* 9 garment factories used duty-free privilege to import raw materials up to 22 times the limit, dodge tax no less than Tk 120cr
* Customs intelligence suspects raw material sold in local market
Nine garment manufacturers have abused the Free of Cost facility and dodged tax of around Tk 120 crore by importing raw materials up to 22 times the permissible limit.
In violation of the rules, the firms sold these raw materials in local market, instead of using those for producing finished products.
All this startling information surfaced during the Customs Intelligence and Investigation Directorate's (CIID) first-ever enquiry into cases of misuse of the facility. It is now probing similar accusations of tax evasion of Tk 500 crore against 20 other firms, said several CIID officials.
Under the FOC facility, a local garment manufacturer can import raw materials worth one third of its export earnings in the previous fiscal year without paying any tax. But the firm has to meet the condition that it export finished garment items to a certain foreign company which pays for the raw materials.
The local firm is not allowed to sell the materials in local market. It can use those only for producing finished goods for export to that particular foreign company. Instead of opening a Letter of Credit (LC), the firm has to submit to the customs authorities a certificate issued by the bank concerned.
One of the nine firms in question imported raw materials under the facility in the current fiscal year even though it didn't export any finished garment items in the previous two fiscal years, said the CIID officials.
Talking to this newspaper, CIID Director General Moinul Khan said the directorate has found evidence of misuse of the FOC facility by a good number of business organisations. There is specific information on tax evasion by these firms.
A special team from the CIID headquarters is now thoroughly investigating the matter, he said adding that the directorate is probing such allegations for the first time.
Tareque Mahmood, assistant commissioner of the directorate, said, “We have already found that nine firms dodged tax of around Tk 120 crore by abusing the FOC facility.
“We have also made a list of 20 other firms and are examining documents of more than 500 consignments released earlier.”
He said that in primary probe, they found that these firms sold imported raw materials in local market, violating the condition of producing finished goods with those.
“These goods are sold in the capital's Islampur area and Chittagong's Terry Bazar, creating an uneven competition for the firms that import raw materials paying taxes. The government also loses a huge amount in tax.”
Giving an example, Tareque said that if a firm imports these raw materials without using the facility, it has to pay 89 percent tax on the items. This means a Tk-100 imported item will cost Tk 189 after paying tax.
Several CIID officials said Miswar Hosiery Mills Private Ltd, based in Narayanganj's Kutubpur, evaded tax of Tk 41.33 crore by abusing the FOC facility.
The firm imported 775 tonnes of raw materials in fiscal 2017-18 and 780 tonnes in the previous fiscal year under the FOC facility though it didn't export any garment items in the last two fiscal years, they mentioned.
Over the last one month, the CIID seized 13 consignments of 333 tonnes of raw materials brought by the company to the Chittagong port under the same facility.
According to data of the Customs Bond Commissionerate and the National Board of Revenue, the company didn't export any items after fiscal 2014-2015.
This newspaper could not reach the firm's Director Shameem Ahmed who is now in Malaysia.
However, his nephew Shofikul Islam, who worked as the company's accounts manager for 22 years, claimed that the firm had closed its import-export operation two years ago, and someone else might have used its name to import raw materials dodging tax.
Shofikul further said he conveyed the matter to Shameem who expressed surprise at it.
Seeking anonymity, one of the CIID officials said they would look into the firm's claims and also quiz its director once he returns home.
Besides, Ashiana Garments Industries Ltd, based in the capital's Rampura, dodged tax of at least Tk 15.22 crore by importing goods more than the permissible limit.
In the first six months of the current fiscal year, the company imported 520 tonnes of raw materials dodging tax of Tk 11.39 crore. The CIID seized its seven consignments for evading tax of Tk 3.83 crore, said directorate officials.
Contacted, Ashiana's General Manager Arif Hossain refused to comment.
The firm imported most of the goods from Chinese firm Shaoxing Gelaitrade Co Ltd, and clearing and forwarding (C&F) agent Delight C&F Ltd was responsible for releasing the goods.
According to the CIID officials, Giant Garments Industries Private Ltd, which exported goods worth $69,399 (around Tk 58 lakh) in fiscal 2016-17, is eligible to import raw materials worth $23,133 (about Tk 19.50 lakh) under the FOC facility in fiscal 2017-18.
But in only the first six months of the current fiscal year, the Gazipur-based firm imported goods worth $537,729 (around Tk 4.48 crore) under the facility -- 22 times the permissible limit -- and evaded tax of at least Tk 3.92 crore, they pointed out.
It imported these goods in more than 50 consignments from various firms in China, and the same C&F agent -- Delight C&F Ltd -- was responsible for releasing the goods, the officials said citing information provided by the bank concerned, Seoul-based Woori Bank.
Asked, Delight C&F Ltd Managing Director Md Nasir Uddin Mozammel avoided giving any answer. He, however, said his firm would follow due legal process to settle the issue.
The CIID officials said another local firm, Gazipur-based Capria Apparels Ltd, evaded tax of Tk 9.30 crore and Dhaka-based 3N Fashion (BD) Ltd Tk 8.21 crore by abusing the FOC facility. The CIID already seized 30 consignments (15 each) of the two firms.
SRKH Design Ltd and Saad Fashion Wear -- both based in Gazipur -- NAAB Fashion Ltd in Dhaka and Apparel Option Private Ltd in Chittagong also dodged tax of Tk 42.17 crore, they mentioned.
This newspaper couldn't reach officials of SRKH Design, Saad Fashion and NAAB Fashion for comment while officials of Apparel Option in the port city's Chatteshwari declined to say anything.
Tareque said that since the certificates issued by the banks concerned do not carry any serial numbers unlike the LCs, customs officials cannot check the export data or other related information of the local firms bringing raw materials from abroad.
He also said the directorate wrote to the NBR with six recommendations for checking abuse of the FOC facility.
In its letter to the NBR early this month, it suggested putting all related information in the NBR's central server about the certificates issued by the banks concerned.
The directorate also asked the NBR to ensure that it is provided with data on the annual permissible limits for local companies to import raw materials under the FOC facility.
Contacted, NBR Member (customs policy) Lutfor Rahman said, “We will consider the recommendations from the directorate and take necessary steps in this regard.”
As per the law, the customs can cancel the licence of a C&F agent and bar any firm from importing and exporting goods by locking its Business Identification Number on charge of misusing the FOC facility. It can also file a criminal case against the agent and the firm.