metals Jewellery and Gemstones Order, 2013 notified vide SRO 760(1)/2013 dated 02.09.2013.
The director general FIA will conduct inquiry against all concerned departments/agencies and initiate criminal proceedings against those found involved, in accordance with law, the FTO order recommended.
According to the order issued by the FTO, this is an own motion investigation of systemic maladministration initiated through exercise of jurisdiction conferred under Section 9(1) of the Federal Tax Ombudsman Ordinance, 2000 (FTO Ordinance). The investigation is based upon a report of misuse of import-cum-export facility in respect of gold jewellery and other precious metals at various customs stations, where some exporters of jewellery failed to remit foreign exchange and customs department did not take cognisance in the matter due to jurisdictional issue. The reported news also referred to cases detected against gold/jewellery exporters and failure of the department to take action for violation of import and export policy orders under the Customs Act, 1969.
Prima facie, the FBR did not put in place institutional mechanism to stop abuse of scheme regulated through concessional SROs issued by the Ministry of Commerce. As a consequence the importers-cum-exporters hoodwinked the department with impunity especially in cases where concession available under Entrustment Scheme/Self Consignment Scheme was misused and which have attained finality.
The Import and Export of Precious Metals, Jewellery and Gemstones Order, 2013 notified vide SRO 760(1)/2013 dated 02.09.2013 prescribes the framework and procedure for exporters of jewellery and gemstones. Prior to Order 2013, the Ministry of Commerce had notified the Import and Export of Gold, Gold Jewellery and Gemstones Order, 2001 vide SRO 266(1)/001 dated 07.05.2001. The exporters of jewellery and gemstones are required to be registered with Trade Development Authority of Pakistan (TDAP). Authorisation to import gold is granted by TDAP to registered exporters. All export proceeds under these schemes are to be realised within one hundred and twenty days. The import or export of precious metals, gemstones and jewellery made up of precious metals and gemstones is allowed under Entrustment Scheme and Self Consignment Scheme.
Audit reports alleging illegality, irregularities and violation of SROs by MCC, Islamabad, Peshawar, Lahore and Karachi in transactions for import and export of gold, gold jewellery, gemstone and precious raw materials on due consideration reflect that the violations committed by each of the collectorate are of different nature, therefore, the case of each collectorate is to be examined separately. However, it is to observe that the collectorates in their reply/reports did not dispute the observation made in audit reports. The same are rather admitted, the FTO order said.
It is to observe that repeated exports were made by all the five exporters. Admittedly, foreign exchange was not repatriated against Forms-E which subsequently turned out to be fake. Ignoring the said fact, there is no explanation how subsequent exports were allowed when it was evident that foreign exchange was not repatriated within the specified period as the evidence of earlier exports were available to the department in shape of Jewellery Pass Book maintained under (2(v) of SRO 266(1)2001and Para 20) of SRO 760(1)/2013. This reflects the negligence, inattention and ineptitude in discharge of duties and responsibilities which is tantamount to maladministration.
It is rather strange that the collectorates had failed to recover the adjudged amount of fine imposed against the clearing agents, who are otherwise licensee of the department. Perusal of the record shows that either no stay had been granted or the period for stay of order under appeal had been lapsed. But the department had not initiated recovery proceedings for which no explanation could be advanced. This again reflects negligence, inattention, inefficiency and ineptitude in discharge of duties and responsibilities by concerned officers/officials of the department which is tantamount to maladministration.
It appears that TDAP has not put in place any mechanism of monitoring and reporting of exports and imports taking place under SRO 760(1)2013 dated 02.09.2013. In the absence of authentic and complete data of import and exports under the said SRO, no meaningful analysis can be carried out. It is, therefore, imperative that the Ministry of Commerce may consider conducting impact analysis of the incentive scheme as provided for under the Import and Export of Gold, Gold Jewellery and Gemstones Order, 2001 and Import and Export of Precious Metals Jewellery and Gemstones Order, 2013, the FTO order said.
The FTO observed that similarly there are some weaknesses in the scheme as notified vide SRO 760(1)2013 dated 02.09.2013 which need to be revisited to provide for a performance based quota scheme for import of gold, authentication of passbook entries by TDAP, only if all timelines are being met including realisation of foreign exchange of previous exports and clearly spelled out penal clauses for defaulters and reporting mechanism to the concerned adjudicating authority.
The findings of the FTO revealed the failure of the departmental officer(s) to take timely action under Section 156(1) and (14A) of the Customs Act, 1969 as well as under Import and Export Control Act, 1950 and failure to exercise due precaution, in the discharge of their duties and responsibilities resulting in massive loss of revenue to the national exchequer, which is a sheer negligence, ineptitude, incompetence and inefficiency, which is tantamount to maladministration as defined under section 2(3)(ii) of the FTO Ordinance.
The director general FIA will conduct inquiry against all concerned departments/agencies and initiate criminal proceedings against those found involved, in accordance with law.