Illegal petroleum sale: Top court directs NAB to probe 14-year-old scam


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By Hasnaat Malik

The Supreme Court referred a multi-million-rupee scam to NAB regarding the illegal sale of oil consignments transported to Afghanistan from Karachi 14 years ago.

The orders were issued while hearing an appeal filed by Pakistan State Oil (PSO) against the Peshawar High Court’s June 10, 2014 verdict.

The court also directed the chairmen of PSO and the Federal Board of Revenue (FBR) to order disciplinary proceedings against officers who may have been instrumental in evading government levies in this regard.

“Over and above this, this also triggers in-house disciplinary action against government or semi-government functionaries concerned and their facilitators who may have been instrumental in the commission of the crime,” said the three-judge bench, which is headed by Chief Justice Mian Saqib Nisar.

The case is about 18 consignments of petroleum of 596,000 liters of PMG-8 meant for export to Afghanistan. Upon scrutiny of PSO records as well as those kept at the Customs Station at Torkham on the Pakistan-Afghanistan border, the Director-General, Intelligence and Investigation (Customs, Sales Tax and Central Excise), Islamabad, in 2004 detected that these consignments that were loaded from PSO’s oil depot in Karachi on 21 tankers between February and September of 2003, but never arrived in Afghanistan. Ostensibly, the entire petroleum volume was clandestinely supplied in the local market.

This fraud caused a loss of Rs9.5 million to the national exchequer in Central Exercise Duty, Sales Tax and Petroleum Development Levy.

These levies are not chargeable when petroleum products are exported but charged when they are consumed in domestic market.

After they were threatened with action via a show-cause notice, PSO functionaries blamed owners of tankers for the mischief.

Subsequently, PSO functionaries scrambled to ensure that evaded duties and charges were deposited in the treasury. The entire amount of evaded taxes and levies were promptly deposited into the government treasury and PSO functionaries claimed that the same had been recovered from owners of tankers.

Later, the functionaries of PSO tried to withdraw the proceedings pending before the Additional Collector (Adjudication) in Peshawar. But, the Additional Collector imposed on PSO a penalty vide an order dated March 17, 2005.

The amount of penalty imposed on PSO functionaries was five times the evaded amount of Central Excise duty under Section 9(b) of the Central Excise Act of 1944, additional tax at one percent and penalty at three percent of the outstanding sales tax.

Subsequently, the petitioner challenged the order in an appeal before the appellate tribunal of Inland Revenue in Peshawar, which was dismissed vide order dated May 4, 2010. The petitioner then filed a Sales Tax Reference in the Peshawar High Court, which also met the same fate.

Justice Faisal Arab, who authored the five-page verdict, observed that they found no justification to interfere in the PHC judgment.

In order to take appropriate action against persons responsible, the apex court asked the NAB to inquire into the matter.