KARACHI: The Internal Audit Federal Board of Revenue (FBR) has pointed out that MCC Appraisement East and MCC Appraisement West are lacking mechanism to implement the conditions to avail the benefits of the SRO 655(I)/2006, which is resulting in loss of revenue.
During scrutiny of data, it revealed that various importers imported different consignments of various items under various PCTs headings involving huge amount valuing to Rs6.442 billion and availed the benefits of Customs Duty under SRO 655(I)/2006.
On examination of the said SRO it is clearly mentioned that this facility of enjoying the exemption of custom duty is only allowed to the importer-cum-manufacturer, who have to fulfill all the conditions mentioned in the said SRO that the manufacturer-cum-importer, has suitable in-house facilities and registration with the Sales Tax department for manufacture of such goods.
Internal Audit is of the view that how the assessing officers/official confirmed that the claimant is manufacture of such goods in sales tax department.
Furthermore, the manufacturer-cum-importer, at the time of import of approved item, shall make a declaration on GD to the effect that the items have been imported in accordance with entitlement for the manufacture of specified items. The manufacturer shall also declare that the imported items shall be consumed for the purpose of manufacture of the items within a period of one year.
During audit the Collectorates shown their inability to prove that the importers made declaration on GD to the effect that the items had been imported in accordance with their entitlement for the manufacture of specified items. Moreover, how the Collectorate confirmed hundred percent consumption of imported items within stipulated time.
According to SRO, the input-output ratios of items to be manufactured and total annual requirement of raw materials, sub-components, sub-assemblies and components shall be defined and determined by Engineering Development Board (EDB).
According to SRO, the manufacture-cum-importer shall maintain records of the inputs and the goods manufacture from imported items. Moreover, the manufacture-cum-importer shall communicate to the concerned Collector of Customs in writing about the consumption of imported items within 60 days of consumption of goods. In case of non-consumption within one year from the date of import, the importer shall pay the custom duty and allied taxes.
In this regard, Internal Audit observes, the Collectorate neither provided importer’s letter addressed to the Collector of Customs regarding consumption, nor provided recovered amount of custom duty and allied taxes in respect of non-consumption within one year.
Internal Audit expresses surprise that imports valuing Rs6.442 billion were consumed cent-percent. Internal Audit has made an observation that the Collectorates may justify that how they confirmed that the importer themselves are not importer-cum-assembler.
Audit is of the opinion that the collectorates are lacking mechanism to implement the conditions to avail the benefits of the SRO 655(I)/2006.
Internal Audit scrutinized the import data of various companies including Ahmad Glass Industries (pvt) ltd, Atlas Battery Limited, Atlas Hitec (private) limited, Atlas Honda Limited, Auvitronics Limited, Bahawalpur Engineering Limited, Berger Paints Pakistan Limited, Century Engineering Industries (pvt) Limited, Exide Pakistan ltd, Faraz Industries Private Limited, Force Batteries (private) limited, Friction Materials Components (pvt.) Ltd, Hinopak Motors Limited, Jahangir Brothers (pvt) limited, Alsons Auto Parts (pvt) ltd, Atlas Engineering Limited, Chaudhary Automotive Industries (pvt) ltd, Electropolymers (pvt) ltd, Kansai Paint (private), Thermosole Industries (pvt) ltd, Volta Dyes & Moulds, Millat Industrial Products Limited, Pak Suzuki Motor Company, Razi Sons Pvt Ltd, Procon Engineering Pvt Ltd, Synthetic Products Enterprises Limited and several others.