PCA Directorate pursuing gross misdeclaration cases: huge losses to exchequer

The Directorate-General of Post-Clearance Audit (PCA), Federal Board of Revenue (FBR), is aggressively pursuing cases of gross misdeclaration of duty and taxes on import of electronic electricity meter kits from China by some Lahore-based commercial importers, causing huge loss to the national kitty.
Sources told Business Recorder here on Friday that the Directorate of PCA has framed audit observations against these importers for violating SRO 575(I)/2006, SRO 549(I)/2008, Income Tax Ordinance, 2001, and Federal Excise Act. The Directorate has also provided an opportunity to the importers to clarify their position before finalisation of the audit observations and recovery proceedings against them.
Details show that the desk audit of clearance data pertaining to period 2007-11 received information that an electronics private limited company of Lahore had imported 58 consignments of 'Electronic Electric Meter Kits' from China and got them cleared from Model Customs Collectorate of Lahore and Karachi by misdeclaring as meter PCBA (meter printed board), etc, under various PCT headings at lower rate of customs duty, instead of correct description ie 'Electronic Electricity Meter Kits', classifiable under Pakistan Customs Tariff (PCT) heading 9028.3000. The goods ie complete Electronic Electric Meter Kits, were imported in SKD condition, meeting the essential character of complete/finished articles which were liable to be classified/assessed as complete/finished article in terms of General Interpretation Rule 2(a), under PCT 9028.3000, attracting customs duty @ 25 percent, sales tax @ 15.17 percent, income tax @ 2-5 percent and special excise duty @ one percent. Moreover, irregular exemption of customs duty under serial No 21 of SRO.575(I)/2006, zero rating of sales tax under SRO 549(I)/2008, irregular concessions under Income Tax Ordinance, 2001 and Federal Excise Act, 2005 had also been availed. Moreover, imported goods were cleared at far lower value than the assessable value. This misdeclaration resulted in evasion of huge amount of duty and taxes to the tune of Rs 394333876.
In case, the importer has not agreed with the audit observation of the department, the importer has to provide a written clarification along with supporting documents along with copies of Goods Declaration, letters of credit, pro forma invoices, purchase orders, packing lists, bills of lading, catalogues/literature, etc, sales tax/income tax records in respect of the said import clearances.
In another case, the Directorate of the PCA detected similar misdeclaration by a Lahore-based company. The desk audit of clearance data pertaining to period 2007-11 showed that the importer had imported 64 consignments of single-phase "electronic electricity meter kits" from China and got them cleared from Model Customs Collectorate of Lahore by declaring as 'meter PC Board'. A special team of PCA Lahore visited the factory premises and samples from in-bond consignments were drawn in the presence of factory representatives. The samples clearly established that the imported goods were in SKD condition. The Directorate detected similar kind of misdeclarations as mentioned in the above mentioned case. The Directorate is in the process of finalising these cases, keeping in view the current tax laws and viewpoint being submitted by the concerned importers, sources added.