Internal strife in FBR threatens customs duty collection worth billions of rupees

Director general customs audit in a recently held meeting decried the forthcoming revenue loss and wanted hesitant collectors to act in 11 long unresolved audit cases translating to a revenue loss of Rs27.3 billion

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ISLAMABAD: The Federal Board of Revenue (FBR) is facing an internal strife as problems have arisen over 11 cases in which its field offices failed to gather customs duty.

Due to lingering delay in legal proceedings, it is endangering over Rs22 billion in a single case of Gwadar port, reported Dawn.

The tax regulator members and chairman were requested by the director general customs audit to intercede and ensure recovery of due taxes.

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According to sources, the Gwadar’s customs authority had tried to enlist the tax regulator’s top officials for a clarification which could conceal the issue, instead of seeking a legal course.

Director general customs audit in a recently held meeting decried the forthcoming revenue loss and wanted hesitant collectors to act in 11 long unresolved audit cases translating to a revenue loss of Rs27.3 billion.

On the other hand, the tax regulator asked the collectors to follow its clarifications in huge revenue loss cases and didn’t instruct them to file these cases with FBR’s adjudication courts.

In aftermath of the meeting, the tax regulator notified two types of instructions to nine customs collectors which would result in legal proceedings being delayed against big tax evaders.

These big tax evaders have already faced passivity on part of the tax machinery even after the discovery of tax evasion/duty done by them, minutes of the meeting revealed.

Collectors of Model Customs Collectorate Gwadar, MCC (Appraisement) Lahore, MCC (Preventive) Lahore and MCC Peshawar in its first set of directives from the tax regulator were directed to seek appropriate clarifications with FBR for four cases of tax evasion/duty of Rs22.5 billion.

ALSO READ: FBR fails to meet revenue collection target for FY18

A whopping Rs22.5 billion case of tax evasion in Gwadar had been unearthed which was recoverable via the levying of SRO 1486 (I)/2012 on remeltable iron/steel scrap which hadn’t been collected in the period between December 2012-May 2016.

The customs authorities at Gwadar opposed the recovery of Rs22.5 billion sales tax and contended SRO imposed a sales tax on remeltable iron/steel scrap imported.

They said it was not applicable on remeltable iron/steel scrap imported in shape of ships and recovered from ship breaking.

The auditors during the meeting highlighted that this contention could result in an admission the SRO was biased and hence unconstitutional.

As a result, this would cause importers who paid sales tax amounting worth hundreds of billions of rupees on remeltable iron/steel scrap imported during December 2012-May 2016 to file for tax refunds asserting the collection of sales tax was done under an unconstitutional and biased law.

And in the 2nd set of instructions, the tax regulator asked Collectors of Model Customs Collectorate Appraisement (West) Karachi, MCC Port Qasim Karachi, MCC Peshawar, MCC Faisalabad, MCC Appraisement (East) Karachi and MCC Islamabad to authenticate audit’s said position with director general customs audit.

For seven cases whose cumulative revenue loss amounts to Rs4.75 billion, the collectors delayed negligence and unwillingness to bring the cases to FBR adjudication courts for legal proceedings caught the eye of the tax regulator, forcing it to intervene.

Shockingly, the FBR directed the collectors to find a way which sidesteps the legal course of adjudication for these kinds of cases under customs law and not forward them to adjudication courts instead.

Ironically, the tax regulator has asked the collector to authenticate these cases with the director general, a mechanism which has been utilized to maximum effect by the collectors to linger legal proceedings against tax evaders.

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