A case has recently been detected by the Intelligence and Investigation of Federal Board of Revenue wherein criminal negligence of EDB's tariff section was reported with respect to mis-use of SRO 655(I)/2006. SRO 655(I)/2006 allow imports of engineering items at concessionary duty rates to manufacturers so as to promote the indigenous engineering goods in the country. Under the said SRO the manufacturers who have adequate in-house facilities and registered with sales tax department and are capable of manufacturing road worthy vehicles are entitled to avail the concessionary regime for import of specified items.
However, in order to avoid the misuse of this facility the SRO binds EDB to strictly monitor the proper utilization of items imported at concessionary duty. The organization is also required to reconcile the account of all inputs used in assembly or manufacturing of vehicles, failing which, the manufacturing certificate of the firm shall not be revalidated.
The EDB which had been disbanded by the former government due to "rampant" corruption was revived due to efforts of Prime Minister's Advisor on Commerce, Textile, Industries and Production and Investment, and the new board was constituted and includes a member from M/s Descon. These corruption charges were mainly related to the tariff department of EDB.
Soon after the revival, EDB's tariff section reportedly the main conduit for investors to reach the highest levels to avoid "illogical hurdles" could not properly monitor the mis-use of SRO 655(1) 2006); some accuse EDB of deliberately turning a blind eye to this essential requirement as this facility is being massively misused by some importers/manufacturers through sale of items imported at concessionary custom duty in the open market.
A recent case of sale of 18 iron and steel coils weighing 144 metric ton by M/s Islam Engineering Private Limited Lahore was reported by the FBR. The Custom Directorate has registered a FIR against the manufacturer who imported these items at concessionary duty under SRO 655(I)/2006 and sold it to M/s Rocco Associate Karachi instead of transporting it to Lahore for further processing and manufacturing as required under the stated SRO.
"This could not have happened if the Incharge tariff section of EDB had exercised strict check and control on manufacturers through proper documentation and had verified the quantity of items imported and consumed for manufacturing of units," said one of the officials of the Ministry.
According to the Ministry of Industries and Production, the position of CEO EDB is vacant since March 31, 2017. Mirza Nasir Baig, General Manager, has been given look after charge from April 9, 2017 till further orders, which is against the recent instructions of Prime Minister, Imran Khan.
Official documents reveal that the referred case for misuse of SRO 655(I)/2006 surfaced because of some intelligence report received by Custom Directorate Karachi, but sources maintain that there are numerous unreported cases of similar nature where items imported under the aforesaid SRO are being sold in the open market by importers thus causing huge loss to the state exchequer.
The amount of loss to government can well be imagined from only one case of M/s Islam Engineering who sold the items to M/s Rocco Associates which has resulted in evasion of tax/duty to the tune of 1,16,80000/-.
Ministry of Industries and Production has also been informed that several applications of eligible candidates who applied for the slot of CEO EDB have "disappeared" and now the Ministry is investigating this scam. Interestingly, the applications are being processed by a "friend" of a candidate, already sitting at the top position.
