M/s Z A Pharma being charged for tax evasion

KARACHI: The Research and Development (R&D) Section of Model Customs Collectorate of Appraisement-East has made contravention report (CR) against the importer M/s Z A Pharma after establishing tax evasion in terms of customs duty, sales tax, additional sales tax and income tax through claiming of inadmissible benefit of SRO 567 (I)/2006 and SRO 551 (I)/2008 and reduced rate of income tax by claiming the status of Industrial under taking.

M/s Z A Pharma was involved in tax evasion of Rs 40,548,666 including customs duty worth Rs 3,779,922; sales tax worth Rs 23,576,635; additional sales tax worth Rs 4,262,163 and income tax worth Rs 8,929,946.

Sources informed Customs Today that the R&D Section of MCC Appraisement-East under the dynamic leadership of Collector Najeeb-ur-Rehman Abbasi has recovered evaded tax of Rs 14,943,058 including Rs 3,184,515 in share of customs duty; Rs 4,267,112 in share of sales tax; Rs 180,064 in share of additional sales tax; and Rs 7,311,367 in share of income tax.

However, R&D Section is yet to recover an amount of Rs 25,605,608 including Rs 595,407 in share of customs duty; Rs 19,309,523 in share of sales tax; Rs 4,082,099 in share of additional sales tax; and Rs 1,618,579 in share of income tax.

Sources further told this scribe that a team of R&D Section of MCC Appraisement-East led by Collector Najeeb-ur-Rehman Abbasi and comprising Additional Collector Wajid Ali, Deputy Collector Rizwan Mehmood, Principal Appraiser Shafiullah Khan Niazi, Appraiser Dost Muhammad, Preventive Officer Muhammad Hashim, Examining Officer Azhar Abbas and UDC Adil Rasheed with their all out efforts and team work had detected and processed the case.

According to the sources, the M/s Z A Pharma has committed offences under Section 16, 20, 32(1), 32(2), 32(3)A, 32A, 79 & 80 ibid of the Customs Act, 1969 punishable under Clauses 9, 10A, 12, 14, 14A and 43 of Section 156(1) of the Customs Act, 1969 read with the Section 36 of the Sales Tax Act, 1990 punishable under Section 33 of the Sales Tax 1990 and read with Section 148 of Income Tax Ordinance 2000, thereby evading customs duty, sales tax and income tax to the tune of Rs 25605608.

Sources revealed that the M/s Z A Pharma, Khushab imported a consignment of 50,000 kilogram Di-sodium Di-hydrogen Phosphate and filed Goods Declaration bearing number KAPE-HC-72694 on 15-02-2014 for clearance under Pakistan Customs Tariff heading 2835.3900 declaring unit value of goods at $ 0.57 per kg. Besides claiming exemption of duty in excess of 5 per cent under FTA SRO 659(1)/2007, Z A Pharma claimed exemption of whole of the sales tax in terms of SRO 551(1)/2008 under the “pharmaceutical raw material.”

Furthermore, the goods were assessed at $ 0.80 per kg and the consignment was allowed release by the assessing group against the payment of duty/taxes on the basis of the aforesaid assessment by extending the benefit of SRO 551(1)/2008 and reduce rate of income tax being an industrial unit.

Later, the preliminary inquiry and scrutiny of the relevant record has revealed that the impugned goods i.e. Di-sodium Di-hydrogen Phosphate imported vide reference consignment which is placed on hold do not fall within the category of ‘pharmaceutical raw material’ and hence, are not entitled for the claimed and availed benefit of sales tax exemption in terms of SRO 551(I)/2008.

In addition, the scrutiny of past clearance has revealed that M/s Z A Pharma imported and got cleared 38 more consignments of Di-sodium Monohydrate, Benzoate/Citric Acid, Monohydrate/Menthol, Crystal/Dextrose, Monohydrate, Sodium Citrate, Monosodium Glutamate and Sodium Cyclamate from the Collectorate of PACCS/East free of customs duty (in one GD) vide SRO 567(1)/2006, sales tax in terms of SRO-551(I)/2008 and withholding tax at 5 per cent under the garb of “pharmaceutical raw material”, Annexed-A.

It is further added that the Assistant Drugs Controller (Lic-II), Ministry of Health, Islamabad vide its letter D No.491/2014-Lic dated 25-04-2014 has confirmed that no such Drug Manufacturing License with the title of M/s Z A Pharma exists in District Khushab and copy of Drug Manufacturing License No.F00256 (Formulation) of M/s Z A Pharma is not genuine as they verified from the record of Licensing Division of drug regulatory Authority of Pakistan. Resultantly, as per S. No. 7 Part-II of Appendix-B of Import Policy Order 2013-14, M/s Z A Pharma were not entitled to import any pharmaceutical raw material and therefore whole import of pharmaceutical raw material is illegal.

According to the sources, the case has been forwarded to the Collectorate of Customs Adjudication-II, Custom House, Karachi for deciding the case on merit after affording due opportunity of hearing to this Collectorate.

This news was published on Customs Today Website