FBR decides to recover Rs807 million duty and taxes from Port Qasim Authority; exemption on import of three tugs disallowed

KARACHI: The Federal Board of Revenue (FBR) has decided to recover Rs807 million as concealed amount of duty and taxes including additional surcharge on import of three tugs acquired by Port Qasim Authority.
The FBR examined the available exemptions under Merchant Shipping Ordinance, 2001 and clarified that exemption of customs duty under SRO 567(I)/2006 dated June 05, 2006 and sales tax under SRO 551(I)/2008 dated June 11, 2008 was not available in the case of the three tugs that were acquired by PQA on the basis of lease agreement with M/s Global Marine Services.
The sources in the FBR said it had been pointed out that Section 15 (C) of Merchant Shipping Ordinance, 2001, ships belonging to the government of Pakistan only were exempt from registry. Similarly, as per rule 2(1)(d) of Merchant Shipping (Registration of Ships) Rules, 2002 flag state means a state whose flag a ship is entitled to fly.
While concluding the observation, the FBR directed the Model Customs Collectorate (MCC) of Muhammad Bin Qasim to collect leviable customs duty and sales tax on import of three tugs by PQA.
According to details, the PQA imported three tugs, included: Tag Sharief Alert GD (goods declaration) date July 28, 2011; Tag Sharief Pilot GD date July 28, 2011; and Tag Sharief Verve GD date August 31, 2011.
Sources said that these tugs were imported with all machinery and fittings as temporary importation and subsequent exportation within two years at Port Qasim.
The sources said that the port authorities filed GDs after a lapse of approximately five months of the filing of Import General Manifest (IGM) through their clearing agent M/s Pakgro Trans (Pvt) Ltd. Karachi. The port authorities claimed exemption from payment of Customs Duty in terms of SRO 567(I)/2006 dated June 05, 2006 and SRO 551(I)/2008 dated June 11, 2008.
The sources said that PQA also claimed duty drawback taking the benefit of SRO 450(I)/2001 dated June 18, 2001. “However, they have not fulfilled the pre-requisites and conditions as laid down in the claimed SRO besides conditions specified in the relevant SRO,” an official said.
The sources said that non-duty paid tugs were identified by customs officials through random inspection at the sea and at the sport the examination report was prepared in September 2011. The sources said that GD was handed over to the importer/clearing agent for further processing. The clearing agent/importer kept silent on the issue despite repeated demand from the customs authorities for finalizing the assessment. However, the same was presented on October 23, 2012 for further process.
The investigation of customs officials revealed that tugs were being used by PQA without any legal authority / coverage and remained operational from the date of its arrival into Pakistan territorial waters prior to release and out of charge by the customs authorities.
The conditions of the SROs defined that ships and other floating crafts including tugs, survey vessels and other specialized craft purchased or bareboat chartered by a Pakistani entity and flying Pakistani flag; and ships of gross tonnage of less then 15 LDT and all floating crafts including tugs, dredgers, survey vessels and other specialized craft purchased or bareboat chartered by a Pakistani entity and flying Pakistani flag except the ships or crafts which are acquired for demolition purposes or are designed or adapted for use for recreation or pleasure purpose. “Therefore, on these conditions exemption of customs duty is only available to the imported tug which hoist Pakistani flag subject to registration with the Mercantile Marine Department (MMD), Ministry of Ports and Shipping. Since such tugs were not registered with MMD, therefore, the same are not entitled for claimed exemption of customs duty and sales tax,” the official said.
The sources said that the matter had been taken up with the PQA and after discussions; the PQA surrendered and paid Rs84 million on account of payment of withholding tax on all imported three tugs into the government treasury.
The sources said that additional surcharge has been imposed as PQA had succeeded to keep the goods in operation without fulfilling the financial obligations.
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