KARACHI: Directorate General of Post Clearance Audit (PCA) has uncovered a significant fraud involving M/s Fairdeal Textiles in Karachi. Acting on a tip-off, Dr. Qadir Memon, the DG PCA, authorized Director PCA South, Sheeraz Ahmed, to investigate allegations of the misuse of the Exemption from Sales (EFS) facility by the textile company.

A specialized team, comprising Assistant Director Muhammad Sarfraz and Assessing Officers Fahad Iqbal and Imran Hyder, was formed to conduct a physical stock-taking of the EFS goods at M/s Fairdeal Textiles’ premises, in accordance with Section 26B of the Customs Act, 1969.

During a preliminary desk audit based on available customs, sales tax, and income tax data from pral-FBR, several discrepancies came to light. These irregularities prompted a physical inspection of the factory premises on June 7, 2023, which confirmed the validity of the information received. Shockingly, the PCA audit team discovered only 5 metric tons of fabric at the factory, while a staggering 106 metric tons had been illicitly removed, in clear violation of Rule 882(2) of the EFS Rules.

The imported fabric, totaling 111 metric tons and valued at Rs 120 million, had been brought in by the accused importer using six EFS Goods Declarations (GDs). The illegal removal of fabric, amounting to Rs 115 million, resulted in the evasion of duty and taxes totaling Rs 51 million.

Initially, the importer claimed that the missing goods were located at Chaman Dryport for export and provided a hard copy of a draft GD as evidence. However, after verification with Chaman customs, it was revealed that the draft GD was forged. The importer was given an opportunity to provide corroborative information such as truck registration numbers, drivers’ cell numbers, and the exact location of the truck and missing goods, but failed to do so convincingly. These circumstances strongly indicated that the importer had sold the EFS goods in the local market, which explained their absence and the inability to confirm their whereabouts. Further investigation revealed that the draft export GD provided by the importer was also concocted and forged.

Consequently, on June 8, 2023, the PCA South lodged an FIR for fiscal fraud, in accordance with Section 32A, against all directors and associates involved in the crime.

Moreover, during the inspection, it became apparent that the factory manufacturing area of M/s Fairdeal was closed, and the machinery was in a dilapidated condition, indicating a prolonged period of dysfunction. In addition to the EFS goods, the importer had been involved in importing a wide range of fabrics, raising suspicions of fraudulent practices under the guise of a “manufacturing entity.” The substantial volume of fabric imports was inconsistent with the importer’s financial standing, prompting PCA to initiate an investigation into possible money laundering activities.

Efforts are underway to apprehend the accused, who include the owners and directors of M/s Fairdeal Textiles. Currently, they are on the run, and two PCA teams have been deployed to track their locations and discreetly monitor their residential addresses. All sea and land customs export collectorates have been put on high alert to prevent any potential flying exports through mis-declaration, as the accused may attempt to evade capture.

The PCA remains committed to uncovering the truth, bringing the culprits to justice, and preventing further financial losses to the government and the economy.