Customs Audit Uncovers Rs2.4 Billion Fraud
Overview of the Fraud
The Directorate of Customs Post-Clearance Audit South, under the Federal Board of Revenue (FBR), has uncovered a substantial fraud amounting to Rs2.4 billion. This fraud involves the evasion of duties and taxes under several export schemes, including the Manufacturing Bond, Duty and Tax Remission for Exports (DTRE), and the Temporary Import and Export Facilitation Scheme.
The Company Involved
The fraud was traced to Qazi Sanjrani Enterprises, which imported a significant quantity of raw and packaging materials meant for cement manufacturing under various export exemption schemes. However, investigations revealed that the company had illegally sold these goods in the local market, bypassing the intended export processes.
Details of the Investigation
The Role of Customs Post-Clearance Audit
According to Shiraz Ahmed, Director of the Directorate of Customs Post-Clearance Audit South, the investigation was initiated based on Customs resource tax data. The audit uncovered irregularities that were further confirmed during a physical inspection of the company’s factory.
Discovery of Missing Clinker
The audit revealed that out of 463,334 metric tons of clinker imported, only 62,000 tons were accounted for in the factory. This left 396,000 metric tons, worth Rs3.3 billion, unaccounted for, suggesting that these goods were sold domestically. The company failed to provide a reasonable explanation for the missing stock, and claims about reserves at Gwadar Dry Port proved false.
Fraudulent Activities
Evasion Through Various Schemes
The investigation revealed that Qazi Sanjrani Enterprises fraudulently benefited from several export exemption schemes:
- Manufacturing Bonds: The company evaded Rs369 million in duties and taxes.
- Temporary Import Facilities under SRO 492: The evasion amounted to Rs91 million.
- Export Facilitation Scheme: The misuse led to the evasion of Rs1 billion.
- DTRE Scheme: The company evaded Rs222 million in duties and taxes.
- Illegal Sale and Transportation: Rs676 million worth of imported goods were illegally sold.
Legal Actions Taken
The Customs PCA has registered a case against Qazi Sanjrani Enterprises after detecting the fraud, which has been ongoing since 2020. Teams have been formed to arrest the accused and ensure legal proceedings.
Implications of the Fraud
Economic Impact
The fraud has significant implications for the economy, particularly in terms of lost revenue from duties and taxes that could have been used for public services and infrastructure development.
Trust in Export Schemes
Such fraudulent activities undermine the trust in export facilitation schemes, which are designed to boost economic growth by promoting exports. The misuse of these schemes can lead to stricter regulations and increased scrutiny, potentially affecting legitimate businesses.
Government’s Response
The government, particularly the FBR and the Directorate of Customs, has shown a proactive approach in uncovering and addressing such frauds. This case highlights the importance of continuous audits and inspections to ensure compliance with tax and duty regulations.
Future Measures
To prevent such frauds in the future, it is essential to implement robust monitoring and verification mechanisms. The government may also consider revising the policies and regulations governing export facilitation schemes to close loopholes that allow for such misuse.
FAQs
Q1: What is the total value of the fraud uncovered by the Customs PCA? A1: The total value of the fraud uncovered by the Customs Post-Clearance Audit South is Rs2.4 billion.
Q2: Which company was involved in the fraud? A2: The company involved in the fraud is Qazi Sanjrani Enterprises.
Q3: What schemes were misused by the company to evade duties and taxes? A3: The schemes misused by the company include the Manufacturing Bond, Duty and Tax Remission for Exports (DTRE), and the Temporary Import and Export Facilitation Scheme.
Q4: How much clinker was unaccounted for during the investigation? A4: Out of 463,334 metric tons of clinker imported, 396,000 metric tons were unaccounted for, indicating that they were sold in the local market.
Q5: What legal actions have been taken against the company? A5: The Customs PCA has registered a case against the company, and teams have been formed to arrest the accused and ensure legal proceedings.
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