FTO for inquiry against misuse of jewellery export, import facility

ISLAMABAD: Federal Tax Ombudsman (FTO), in a suo moto case, has recommended to the FBR and FIA to initiate inquiry against all the officers, departments and importers/exporters involved in misuse of imports- cum- exports’facility in respect of gold, jewellery and other precious metals resulting in massive loss of revenue to national exchequer.

The FTO finding reveals 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 authorised 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 realised in foreign exchange. The registered exporter shall apply to the TDAP for export authorisation. The sale proceeds shall be realised 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 as well as to TDAP.

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

It was observed that repeated exports were made by exporters. Admittedly, foreign exchange was not repatriated against Forms-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, inattention and ineptitude in discharge of duties and responsibilities.

It is rather strange that the Collectorates had failed to recover the adjudged amount of fine imposed on the clearing agents, who are, otherwise, licencee of the Department. Perusal of the 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.

In order to ascertain the amount of foreign exchange involved in the import of gold and other raw materials and jewellery exported under SRO 266(I)/2001 dated 07.05.2001 and SRO 760(I)/2013 dated 02.09.2013, The FTO sought information from Trade Development Authority of Pakistan (TDAP) and State Bank of Pakistan (SBP). The SBP, vide its letter dated 12.02.2019, informed that in terms of both SROs 266((I)2001 dated 07.05.2001 and SRO 760(I)2013 dated 02.09.2013, complete data of export and imports of precious metals and jewellery along with the amount of foreign exchange being maintained by TDAP and may be obtained from them. The TDAP vide its letter dated 15.03.2019 informed that all the remittances actually realised are maintained by the SBP and provided value of imports and exports of gold under the scheme. 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 synchronisation relating 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 02.09.2013. In the absence of authentic and complete data of import and exports under the said SRO, no meaningful analysis can be carried out.

The FTO 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 imports/exports in violation of SRO 266(I)/2001 and SRO 760(I)/2013 and ask the collectors concerned to initiate recovery proceedings in accordance with law to recover the adjudged amount. The FBR has to request the Ministry of Commerce to constitute a committee comprising of representatives from SBP, FBR and TDAP to review SRO 760(I)2013 dated 02.09.2013 and proposed amendments to plug in the loopholes in the procedure to obviate chances of misuse /abuse in future.

The FTO recommended to the Ministry of Commerce to get a study conducted to measure impact analysis of the incentive scheme as provided for under the Import and Export of Gold, Gold Jewellery and gemstones Order, 2001 and Import and Export of Precious Metals Jewellery and Gemstones Order, 2013. The Ministry of Commerce has to examine the proposal to prescribe bank guarantee against import value of precious metal instead of one percent cash margin and make necessary amendment to the import and export of precious metals jewellery and Gemstones Order, 2013, notified vide SRO 760(I)/2013 dated 02.09.2013.

The FTO also recommended to the FIA to conduct inquiry against all concerned departments/agencies and initiate criminal proceedings against those found involved, in accordance with law.