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PCA Lahore detects tax evasion of Rs 435m by M/s CMPak through mis-declaration

PCA Lahore detects tax evasion of Rs 435m by M/s CMPak through mis-declaration

LAHORE: Directorate of Customs Post Clearance Audit, Lahore, has detected tax evasion of Rs 435 million allegedly by M/s CMPak on account of customs duty, sales tax, additional sales tax and income tax under 110 GDs.

According to the details, the PCA Lahore detected evasion of customs duty amounting to Rs 343,544,992, sales tax Rs 58,402,649, additional sales tax Rs 10,306,350 and income tax Rs.23,255,353.

The PCA detected the evasion under section 32 (1) (2) (3A) of the Customs Act, 1969, Section 3, 6(1), 7 and 11(4) of the Sales Tax Act, 1990, and Section 148 ibid punishable under clause 1 and 14 of subsection (1) of Section 156 of the Customs Act, 1969, Section 33(5)/34 of the Sales Tax Act, 1990 and Section 182(14) of the Income Tax Ordinance, 2001.

The documents revealed that on receipt of an information through Director, Directorate of Customs, PCA Lahore regarding evasion of duty / taxes by way of misclassification of wi-fi/mi-fi devices as modems under PCT Heading 8517.6220, soft data for the years 2015-17 regarding clearance of imports made by various telecommunication companies from Customs Collectorates (Preventive / Appraisement), Lahore was scrutinized with a view to conduct audit.  During the course of audit it transpired that the said imported goods were misclassified under PCT Heading 8517.6220 paying CD @0% against benefit of FTA on import from China.

Whereas, the subject devices, being subscriber end equipment, were appropriately classifiable under PCT Heading 8517.6940 and liable to payment of CD @5%, 10%, and11% respectively plus usual taxes without any benefit of FTA, it was explained.

It was indicated that from the foregoing position, it is quite evident that the importer had got clearance of the imported ‘wi-fi/mi-fi modem/router, wireless work card modem, wireless mobile router modem, broadband mobile Wi-Fi modems, wireless access device mobile wi-fi modem etc., as “Modem” under PCT Heading 8517.6220 and claimed / availed inadmissible benefit of China-Pakistan FTA under SRO 659(I)/2007 dated 30.06.2007.

It was added that further scrutiny revealed that the said impugned goods are devices used with computers, laptop, tablets mobile phones etc., for connectivity through Wi-Fi cloud with the system for internet by the subscriber at a home, small office or similar place on 5-10 plus devices. These devices are not useable within the premises/ installations of Telecommunication Companies. Instead they have multiple functions including those of modem as well as router.  The documents said in this regard attention is invited towards Tariff Classification of telecom apparatus under PCT 8517. Telecom apparatus used by or installed at the telecoms are classified under PCT heading 8517.6100 & 8517.6200.

It was said that on the contrary, the apparatus used or installed at subscriber’s end are classified under PCT Heading 8517.6900 and in view of foregoing position and by virtue of G.I.R 3© the aforesaid goods are specifically classified under PCT Heading 8517-6940 i.e.  subscriber’s end equipment and chargeable to  CD @ 5%, 10% & 11% respectively plus usual taxes and have no  benefit of FTA.

It was explained that in view of above-narrated factual position, an audit observation was issued to the importer vide letter C. No.  PCA/LHR/AMU//71/2017/896 dated 20.06/2017.

In response to the audit observation, a written reply dated 07.08.2017 was submitted by the importer stating that the imported goods are Wi-Fi/Mi-Fi modems and as per their functions and technical specification correspond to the characteristics of modems of PCT 8517.6220, being devices designed to receive, process and transmit when connected with a communication system and is not a subscriber-end-equipment which lack these three essential characteristics, the documents, said adding that the contention of the importer has been found unsatisfactory.

Therefore, by reasons as explained hereinabove, the importer M/s CMPak Limited, Islamabad had short paid an amount of Rs. 435,509,344 (customs duty: Rs.343, 544,992, sales tax: Rs. 58,402,649, additional sales tax: Rs.10, 306,350 and income Tax: Rs23,255,353), the PCA Lahore observed.