Customs laws provision: indemnity bond, post-dated cheques as replacement of bank guarantee opposed

A study of the Auditor General of Pakistan (AGP) has strongly opposed the provisions of the Customs laws, which will allow the customs department to accept the indemnity bond and post dated cheques from importers as a replacement of the bank guarantee, where securing government revenues is more risky.
The AGP on Monday presented a special study on debentures, bank/insurance guarantees and indemnity bonds before the special committee of the Public Accounts Committee (PAC). According to the AGP study, the substitution of bank guarantee with indemnity bond and post dated cheques should not have been made as bank guarantee is the only safer instrument to secure the Government revenue.
The debentures, bank/insurance guarantees and indemnity bonds are instruments to provide relaxation against payment of duties and taxes under the relevant law. Subject study on debentures, bank/ insurance guarantees and indemnity bonds was conducted with a view to examine whether the customs laws and procedures prescribed under various notifications issued from time to time were being followed in letter and spirit and to see whether adequate rules and procedures exist for the security of government dues. AGP also examined the department's overall approach of achieving their goals set for the purpose. Follow up interviews were also conducted with some of the officers of FBR.
The AGP office has recommended that the issue regarding non-realisation of huge amount of revenue was required to be investigated and looked into at appropriate level for initiating corrective action. There is need to streamline and observe the procedure laid down for filing of the bank guarantees through the bank authorities to cover the deferred amounts of revenue.
The study further said that there was lack of monitoring of the assessment of government dues by the assessing authorities with regard to the application of correct rate of taxes/exemptions. There was need to watch the realization of surcharge/principal deferred amounts by the specified dates from the importers who were availing facility of deferred payments.
It said that the procedure for acceptance of the debentures, bank/insurance guarantees and indemnity bonds etc. was required to be observed. Pre-requisite formalities e.g. affixation of special adhesive stamps etc were required to be observed before acceptance of the instruments. The certificates of consumption of raw material and installation of machinery issued/ produced within the stipulated period should only be accepted for release of bank/ insurance guarantees & indemnity bonds etc. Otherwise should be enforced and government revenue recovered under Section 202 of the Customs Act, 1969, AGP added.