KARACHI: The Collector Syed Shahanshah Hasnain of the Collectorate of Adjudication-I has issued three Order-in Original (ONOs) containing numbers: 547/2013-14, 548/2013-14 and 549/2013-14 against M/s Green Star Social Marketing, Pakistan (Guarantee) Ltd for availing undue benefit of the exemption from whole of the Sales Tax and Income Tax under special classifications provisions of Chapter 9927 and recovered an amount of Rs15,139,386 in share of Sales Tax, Additional Sales Tax and Income Tax. While the Collectorate of Adjudication-I has also imposed Rs1,500,000 as fine and Rs1,500,000 as penalty.
According to the details, the case was instituted by MCC-Port Muhammad Bin Qasim on 30-06-2013. The hearings of the case were held on 25-11-2013, 12-12-2013, 24-12-2013, 06-01-2014, 15-01-2014, 22-01-2014 and 29-01-2014. The Collector Syed Shahanshah Hasnain made the judgment in the case on 24 April, 2014.
As per details, it was reported by MCC-Port Muhammad Bin Qasim that M/s Green Star Social Marketing, Pakistan (Guarantee), Limited had imported consignments vide IGM No.350, dated 05-09-2012, Index No.29, declared to contain contraceptive IUD-Intrauterine Device Multiload Cu375 standard, quantity 199500units and filed a Goods Declaration bearing No.KPPI-HC-9926-15-09-2012 in computerized system WeBOC, at MCC-Port Muhammad Bin Qasim for clearance thereof under the special classification provisions available vides Chapter 9927 of Customs Tariff.
According to the details, the claimed special classification provisions under Chapter 9927, allows exemption of customs duty only, however; leviable to Sales Tax at 16per cent, additional Sales Tax at 3per cent and Income Tax at 5per cent.
The Goods Declaration was accordingly processed by the assessing staff but final demand of taxes was not transmitted to the importers due to the reason that the WeBOC computerized system was not updated to this effect. Nevertheless, being a reputable organization, it was an ethical obligation of the importers to inform the Customs regarding short payment of government taxes but they failed to do the same.
Therefore, the importers have got to clear of their goods without payment of leviable Sales Tax Rs3,136,080, additional Sales Tax Rs682,097 and Income Tax Rs1,170,934 and the government would have been lost to its legitimate revenue to the tune of Rs4,989,111.
All the three ONOs against the importers stated that the importers M/s Green Star Social Marketing, Pakistan have therefore contravened the provisions of Section 32(3) of the Customs Act, 1969, Section 3 & 6 of the Sales Tax Act, 1990 and Section 148 of the Income Tax Ordinance, 2000; punishable under Clauses (14) of the Section 156(1) of the Customs Act, 1969, read with the notification SRO499(1)/2009 dated 13-06-2009 and Clause 5 & 6 of Section 33 of the Sales Tax Act, 1990 and Section 148 of the Income Tax Ordinance, 2000.
Therefore, in the light of above reported facts presented by MCC-Port Muhammad Bin Qasim, M/s Green Star Social Marketing, Pakistan were called upon to show-cause as to why impugned goods should not be confiscated and penal proceedings should not be initiated against for violation of above mentioned provision of law.
The Collector of the Collectorate Adjudication-I in his judgment stated that “I have examined the record as well as heard both sides in details. The respondent has submitted detailed and exhaustive comments to defend themselves. However; the respondent’s explanation could not absolve them from their responsibilities. On the other hand, the department was able to explain the position more properly by submitting concrete arguments to establish their point of view.”
“On examination of the issue in depth, it was found that the provisions of the HS Code 99.27 deal with the sectors/services, which are exempt from payment of custom duty, if the goods have been imported for the requisite, prescribe purposes”.
“The HS Code 99.27 does not specify the goods of exemption of custom duty, whereas, the SR No.60 of the 6th Schedule to the Sales Tax Act, 1990 deals with the exemption of the sales tax to the goods specified in First Schedule to the Customs Act, 1969 chargeable to duty in terms of Section 18 of the Customs Act, 1969. The importers were aware of the fact that if the goods are declared for exemption of sales tax in terms of Sr. No 60 of 6th Schedule to the Sales Tax Act, 1990 then they have to make the declaration on the face of the GD for clearance of goods under respective PCT Heading of 3926.9020 and 4014.1000”.
It is pertinent to mention here that both of these PCT classifications do not cover the goods for exemption of customs duty. Without prejudice to the above, according to the contents of Section 13 of the Sales Tax Act, 1990 and as per the contents of the preamble paragraph of the 6th Schedule of the Sales Tax Act, 1990, the sales tax exemption was only available at import stage and not subsequently.
“The above details show that the exemption under Sr. No. 60 of the 6th Schedule of the Sales Tax, 1990 was not part of the declaration i.e. self-assessment in term of Section 79(1) of the Act, therefore, there is no question to allow exemption of sales tax at the subsequent stage. Therefore, charges leveled in the Show-Cause Notice (SCN) stand established. Department shall recover the amount of duty and taxes as determined in the Contravention Report (CR) from the importer”.
“A fine of Rs500,000 and a personal penalty of Rs500,000 against each ONO has imposed on the importer which is recoverable from them by the department. The case is disposed off accordingly”.