KARACHI: Collector Customs Adjudication on reply of DG Khan Cement Company that Company has imported a generator set of 1,102 kilovolt ampere (KVA) put forward a formula in order to assess the real power factor of the imported generators hence to save the national kitty from the wrongdoings of the importers and taxes and duties evasion by them.
DG Khan Cement in a show cause notice by Collectorate of Customs (Adjudication-II) Karachi was charged that Company has evaded an amount of taxes and duties to the tune of Rs 5.59 million by mis-declaring in description/capacity of generator in Goods Declaration and invoices aiming to evade Customs duty and other taxes.
The generator was imported by showing 1,102 KVA capacity in order to evade duties and taxes by the Company. Above 1,100 KVA generators comes under zero Customs Duty and free of Sales Tax through PCT heading 8502.1390 of the Customs Act.
In formula, it was adopted that primarily difference between KW (kilowatt) and KVA (kilovolt ampere) is the power factor. KW is the unit of real power and KVA is a unit
of apparent power or real power plus re-active power. The power factor unless it is defined and known, is therefore an approximate value (typically 0.6) and the KVA value will always be higher than the value of KW.
It is said under this formula, it can be deduced that the real power of the generator sets is .8×1102=881 KW from which it transpires that gensets under discussion has a power rating of 881 KW again instead of 80 percent, if 70 percent power factor is used than the real power would be .7×1102 KVA=771 KVA.
Therefore generator is classifiable under PCT heading 8502.1310 attracting Customs duty at 15 percent. The said generator has a standby rating of 881 EKW 1102 KVA, 50 Hz 1500 rpm 400 volts which converts into 881 KW at 80 percent (.8) power factor or 771 KW at 70 percent power factor for 200 hours per year.
Collector Customs Adjudication Ch. Muhammad Javed held the importer it evaded the duty and taxes amounting to Rs 5.59 million in violation of Sections 32(1) and 32(2) read with Sections 79 and 80 of Customs Act 1969, Sections 3,4,6,33 of Sales Tax Act 1990 and Sections 148 of Income Tax Ordinance 2001. Collector Adjudication also put a penalty of Rs 500,000 on DG Khan Cement.