KARACHI: Directorate of Post Clearance Audit (PCA) South has uncovered a massive fraud involving M/s Hamza Corporation Karachi which was mis-using three exemption licenses under manufacturing bond, DTRE and EFS regimes. The DG PCA Dr Zulfikar Ali Chaudhry, tasked Director PCA South, Sheeraz Ahmed, to investigate allegations of the misuse of the export facilitation regimes by the textile company.
During a preliminary scrutiny based on available customs, sales tax, and income tax data, several discrepancies came to light. These irregularities prompted a physical inspection of the factory premises on July 02, 2024, which confirmed the validity of the information received. Shockingly, the PCA audit team, comprising of audit officers Mujahid Iqbal and Imran Saifee, discovered that 494 MT of Polyester DTY/FDY Yarn had been illicitly removed, in clear violation of the EFS, MB and DTRE Rules.
The imported yarn, totaling 494 metric tons and valued at Rs 187 million, had been brought in by the accused importer using twenty one (21) EFS Goods Declarations (GDs), seven (7) Manufacturing Bond (MB) GDs and one (01) DTRE GD. The illegal removal of polyester yarn, resulted in the evasion of duty and taxes totaling Rs 125 million.
Initially, the accused importer Muhammad Ali claimed that the missing goods were lying with vendors in Faisalabad and Lahore. The importer was given an opportunity to provide corroborative information such as goods transfer application / approval in terms of Rule 882(2) of the EFS Rules, gate passes, truck registration numbers, cell numbers of drivers, and builty receipts in respect of transported goods, and the exact location of the missing goods, but he failed provide any such information. These circumstances strongly indicated that the importer had sold the exempt / EFS goods in the local market, which explained their absence and the inability to confirm their whereabouts.
During the visit of factory premises, the Audit Team also observed that the unit did not have any installation facilities relating to Spinning, Weaving, Dying, Printing, Stitching, and only machines of yarn-texturing were found installed, many of which were out of service. The installed machinery of M/s Hamza Corporation contradicted with the goods exported under DTRE, MB and EFS regimes; as finished items such as garments, suits, finished fabric, hand bags, scarf / roomaal, towels, and mop with wooden broom stick etc. had been exported. This discrepancy raised serious doubts on the genuineness of exports made under the DTRE, MB and EFS regimes. The accused importer was unable to justify manufacturing and export of said finished goods without having corresponding manufacturing facilities; thus indicating that exported goods were procured from the unregistered local market to justify consumption and export under DTRE, MB and EFS regimes.
Consequently, on June 4, 2023, the PCA South lodged an FIR for fiscal fraud under Section 32A, against the accused Mehwish and her husband Muhammad Ali who were involved in the crime. The substantial volume of yarn imports was also found 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 are on the run, and two PCA teams have been deployed to track their locations and monitor their addresses. All sea and land customs export collectorates have been put on high alert to prevent any potential flying exports through mis-declaration in the name of M/s Hamza Corporation.
There is information of massive misuse of export facilitation regimes by the unscrupulous traders. The PCA formations of FBR remain committed to uncovering the fiscal frauds, bringing the culprits to justice, and preventing further financial losses to the government and the economy by taking stern actions on the misuse of export facilitation regimes.