Importer defeats Customs in tax recovery after release of goods

LAHORE: An importer of raw material, used in shoes for the manufacturing of sole, has defeated Customs in recovery of sales tax and income tax after the assessment and release of goods, said sources.

According to details, the importer had imported two consignments of thermoplastic rubber and claimed the benefit of zero rate of sales tax. The Collectorate accepted the classification of the goods and allowed clearance by granting the said benefit.

However, the department issued show-cause notice after the lapse of two years, saying that the benefit of zero-rating was not available against the import. Therefore, the importer was liable to pay all the recoverable duty and taxes besides a penalty for misdeclaration.

The importer challenged the notice, saying that the consignments were examined in both the cases and examination report was reduced by the examination staff. He further pointed out that on the basis of the examination report, the assessment was made and the goods declarations were gate out as per law.

He maintained that the recovery cannot be enforced on the presumptions basis. Further, he contested his case on the point that the department has no jurisdiction to recover or adjudicate any short levied (i.e. recovery of sales tax and income tax) once the imported consignments are released/cleared from Customs. He said it is a settled principal that the Clearance Collectorate as well as Adjudication Collectorate have no jurisdiction to adjudicate/ recover sales tax at post release stage.

The department, on the other hand, stressed that the importer had misdeclared the goods to avail undue benefit of exemption from sales tax to defraud the government from its legitimate revenue. It further said that the Customs Act provides that in case by reason of any such document or statement or by any collusion, any duty or charge has not been levied or short levied or has erroneously funded, a show-cause notice can be served within five years of the relevant date. The relevant forum disagreed with the department and set aside the notice.

Copyright Business Recorder, 2024