KARACHI: Regional Directorate of Post Clearance Audit (PCA) South Customs has detected fiscal fraud and EFS scam by M/s Gulf Enterprises during audit of sales tax and income tax data and registered a First Information Report (FIR) against importer Abu Bakar and arrested him.
According to the details, Director-General Post Clearance Audit (PCA) Dr Zulfikar Ali Chaudhry directed Director PCA South, Sheeraz Ahmed to probe allegations of the misuse of the export facilitation regimes by the above mentioned textile company.
During initial scrutiny based on available customs, sales tax, and income tax data, several discrepancies came to light. These irregularities prompted a physical inspection of the factory premises on July 10 and July 23, 2024 which confirmed the validity of the information received.
The PCA audit team, comprising audit officers Mujahid Iqbal and Imran Saifee, detected that 163 MT of yarn, intended for export, had been illicitly removed, in clear violation of the EFS Rules, evading tax evasion amounting to Rs40 million, besides Rs15 million surcharge.
It was further revealed that the company had been misusing its “manufacturing status” to claim exemptions and concessionary tax rates at the import stage while engaging in local sales of the imported yarn.
This malpractice led to an additional duty tax evasion estimated at Rs298 million, besides Rs40 million surcharges.
Scrutiny of sales tax records established that that the importer was involved in selling smuggled goods that were neither legally imported nor purchased locally. Items such as cotton sewing thread, sisal textile fibers, and synthetic monofilament of 67 decided or more were being sold illicitly, resulting in tax evasion worth Rs158 million.
The Audit Team also take notice that there was not any installation facility in the factory premises relating to spinning, dying, or printing stitching, and only machines of yarn texturing / covering were found installed, many of which were out of service.
The installed machinery of M/s Gulf Enterprises contradicted with the goods exported under EFS; as finished items such as dyed and printed finished fabric had been exported.
This discrepancy raised serious concerns on the genuineness of exports made under the EFS. The importer was unable to justify manufacturing and export of said finished goods without having corresponding manufacturing facilities; thus indicating that exported goods were procured from the unregistered local market to justify consumption and export under the EFS regimes.
The importer was also found involved in over-invoicing to inflate both import and export values involving Rs173 million.
Furthermore, the substantial volume of yarn imports was also found inconsistent with the importer’s financial standing, prompting PCA to initiate an investigation into possible money laundering activities.
The findings exposed M/s Gulf Enterprises as a hub of financial malpractice, smuggling, and fraudulent activities.
On August 8, 2024, the PCA South registered an FIR for fiscal fraud under Section 32A of the Customs Act, involving Rs551 million, and arrested the accused Abu Bakar being the sole proprietor of M/s Gulf Enterprises.
