PTBP Web Desk
The Post Clearance Audit (PCA) South has unearthed a massive tax fraud worth Rs. 2.4 billion involving a prominent cement manufacturer. The company is accused of exploiting four export tax exemption schemes simultaneously, resulting in severe financial losses to the national treasury. This case highlights the complexities of tax evasion in the manufacturing sector and underscores the need for stringent monitoring of tax exemption schemes.
According to official documents, the fraudulent activities involved the misuse of four export tax exemption regimes: Manufacturing Bond, Duty and Tax Remission for Exporters (DTRE), Temporary Import under SRO 492, and the Export Facilitation Scheme (EFS). The company’s actions provided a severe financial blow to the national exchequer, amounting to Rs. 2.4 billion.
The enterprise imported substantial quantities of clinker and packing materials but failed to meet the export requirements stipulated under these schemes. This blatant disregard for compliance highlighted significant loopholes in the implementation and monitoring of these tax exemption policies.
The investigation was launched under the leadership of Sheeraz Ahmed, Director PCA South, following directives from Dr. Zulfikar Ali Chaudhry, Director General of PCA. Preliminary scrutiny of customs and sales tax data revealed glaring discrepancies, prompting a physical inspection of the factory premises on December 18, 2024. The findings validated the concerns and exposed the extent of the fraudulent activities.
During the inspection, the PCA audit team conducted a detailed stock assessment. Out of a total quantity of 463,334 metric tons (MT) of clinker, only 62,000 MT was accounted for at the factory. A staggering 395,000 MT, valued at Rs. 3.3 billion, was missing. This discrepancy strongly indicated that the missing goods had been pilfered and likely sold in the domestic market.
The importer’s claims that 15,000 MT of clinker was stockpiled at Taftan and Gwadar dry ports were investigated and found to be baseless. No evidence corroborated these assertions, pointing to another layer of deceit in the company’s operations.
The PCA audit calculated the evaded duties and taxes as follows:
Manufacturing Bond: Rs. 369 million
DTRE: Rs. 222 million
Temporary Import (SRO 492): Rs. 91 million
Export Facilitation Scheme (EFS): Rs. 1 billion
In addition, a surcharge of Rs. 676 million was identified as recoverable due to the illegal removal and sale of exempt goods. The company’s failure to meet export obligations under these schemes, even after the expiration of utilization periods, further aggravated the situation.
Acting swiftly, PCA South lodged a First Information Report (FIR) under Section 32A of the Customs Act. This marks the beginning of an in-depth investigation to identify and prosecute all individuals and entities involved in this elaborate scheme. Officials indicated that the fraudulent activities had been ongoing since 2020, highlighting the long-term impact on the national economy.
PCA officials noted that the misuse of export facilitation regimes by unscrupulous traders is a widespread issue, causing significant financial damage to the country. This case serves as a wake-up call for the authorities to enhance the monitoring and enforcement mechanisms for tax exemption schemes. Ensuring compliance with export requirements is critical to safeguarding national revenue and maintaining economic stability.
For more details on export tax exemption policies, visit the Federal Board of Revenue (FBR) website. Learn about recent initiatives to combat tax fraud in our article on Strengthening Tax Compliance in Pakistan.
