KARACHI: Directorate of Post Clearance Audit (PCA) detected tax evasion by M/s Omar Associates to the tune of Rs.8.93 million while violating Duty Tax Remission Export (DTRE) concessions.
While scrutinising the DTRE No. KEXP/4067/09122012 dated December 09, 2012, it has been observed that M/s Omar Associates imported 15,000 metric tons of soap stone under H.S. Code 2526-1010 availing facility of provisions of DTRE rules notified vide SRO 450(i)/2001 dated June 18, 2001. The importer imported subject raw material under 22 goods declaration during the period December 18, 2010 to March 14, 2011. The DTRE user exported 14,821.340 metric tons of finished talc lumps under 5 export goods declarations during January 03, 2011 to April 07, 2011.
M/s Omar Associate under Rule 302 of DTRE rules was granted specific contract based DTRE approval for acquisition of duties and taxes suspended input goods for solely use in exports as specified in the application to the regulatory collector in the form set out in Appendix I to the DTRE Rules having all required information (Rule 298 of DTRE rules).
This approval is on the basis of declaration of the applicant who stand responsible for fulfillment of these declarations which besides others includes that the input goods acquired under Chapter XII of SRO.450(I)/2001 dated 18-6-2001 shall be utilized in the manufacture and export of output goods within 24 months. The DTRE user submitted reconciliation statement on February 27, 2012 on prescribed form (App-III) in terms of Rule 307-D of the aforesaid Rules.
The analysis of import and export documents and the record provided with reconciliation statement revealed that DTRE user has not followed the rules in its true spirit. Port of importation is shown Karachi instead of Torkham in Appendix-I. Similarly the date of import at Torkham is recorded as date of arrival in Karachi. Clearance at Torkham, unloading at Peshawar Terminal, sorting by Labors, reloading and transportation to Karachi will take minimum 10 days.
The analysis further revealed that first import of input goods was on December 18, 2010 while Sales Tax Invoice OAL/ 2010/428 dated December 29, 2010 was issued for first export of 104.620 M.Ton vide KEXP-SB-03-1-2011. The input goods acquired & imported for the instant DTRE in surely not used in production of the output goods of this 1st export because the period between date of importation and issuance of S.Tax invoice is 10 days which is minimum required for transportation upto Karachi. The 2nd Export of 6620.720 M.Tons against S.Tax invoice dated 14-01-2011 was under KEXP-SB-37270 dated 17-0102011. The import data revealed that maximum 1606 M.Tons input goods were available for this export and that too without required processing time. It means that 5014.720 M.Tons of goods in the 2nd export shipment is from input goods of other source as for this no input goods acquired was available during the period. From all this it is crystal clear that out of total export of 14821.340 M.Tons under this DTRE 5119.340 M.Tons is produced from input goods which was neither acquired/ imported against the instant DTRE. In other words the input goods of 5119.340 imported free of duty & taxes for this DTRE was used somewhere else which in violation of Provisions of DTRE Rules as notified vide SRO.450(i)2001 dated 18.6.2001 and attract recovery of suspended duties & taxes besides penal action under the relevant provisions of law.
The value of 5119.340 M.Tons at Rs.5 per kilogram comes to Rs 25.596 million on which suspended customs duty at the rate of 10 percent was Rs 2.559 million, sales tax at the rate of 17 percent was Rs 4.786 million, federal excise duty at the rate of 1 percent was Rs 255,967 and withholding tax at the rate of 4 percent was Rs 1.327 million, while the total value of taxes is Rs 8.93 million.
M/s. Omar Associate (Pvt) Ltd, Karachi, is accordingly advised to deposit the short levied amount of Rs.8930175 along with additional duty and taxes.
