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Post Clearance Audit detects taxes evasion by M/s Bhutta International

Post Clearance Audit detects taxes evasion by M/s Bhutta International

KARACHI: The Directorate of Post Clearance Audit (PCA) has detected evasion of duty and taxes by M/s Bhutta International on import of “LED / SMD emergency / penal lights/ strip light”.

According to sources, on scrutiny/audit of import data it has been found that M/s Bhutta International imported a consignment of “LED / SMD Emergency / Penal Lights/ Strip Light” under PCT heading 9405.1090 and cleared the same from Customs Appraisement (West), Custom House, and claimed the benefits of Fifth Schedule (customs duty) Part I-24, Sixth Schedule (Sales Tax)-15.2-25/06/20 and income tax @ 0% CL77 PT-IV 2nd Schedule ITO-10. The exemptions are only available to SMD, LEDs with or without ballast with fittings and fixtures for promotion of the renewable energy technologies as per notification mentioned above.

Whereas, clause 77 part-IV Second Schedule of Income Tax Ordinance, 2001 is more restrictive and allows exemption to items with dedicated use of renewable source of energy which includes sources like solar and wind power only. The examination staff in their examination report has not confirmed that the imported LED Lights are for solar or wind energy use. It appears from the examination report that the imported items are for general use as these are operative / works under alternating current (AC) of voltage ranges 86 -265 volts which is the normal thermal / hydel power sources normally produced and used in Pakistan National Grid.

The images scanned by the examination staff and examination report shows goods are operative at voltage as 86 – 265 volts. It is an undeniable proof that the imported goods are not meant for to work / operate with the renewable energy sources like Solar Energy or Wind Energy. Further it transpires that the imported goods operate on alternating current (AC) voltage rather than on direct current (DC) which is used / and operate in the renewable energy technologies. Therefore, the concessions under the claimed notifications are not available to the subject imports.

Therefore importer M/s. Bhutta International, Karachi, was required to pay evaded amount worth Rs. 2,338,624.  Accordingly, an audit observation was issued to M/s Bhutta International, Karachi, for explaining and clarifying as to on what basis concessions were availed by them as the items imported by them are not covered by descriptions, definition and due to technical reasons as mentioned above that the goods are not usable for the promotion of the renewable energy technologies under the claimed notifications. The importers however failed to come up with any tangible evidence and explanation and they were also unable to refute the charges leveled by the Department.

In view of the aforesaid M/s Bhutta International, Karachi, are held to have intentionally & willfully caused loss to the Government exchequer amounting to Rs. 2,338,624/- by misuse / claim of inadmissible Fifth Schedule (Customs duty) Part I-24, Sixth Schedule (Sales Tax)-15.2-25/06/20 and Income Tax @ 0% CL77 PT-IV 2nd Schedule ITO-10, which was evidently not admissible to them at the time of import. The contravention report is forwarded herewith for initiation of adjudication proceedings in the case.