Internal Audit questions revenue leakage of Rs881 million at MCC Port Qasim

KARACHI: The Directorate of Internal Audit (Customs) has detected short realization/revenue leakage to the tune of Rs881.018 million audit in respect of Bulk import, Manifest Clearance department, off Dock terminals, Chapter 72 to 83 (WE-BOC & One Customs) regarding MCC Port Qasim, Karachi for the period from 2013 to 2014.
Directorate Internal Audit (Customs), constituted a team comprising of Deputy Director Sabir Jamal, Superintendents S.A Jafri and Muhammad Qadeer, Deputy Superintendent Shaikh Mansur, which scrutinized the available records randomly and noted 10 different observations.
Assistant Collectors Iqbal Memon, Rehan Akram, Imran Lila and Principal Appraisers Shahid Rizvi and Babar Kabeer remained posted and furnished partial records to audit team.
According to the Audit observations, Directorate of Customs Valuation has determined the LPG value of $0.89 per kg vide Ruling No.358. In view of this, functionaries of MCC Port Qasim were bound to make compliance and assess the duty and taxes on the value exactly determined by the Valuation Department.
But, later the scrutiny of the goods revealed that MCC Port Qasim assessed the sales tax on declared lower value instead of higher value which caused the ex-chequer loss to the tune of Rs.18.103 million after which the MCC Port Qasim was directed take steps for the immediate recovery of the amount along with its surcharge.
Scrutiny of the 16 goods declaration filed by Ms Pak Suzuki Motor Co. Ltd, Karachi revealed that the goods were finalized in the month of July-2013 with the allotment of free numbers instead payment of duties and taxes. Apart from this, bank stamps were also missing in the relevant GD’s.
It is important to mention that the audit team has issued a letter to the Assistant Collector (Customs) to show the proof of payment of duty and taxes. The details received in response to the letter made it explicit that no proof of payment of Sales Tax and Income tax was provided. As a result, a loss to the tune of Rs.293.388 millions was observed.
According to SRO 499, in case of weight ascertained in excess of 5% of declared weight, redemption fine of 20% of the value would be applicable. But the examination of the 16 goods declaration revealed that all the GD’s were processed systematically without imposing the redemption fine. Due to nonconformity of SRO 499, the national ex-chequer received a loss to the tune of Rs4.08 million.
M/s Lahore electric Supply company limited imported Steel Tubular Pool by claiming the exemption from customs duty and sales tax under conditional exemption notification SRO No.575.
Conditions for exemption requires that contractor shall submit a copy of the contract or agreement under which he intends to import, Chief executive of the contracting Company must also certify in the prescribed manner and the goods should not be sold without prior approval of FBR. Consequently, audit observed that the importer is neither the supplier to new industrial units nor primary contractor of the project. Also, the importer has failed to submit the copy of the agreement and the Chief Executive of the importer Company also failed to submit the required information.
Later, taking into considerations all such facts and figures, it is evident that the subject goods were chargable to customs duty at the specified rates. Whereas, the exemption allowed by the MCC Port Qasim is aginst the spirit of the conditions due to which national ex-chequer received a loss to the tune of Rs.13.196 millions.
In accordance with the Rule 58B of the Sales Tax Special Procedures Rules, 2007 notified vide Notification No. S.R.O. 480(1)/2007, dated 9th June, 2007, there shall be levied and collected Three percent Value Addition Tax (VAT) at import stage from Commercial Importers. Scrutiny of the records revealed that in 82 cases, Collectorate has failed to realize 3.0% Value Addition Tax (VAT) from commercial Importers. Thus, exchequer sustained a loss to the tune of Rs. 2.873 million.
Scrutiny of One Customs GDs for the year 2013-2014 revealed that 23 Goods Declaration processed against the Custom Securities and affixed stamp showing the expiry date of such securities. Perusal of the same found that expiry dates of the same were lapsed but no evidence furnished to justify that further action has been initiated in the matter. Revenue involved in following GDs is Rs.378.898 million.
Under Section 98 of Customs Act 1969 warehousing period prescribed for goods, other than perishable goods six months following the date of their admission into the warehouse provided that the said period, be extended, on sufficient cause being shown by the owner of the warehoused goods and subject to the condition that he pays in advance surcharge on the duty and taxes involved at one percent per month for the extended period.
Scrutiny of the records of M/s. Tufail Chemicals Bond revealed that the goods are stored beyond prescribed period under law. Neither the Department taken any action for recovery of Govt. revenue nor Bonder applied for the extension of the storage period even after expiry of more than one year time. The Government revenue to the tune of Rs35.523 million is stuck up which is recoverable from them along with penal surcharge aggregating to Rs.36.872 million.
Scrutiny of the PRAL data provided by the concerned formation revealed that in several GDs, MCC Port Qasim assessed Income Tax without including the incidence of Federal Excise Duty leviable at Rs1.0 per KG on Edible Oil & Vegetable Ghee including Cooking Oil in terms of SRO 1299(1)2005 in the value for the assessment of Income Tax.
MCC Port Qasim failed to implement the above mandatory provisions for the assessment & collection of Income Tax. Thus national exchequer sustained a loss to the tune of Rs.133.679 million during the period 2013-2014.
The Directorate has noted that despite issuance of written as well as verbal communication the concerned section has failed to provide the requisite records pertaining to off-dock terminals.
MCC Port Qasim is required to look into the matter and furnish the requisite records to the internal audit.