RECOVERY OF IMPORT SURCHARGE BY APPRAISEMENT COLLECTORATE KARACHI ON RING SPINNING FRAMES IMPORTED DURING THE YEAR 1991

RECOVERY OF IMPORT SURCHARGE BY APPRAISEMENT COLLECTORATE KARACHI ON RING SPINNING FRAMES IMPORTED DURING THE YEAR 1991 RECOVERY OF IMPORT SURCHARGE BY APPRAISEMENT COLLECTORATE KARACHI ON RING SPINNING FRAMES IMPORTED DURING THE YEAR 1991 By Mr. Akhtar Javed, Advocate, Lahore Various textile mills imported consignments of Ring Spinning Frames during the year 1991; 2. The clearance of the aforesaid consignments had been sought without payment of customs duty in terms of S.R.O. 530(I)/90 dated 7-6-1990; that under the aforesaid notification, the Federal Government had granted exemption from whole of customs duty on machinery which was not manufactured locally, if imported before 30-6-1993, for initial installation or for balancing, modernization, replacement or extension of the approved projects for certain areas; 3. Vide Sr. No. 23 of S.R.O. 480(I)/88 dated 26-6-1988 as amended vide S.R.O. 501(I)/89 dated 3-6-1989 and S.R.O. 568(I)/89 dated. 3-6-1989, the Federal Government had also granted exemption from payment of whole of Import Surcharge to goods inter alia including plant and machinery imported for setting up industrial projects in certain areas; 4. During the year 1991, the issue of local manufacture of Ring Spinning Frame was under dispute between the importers of textile machinery and C.B.R. field formations; it was a normal practice that the field formations of C.B.R. used to release of Ring Spinning Frame against Insurance Guarantee/Indemnity Bonds; that in the instant case, the consignments of Ring Spinning Frames imported by textile mills were also released against Insurance Guarantees; 5. The issue of local manufacture of Ring Spinning Frame had not been resolved when through S.R.O. 1076(I)/95 dated 5-11-1995, the Federal Government exempted Ring Spinning Frames imported during the period from 14-6-1984 to 30-6-1995, and release of which had been allowed provisionally from payment of custom duty and sales tax as was in excess of 30% of the leviable rates of customs duty and sales tax at the time of filing of bill of entry subject to certain conditions which inter alia included that the said 30% duty and sales tax would be secured through Bank Guarantee and would be paid in five (5) equal instalments in terms of Deferment of Import Duty Rules, 1991 and the first instalment would be payable after expiry of one year from the date of issuance of the notification; 6. In the light of the provisions contained in S.R.O. 1076(I)/95 dated 5-11-1995, textile mills submitted Bank Guarantees equivalent to 30% of the leviable customs duty; that the insurance guarantees submitted at the time of release of machinery were cancelled by Custom House, Karachi and were returned to textile mills after obtaining fresh Bank Guarantees in pursuance of exemption granted under S.R.O. 1076(I)/95 dated 5-11-1995; that the installments of customs duty were paid alongwith mark-up as per schedule given in the debentures were furnished by textile mills under S.R.O. 1076(I)/95 dated 5-11-1995; 7. After payment of installments alongwith mark-up as were required under Deferment of Import Duty Rules, 1991, textile mills requested Custom House, Karachi for release of its Bank Guarantee; that instead of releasing the aforesaid Bank Guarantees, BG Cell communicated the textile mills that there was no exemption of Import Surcharge for the local manufactured machines; hence they should make payment of Import Surcharge leviable on textile machinery imported; that it has been threatened that as a first step the embargo will be imposed on clearance of goods and 14% mark-up would continue to be accrued till 'final payment is made; 8. Custom House Karachi has been apprised that the mills had submitted Insurance Guarantees equivalent to the amount of customs duty at the time of import of machinery which were cancelled and returned to them after having accepted fresh Bank Guarantees in pursuance of S.R.O. 1076(I)/95 dated 5-11-1995; that without going into merits of the case and without considering our reply, the Assistant Collector has threatened various textile mills including Ahmed Hassan Textile Mills Multan to pay Import Surcharge with 14% mark-up failing which coercive action would be adopted; 9. Being aggrieved, we filed a complaint before the Honourable Federal Tax Ombudsman on behalf of Messrs Ahmed Hassan Textile Mills, Multan; that the honourable FTO vide his order dated 27-12-2002 has been pleased to recommend that the Revenue Division shall direct the Collector of Customs (Appraisement) 'Karachi to release the bank guarantee in question to the complainant and pursue the recovery of import surcharge separately in accordance with the provisions of law. The honourable FTO, has required Revenue Division to submit compliance report within 30 days of the receipt of this order. 10. In the light of the directions contained in the orders of the Honourable FTO, Custom House, Karachi has been requested to release Bank Guarantees submitted by Messrs Ahmed Hassan Textile Mills Ltd.