ISLAMABAD: In a stunning development, the Directorate of Post Clearance Audit (North), Islamabad, has blown the lid off a colossal fraud involving the gross misuse of the Export Facilitation Scheme (EFS), 2021. M/s Premium Textile Blanket Industries, a seemingly legitimate business entity, was discovered to be at the center of a Rs 1.4 billion fraud against the government.

Acting swiftly on solid information, the auditing body found that M/s Premium Textile Blanket Industries had acquired an EFS license with a staggering face value of Rs 16 billion. Instead of using the scheme for its intended purpose, the company was caught red-handed selling high-value EFS fabrics in the local market, shirking their export obligations.

Perplexities deepened as the PCA North’s audit team embarked on a thorough physical verification at the company’s premises located in the remote and historically under-regulated region of Sabal Bahtay, Bara Bazar, Khyber. The ground reality painted a grim image: a disheveled factory, devoid of adequate labor or manufacturing facilities, and a glaring shortfall in imported fabric stock.

The scale of the evasion was staggering—2,194 Metric Tons of valuable fabric, meant to bolster the nation’s exports, had been illegally removed and sold. This egregious act robbed the government of a whopping Rs 1.4 billion in duty and taxes.

An inquiry into the business operations revealed the maleficence to be a well-orchestrated plan. Registered just months ago in September 2023, the importer cleverly navigated the supply chain, transshipping fabrics from Karachi ports to the Faisalabad Appraisement Collectorate for clearance and “utilisation” in the so-called factory in KP (FATA area). Choice of faisalabad appears to be for the reason that fabric was sold in the victim of faisalabad as the importer failed to provide any transportation records to prove transport of fabrics from Faisalabad to KP/FATA. In under three months, heavy imports haemorrhaged the government causing loss of staggering Rs 1.4 billion.

Without  the timely intervention of PCA North, the potential loss could have ballooned to the entire Rs 16 billion EFS facility that the Collectorate of Appraisement in Peshawar had permitted. The PCA’s timely and decisive actions have capped the bleeding at Rs 1.4 billion, thus saving the government from further loss.

After issuance of audit observation, PCA North referred the case to the Collectorate of Customs (Appraisement), Peshawar for lodging of FIR and joint investigation. Customs formations are on high alert to preempt future imports of the fraudulent entity, and two teams have been constituted  to arrest the culprits and their associates to recover the government revenue.

It’s a high-stakes investigation for which PCA North and the Peshawar Appraisement have joined forces to probe deeper into this scandal that has spotlighted significant risk factors inherent in the EFS Scheme. The ramifications of this discovery may very well redefine regulatory measures and shake up enforcement protocols within the export sector.