Author: Mrs. Anjum Shahnawaz

ISLAMABAD: Federal Tax Ombudsman (FTO) in a suo moto case directed tax authorities and investigation agency to launch inquiry against officials, department and traders involved in misuse of gold import and other precious metals.

The FTO asked the Federal Board of Revenue (FBR) and Federal Investigation Agency (FIA) to initiate inquiry against all the officers, departments and importer/exporters involved in misuse of import-cum-exports’ facility in respect of gold, jewellery and other precious metals resulting in massive loss of revenue to national exchequer.

The FTO finding revealed that gold worth billions of rupees was either not exported against imported gold or was exported against fake form-E.

The FTO observed that the export promotion scheme did not put in place institutional mechanism to stop abuse of entrustment scheme/self-consignment scheme regulated through concessional SROs issued by the ministry of commerce.

“As a consequence, the importers-cum-exporters deceived the departments with impunity especially in cases where concession available under the entrustment scheme/self-consignment scheme was misused.”

The entrustment scheme provides facility for export of jewellery against imported gold supplied as partial advance payment, by the foreign buyer to be used in the manufacture of jewellery to be exported.

The exporter is required to export eligible and authorized items within 120 days from the date of import.

Under self-consignment scheme export of gold jewellery is made from locally procured gold and gemstones and sale proceeds are realized in foreign exchange.

According to the scheme the registered exporter shall apply to the Trade Development Authority (TDAP) for export authorization.

The sale proceeds shall be realized within 120 days from the date of export and the commercial banks shall ensure that sale proceeds are repatriated in full within 120 days; otherwise, commercial banks shall inform State Bank of Pakistan (SBP) as well as to TDAP.

The FTO observed that during special audit, the Directorate General of Internal Audit detected serious regularities of Model Customs Collectorate (MCC) Peshawar, MCC (Export) Port Qasim, Karachi, MCC Islamabad and MCC Preventive Lahore.

It was further observed that repeated exports were made by exporters.

Admittedly, foreign exchange was not repatriated against Form-E which subsequently turned out to be fake.

“Ignoring the said fact, there is no explanation that how subsequent exports were allowed when it was evident that foreign exchange was not repatriated within the specified period.”

“This reflects the negligence, intention and ineptitude in discharge of duties and responsibilities,” the FTO observed.

The FTO further observed that it was rather strange that the collectorates had failed to recover the adjudged amount of the fine imposed on the clearing agents, who are, otherwise, licencee of the department.

Perusal of record shows that either no stay had been granted or the period for stay of order under appeal had been lapsed. But the department had not initiated recovery proceedings for which no explanation could be advanced.

“This again reflects negligence, inattention, inefficiency and ineptitude in discharge of duties and responsibilities by concerned officers/officials of the department which are tantamount to maladministration.”

The FTO further said that the position emerged on the basis of information provided by TDAP and SBP, reveals that there is a gap between the value of import and value of export and lack of data synchronization related to data provided by the TDAP and SBP.

It appears that the TDAP has not put in place any mechanism of monitoring and reporting of exports and imports taking place under SRO 760(I)/2013 dated September 02, 2013. In the absence of authentic and complete data of import and exports under the said SRO, no meaningful analysis can be carried out.

The FBR recommended to the FBR to direct the chief collectors (North), (Central) and (Enforcement) South to initiate departmental enquiry to ascertain the officers/officials and take disciplinary action against those found involved in illegal/inadmissible import/exports.