Oil & gas exploration contractors claiming undue exemptions on import of luxury vehicles

KARACHI: Customs Intelligence & Investigation Karachi (I&I Karachi) has served a Contravention Report against M/s Shahzad Oil & Gas Exploration Company and M/s Your Choice Services for evasion of duty and taxes in import of super luxury cars by availing inadmissible exemption of SRO 678(I)/2004.

According to SRO 678(I)/2004, only such goods shall be entitled to the exemption under this notification as have been certified, for clause (1), by an E&P Company, and for clause (2), by a company other than an E&P company, for its own use or its contractors, sub-contractors and service companies for its projects of oil and gas exploration and production, refinery, oil and gas pipeline, liquefied petroleum gas (LPG), compressed natural gas (CNG) and natural gas infrastructure importers and its developers, Liquefied Natural Gas (LNG) petroleum terminals, energy conservation, environment and safety controls.

The exemption available to E&P companies shall be admissible only to such E&P companies who hold permits, or licences, or leases or concession or production sharing agreement and who enter into supplemental agreements with Government of Pakistan.

Information was received through Director I&I Karachi Khalil Yousafani to Additional Director Ghulam Nabi Kamboh that various importers are involved in evasion of duty and taxes through import and clearance of brand new motor vehicles by availing the inadmissible exemption of Sales Tax and Add Sales Tax SRO 678(I)/2004.

To confirm the veracity of the information, Deputy Director R&A Tauseef Gorchani formed a team comprising Farooq Ahmed Principal Appraiser; Khayam Hussain Intelligence Officer; Ilyas Gichki Appraising Officer; Umair Mustafa Appraising Officer, and import of various importers importing brand new motor vehicles by availing the exemption of Sales Tax and Add Sales were scrutinized online through WeBOC.

It revealed that M/s. Petroleum Exploration (Pvt) Ltd’s GD declared to contain New Rolls Royce Model was under-clearance at MCC PMBQ wherein the importer claimed the exemptions vide SRO 678(I)/2004 and Part II of 1 st Schedule of Income Tax Ordinance 2001. The GD was kept under vigilance till the gate out stage.

However, on completion of assessment, it was observed that the assessment officer assessed the GD against ST 17%, AST 3% & IT 5.5% without giving importer the benefit of exemption under SRO 678(I)/2004.

In order to quantify the amount of evaded duty / taxes against the past clearance, data of other importers was further scrutinized which revealed that M/s. Shahzad Oil and Gas Exploration Company (Private) Limited got cleared two consignments declared to contain Bentley – New Bentayga V8 First Edition and New Toyota Lexus LX570 respectively from MCC Appraisement PMBQ by availing inadmissible exemption evading duty and taxes to the amount of Rs11 million recoverable from the importer.

It is also pertinent to mention here that on scrutiny of import data of M/s. Shahzad Oil and Gas Exploration Company (Private) Limited, it transpired that the importer has imported only aforementioned two consignments consisting of Luxury Vehicles on the pretext of being Exploration & Production Company.

Contravention Report in respect of previously cleared goods from MCC PMBQ is accordingly submitted for initiation of adjudication proceedings.

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