KARACHI: Collector of Customs Adjudication-I, Dr. Fareed Iqbal Qureshi upheld the contravention case against Pakistan Telecommunication Limited (PTCL) made by the Directorate General of Investigation and Intelligence, Customs Karachi and established the case of evasion of customs duties and other taxes amounting to the tune of Rs 1.977 billion approximately by the PTCL, Islamabad,
The collector also imposed a penalty of Rs 50 million on PTCL, Rs.10 million on Huawei Technologies Pakistan (Pvt) Ltd and Rs 5 million on the clearing agent.
The collector of Customs Adjudication-I upheld the contravention case through its Order-in-Original No.613 of 2014-2015 dated June 3, 2015 on a case of valuation fraud/mis-declaration by concealment of actual import/CRF value of imported telecommunication equipments and spare parts etc. aimed at evasion of custom duty and other taxes amounting to Rs 1.977 billion on telecommunication equipment imported by PTCL, Islamabad.
Saud Hassan Khan Investigation Officer (IO) appeared before the collector Adjudication-I for the respondent and defended the case.
It may be mentioned here that earlier, the Directorate General of Intelligence and Investigation -FBR, Regional Office Karachi vide its Contravention Report No. Appg.13/DCI/R&A/PTCL/Cont/2014 dated December 19, 2014 that credible information was received that PTCL in collusion with their foreign supplier Huawei International, Singapore, their local contractor Huawei Technologies Pakistan, and their clearing agents Ryan Agencies (Pvt) Ltd are involved in huge evasion of customs duty and other taxes through valuation fraud / mis-declaration by concealment of actual import / CFR value of imported telecommunication equipments and spare parts, etc, under Contract No. Proc.3-3/4/250913/0910 dated October 11, 2013 meant for supply, installation, up-gradation, integration, testing and commissioning of 374 LTE sites (out of 400 up-gradation of existing sites and 30 new sharing sites) on turnkey basis. According to the source, the equipments under afore-said contract were imported and cleared on meagre declared value which comes to about 2 percent of the actual CFR value of the items mentioned in the price lists and Bill of Quantities (BOQs) as mentioned in initial (parent) Contract (dated 22.05.2013).
It was further disclosed by the source that consignments were being cleared on heavily discounted prices up to 98 percent of the actual CFR prices evading thereby huge amount of leviable duty and taxes. Reportedly, 5 such consignments were cleared through Yellow Channel of Automated Clearance System of Model Customs Collectorate Appraisement-West, Karachi on declared values.
As reported by the detection agency, PTCL were previously also found involved in huge evasion of duty and taxes through fiscal fraud, mis-declaration / concealment of actual CFR values of telecommunication equipments in connivance with their foreign suppliers Huawei International Pet Ltd., Singapore and their local contractors Huawei Technologies Pakistan (Pvt) Ltd., Islamabad, wherein this directorate during July, 2013, seized one of such consignment imported under initial Contract No. Proc.3-4/4/290413/0796 (SAP PO No. 4800000488) dated May 22, 2013.
On submission of seizure report, the case was adjudicated by the Customs Adjudication-I vide Order-in-Original No. 208/2013 dated October 14, 2013. The evaded amount on account of concealment of actual CFR value of afore-said equipments was adjudged to the tune of Rs 261.815 million, besides imposition of penalty of Rs 100 million on PTCL.
On intervention by the Sindh High Court, by way of interim orders in CP No. 3155/2013, the seized consignment was released on depositing bank guarantees for adjudged amount and anticipated fine to the extent of 20 percent of the evaded amount with the ‘Nazir’ of the court.
Subsequently, on appeal by PTCL, the ONO was upheld by the learned Customs Appellate Tribunal vide Order-in-Appeal No. 2175/2013-14 dated November 5, 2014. Perusal of records further revealed that during July, 2013 PTCL had also cleared two identical consignments of telecommunication equipments under the said Contract No. Proc.3-4/4/290413/0796 (SAP PO No. 4800000488) dated May 22, 2013 adopting same modus operandi i.e. concealing the actual CFR value as mentioned in the price lists annexed to the contract and by declaring heavily discounted value to the extent of about 2 percent of the actual CFR value and by also concealing the element of such abnormal discount in vague and sketchy invoices.
On submission of contravention report, the evasion was adjudged to the tune of Rs 116.228 million vide ONO No. 129/2014-15 dated September 11, 2014, besides imposition of penalty of Rs 1 million each on PTCL and their local contractor.
Further investigations by the detecting agency revealed yet another case of clearance of identical consignment wherein the goods were cleared under a newly executed tripartite Contract No. Proc.3-3/4/210613/0828 dated 09.09.2013 wherein a new modus operandi was adopted and the element of declaration of actual CFR value of equipments was totally deleted from the Bills of Quantities and Price Lists and contrarily the heavily discounted price (to the extent of 2 percent of CFR value) was termed as ‘agreed value’ with a view to pre-empt legal / penal action for mis-declaration and fiscal fraud.
Apparently, the new modus was adopted in view of the detection of the fraud by the directorate general. The perusal of contract dated September 9, 2013, however, revealed that although the element of actual CFR value and discount was deleted from the BOQs and price lists, even then the ‘Summary of Prices’ given in the ‘Price Schedule’ to said contract clearly revealed that the declared value was, in fact, heavily discounted price of the equipments i.e. to the extent of only 2 percent of the actual CFR value.
As contended by the detecting agency, scrutiny of the relevant clauses No. 41.1 to 41.3 of the initial contract No. Proc.3-4/4/290413/0796 dated 22.05.2013 clearly shows that the actual CFR prices of all equipments meant for supply, installation, up-gradation, integration, testing and commissioning of LTE sites under Phase-I and Phase-II (Part-I Rawalpindi and Part-II Lahore and Karachi) projects were mentioned and such prices were locked for future contracts.
The order further stated that keeping in view the above deliberations, it is concluded that PTCL in collusion with their contractors Huawei Technologies and clearing agents Ryan Agencies (CHAL No.672) mis-declared the actual value of subject consignments i.e. Rs 877.8 million instead of actual CFR value of Rs 20.171 billion suppressing an amount of Rs 19.293 billion at 98 percent of the actual value.
The offence of mis-declaration and fiscal fraud in terms of Section 32(1) & (2) and 32A respectively read with Sections 79 and 80 of the Customs Act, 1969, further read with Section 148 of the Income Tax Ordinance, 2001, punishable under clauses (14) and (14A) of Section 156(1) of the Customs Act, 1969, stands established.
The liability of evaded amount of duty / tax against PTCL has been calculated to Rs.19.77 billion (customs duty Rs 964.68 million and income tax Rs 1.012 billion.
Accordingly, the importers Pakistan Telecommunication Company Limited are directed to immediately deposit the aforesaid amount in the Government Treasury failing which action may be initiated against the respondents under Section 202 of the Customs Act, 1969 read with Chapter XI (Recovery Rules) of the Customs Rules, 2001 notified vide SRO NO.450(I)2001 dated June 18, 2001.