KARACHI: The Customs Post Clearance Audit has prepared a contravention report against M/s Muller and Phipps (Private) Limited for tax evasion of Rs 2.323 million by taking inadmissible benefits under SRO 1125(I)/2011.
While scrutinizing data of the importer, the PCA Karachi found that M/s Muller and Phipps imported consignments of Latex Surgical Gloves Powdered vide GD No KSCI-HC-68655/24.5.2012 and had illegally availed benefits of concessionary rate of sales tax and income tax.
It may be mentioned here, that the concessions offered vide SRO 1125(I)/2011 dated 31.12.2011 are only admissible to manufacturers of goods covered in the five sectors only as highlighted in the conditions given in the said notification. Furthermore, the imported item Latex Surgical Gloves is a consumable item used for different general purposes like examination of patients by the doctors, dentists and by compouders in the hospitals.
Therefore, item is not covered under the description of Surgical Goods. The importers were required to pay sales tax at 17 percent and income tax at 5 percent instead of 1 percent.
It transpired that the status of M/s Muller and Phipps Pvt Ltd is that of an importer/exporter/retailer and the concern was not registered as a manufacturer at the time of subject imports.
Therefore, an amount of 2.323 million has been short paid/evaded by the importers on account of paying concessionary rate of sales tax and withholding income tax otherwise not admissible to them.
Hence, M/s Muller and Phipps Pvt Ltd violated the provisions of Section 32(1)(2) and (3A) of the Customs Act, 1969, Sections 3(1), section 3, 6, & 7 read with section 34 of Sales Tax Act, 1990 and Income Tax Ordinance 2001 punishable under clauses (1), (9) and 14 of Section 156 (1) of the Customs Act, 1969, punishable under Section 33(5) and section 7A of the Sales Tax Act 1990 read with chapter X of the Sales Tax Special procedure rules 2007 (special procedures for payment of sales tax by the importers) and punishable under the relevant provisions of Income Tax Ordinance 2001.
Accordingly, an audit observation was issued to M/s Muller and Phipps Pvt Ltd for explaining and clarifying as to on what basis concessions were availed by them even when they were not manufacturers at the time of subject imports and thus legally ineligible for concessions accorded vide SRO 1125(1)/2011 dated 31.12.2011. The importers however failed to come up with any tangible evidence and were also unable to refute the charges leveled by the department.
In view of the aforesaid M/s Muller and Phipps Pvt Ltd are held to have intentionally and willfully caused loss to the government exchequer amounting to Rs 2.323 million by illegally availing benefits of SRO 1125(1)/2011 dated 31.12.2011 which was evidently not admissible to them at the time of import.
The contravention report is forwarded herewith for initiation of adjudication proceedings in the case.
