ISLAMABAD: Directorate of Customs Intelligence and investigation of the Federal Board of Revenue (FBR) has completed the contravention report about tax evasion scam of Rs 1.61 billon by M/s PTCL Islamabad with the collaboration M/S Huawei International Singapore and Huawei Technologies Pakistan (Private) Limited. The contravention report along with request of issuance of show cause notice to M/s PTCL and M/s Huawei has been sent to Collector Adjudication Customs Islamabad.
According to report M/s PTCL in support with their foreign suppliers M/s Huawei International Singapore, their local contractor M/s Huawei Technologies Pakistan and their clearing agent M/s Eastern Freighter Services are allegedly involved in huge evasion of customs duty and other taxes on import of telecommunication equipment and spare parts, etc, under contract No. PROC. 3-4/4290413/0796 (SAP No. 4800000488) dated 22.05.2013.
Perusal of the contract transpired that M/s PTCL Islamabad concluded a deal with M/s Huawei International Singapore and M/S Huawei Technologies Pakistan Limited for procuring, supply, installation, up-gradation, integration, testing and commissioning of 100 LTE BTS-Phase-1 (overly 3GPP Rel.10 complaint LTE solution on existing PTCL CDMA/EVDO Rev. network only for Islamabad city consisting of 70 SWAP sites, 30 new sharing sites total 100 sites complete core & 2000 LTE Dongle) on turnkey basis. The telecom equipment were imported as installation material and networking equipment under PCT Heading 8517.6990. Invoices which the importer produced in support of declaration contain the information such as supply, installation, up-gradation, integration, testing and commissioning of 100 LTE BTS (DBS 3900, BBU,RRU etc).
It also shows PCT Headings 8517.6100, 8517.6980, 8517.6990 & 8517.7000 on the invoice. From the contract supply by the importer it transpired that actually, the importer imported Base Transceivers Stations (BTS) distributed base stations which is also shown in the price list of contract. However at the time of clearance the importer mis-declared the same as installation material under PCT Heading 8517.6990. On the contrary a Base Transceiver Station (BTS) actually is a base stations (BS) which is also called radio base station (RBS), node B (eNB) or cell site.
It is falls under PCT heading 8517.6100. The report said Actual contract price for the whole project (Phase-1) inclusive of cost of hard ware, software, spare parts and services was concealed in the invoice as well as GDs. However, discounted price was mentioned in the contract as (i) Foreign portion: CFR $11,50,000 (ii) Local Portion DDP Rs 133,650,000. Perusal of L/C No. TF1314773081 dated 27-05-2013 revealed that L/C was opened to the extent of discounted price (Foreign Portion) i.e. $11,50,000 whereas up to 98 percent of the actual price (CFR) and the entire amount of local portion i.e. PKR 133,650,000 was not included in the L/C and duty and taxes were not paid on the concealed portion of value of the imported goods. It means that local portion which is mainly services portion is more than the declared value of the imported base stations which corroborates the claim of concealment of actual value.
A bare reading of the contract reveals that the offshore supplier and contractor (M/S. Huawei) relates to each other and their rights and obligations under the contract are not different. As per contract, scope of work is obligation of the offshore supplier and contractor which includes but not limited to the supply, Installation, up-gradation, integration, testing and commissioning of the equipment on turnkey basis. Similarly full compensation is their right.
PTCL shall pay, the offshore supplier and contractor shall receive, full compensation for everything furnished and done under the phase -1 of the contract. L/C should have mention of the actual contractual price (inclusive of concealed price of hardware, software, spare parts and services). Duty and taxes should have been paid on the said price. The circumstances surrounding the sale of the imported goods and service demonstrate that particular relation between foreign exporter and importer adversely affected the transaction value of the goods and services which is not permissible in term of section 25 (1) & (3) of the Customs Act 1969.
