On the recommendation of Ministry of Commerce, the Central Board of Revenue (CBR) has launched a recovery drive against importers involved in import of Polyvinyle Chloride (PVC) compound from Sri Lanka in violation of the Free Trade Agreement (FTA).
Sources told Business Recorder on Sunday that CBR has issued instructions to all collectors of customs to start investigation as directed by the Commerce Ministry. In case of any irregularity or inconsistency in assessing tax on PVC compound, the duties and taxes should be re-assessed and recovered under intimation to the Board, the CBR directive said.
The CBR is empowered under Customs Act, 1969 to initiate recovery of duties and taxes in case violations of rules and regulations is proved by the concerned customs authorities. According to commerce ministry's findings, importers of PVC compound from Sri Lanka are not entitled to any duty concession under SRO 570(I)/2005.
Ministry of Commerce has informed CBR that the PVC Compound imported from Sri Lanka does not fulfil the criteria of origin as stipulated in the Rules of Origin for the bilateral FTA. This argument has been accepted by the Government of Sri Lanka and no Certificates of Origin for this product would be issued by it as long as the product is manufactured in the manner as has been done now. Accordingly, CBR should ensure that PVC compound imported from Sri Lanka is released only on payment of MFN duty. In case any customs duty was not recovered on the consignments imported and cleared earlier, CBR may initiate appropriate action under the Customs Act, 1969.
Sine the commerce department of Sri Lanka has undertaken not to issue any Certificate of Origin for PVC compound, in case any consignment of PVC compound is imported and the importer files a Certificate of Origin, it may not be genuine. CBR must direct the collectors that in such eventuality a reference may be made to the Ministry of Commerce to ascertain the factual position.
Commerce Ministry stated that the pre-condition to avail concession of duty in terms of SRO 570(I)/05 is to comply with the Rules of Origin applicable to Pakistan-Sri-Lanka Free Trade Agreement (FTA). These Rules of Origin have been notified by the Ministry of Commerce.
PVC Compound is manufactured in Sri Lanka, admittedly from the non-originating components. In order to be treated as "Origin" of Sri Lanka, the conditions prescribed in Rule 8 (d)(5) must be fulfilled.
THESE PROVISIONS READ AS FOLLOWS:
"(d) The following shall in any event be considered as insufficient working or processing to confer the status of originating products, whether or not there is a change of heading.
(5) simple mixing of products, whether or not of different kinds, where one or more components of the mixture do not meet the conditions laid down in these Rules to enable them to be considered as originating products.
Commerce Ministry pointed out that the PVC Compound is being manufactured in Sri Lanka by a simple process of mixing; there is no chemical reaction; and the physical properties of the ingredients remain intact in the mixture so obtained.
The change is HS sub-Heading at six digits or value addition equal or over the prescribed threshold would also not confer the origin to such products.
Although the Certificate of Origin was issued by the Department of Commerce, Government of Sri Lanka, during a recent meeting at Colombo, they were confronted with the position as stated in para-4. The Government of Sri Lanka agreed with the position taken by the Ministry and shall not issue any more Certificate of Origin for PVC compound to exporters employing similar process of manufacture.