ISLAMABAD (May 30 2004): The Central Board of Revenue (CBR) has announced that contravention cases would not be framed against exporters on the plea of meeting 50 percent annual export target from the date of importation of machinery under concessional SRO 439(I)/2002.
The CBR on Saturday issued a directive to collectors of customs and adjudication authorities saying that SRO 439(I)/2002 clearly provides 2 years for installation of machinery from the date of its import.
This means that the production should be accounted for from the date of installation of machinery and not the date of its importation.
The SRO does not provide that the annual export target of 50 percent should be computed from the date of importation of machinery.
Earlier, similar issue under SRO 554(I)/98 was also clarified by the Board and all collectors were advised to consider the date of installation of machinery for the purpose of making a judgement about the achievement or failure to meet the annual export target.
Details show that Nawab Exports approached the Board for clarification of SRO 439 for reckoning of export performance.
The exporter imported 20 and 8 sets of looms, claiming the benefit of duty under SRO 439(I)/2002.
The exporter stated that under Para 2 of the said SRO it was required to furnish indemnity bond in respect of the goods imported free of custom duty, and the bond was to be released on production of an installation certificate within 2 years from the date of machinery import.
Accordingly, it obtained the installation cum-production certificates. The installation certificate produced by it shows that the looms imported under the bills of entry were installed within a period of 9 and 7 months respectively, and the company commenced the production of the export goods.
It exported 73 percent of its total production since the installation of the machinery, which was well above the minimum annual export threshold of 50 percent required under the SRO.
The exporter further said that the Collectorate of Faisalabad had framed a contravention case against it on the ground that it failed to achieve the annual export target starting from the date of the importation of the machinery.
The company argued that the commencement of the production would start from the date of installation and not the date of importation of machinery.
The Board examined the issue.
It was determined that SRO 439(I)/2002 clearly provides that the machinery must be installed within a period of 2 years from the date of its import. This means that the production should be accounted for from the date of installation of machinery and not the date of its importation.
The notification has not specified that the annual export target of 50 percent shall be computed from the date of importation.
It is important to mention here that the CBR has already withdrawn contravention cases against exporters who were unable to meet the annual export target for availing concession of duties/taxes on the import of machinery/equipment under SRO 554(I)/98 of June 12, 1998.
The notification permits a special concessionary regime on the import of machinery and equipment for establishment of manufacturing unit or balancing, modernisation and replacement (BMR) of existing units. However, it is necessary to meet export target from the date of installation of machinery for five years.
Units failing to achieve export target are liable to pay full duties/taxes applicable at the time of importation of machinery.
But there were some instances of misinterpretation of SRO, upon which contravention cases were made against the exporters.
On the other hand, the factual status is that there is no provision of achievement of annual export target as per notification, whereas, SRO 554(I)/98 specifies two staggered periods of two and three years for meeting the export target, the CBR added.