Butterfly accused of evading Tk 82.82cr customs duty

‘Deliberate’ use of wrong HS Code for importing refrigerator parts

SHAMSUDDIN ILLIUS, Ctg

Butterfly Manufacturing Co Ltd has been accused of evading customs duty in connection with import of refrigerator parts. The company allegedly used the wrong HS Code (which identifies different goods) in its import declaration form, thereby paying lesser duties than would have been applicable.
The company has, allegedly, been carrying out this evasive practise since 2013, until the anomaly was spotted this month. During this period, Butterfly allegedly managed to evade duties worth Tk 82.82 crore by imputing the wrong HS Code during the Port Clearance Audit (PCA). It had imported 398 consignments of such goods during this period, which was confirmed by customs authorities.
The customs authorities have decided to realise the unpaid duties.
Customs officials said that Butterfly had used HS Code 84189910 at the time of the PCA. HS Code 84189910 stands for ‘parts imported by VAT registered refrigerator and freezer manufacturers’ and attracts a customs duty of 59.89 per cent.
However, the actual nature of goods imported were ‘parts of refrigerator foam case’ and ‘spare parts for refrigerator foam case’, for which, HS Code 84189100 would have been applicable. HS Code 84189100 stands for ‘furniture designed to receive refrigerating or freezing equipment’ and attracts a customs duty of 106.46 per cent, said customs officials.
In this way, it was alleged, the company managed to evade 46.57 per cent duty on every consignment. Customs authorities noticed this anomaly when they checked consignment no. 464179. The Audit Investigation Research (AIR) department of the customs discovered that the company was using HS Code 84189910 for importing refrigerator cabinets, instead of HS code 84189100.
In the consignment, worth Tk 53 lakh, the customs officials found the company evaded duties of Tk 24.61 lakhs, by changing the HS Code. The customs authorities then withheld 12 consignments imported by Butterfly and found that the company had given the wrong HS Code for all the
consignments.
Butterfly was subsequently fined Tk 12 lakh and Tk 2.61 crore of duties, which the company was apparently trying to evade, was also realise6d.
Tapan Kumar Chakrabarty, assistant commissioner of Chittagong customs, told The Interdependent: “For importing refrigerator cabinets, HS Code 84189100 should have been used. However, for a long time, importers have been clearing their consignments using HS Code 84189910.”
“As importers did not mention the right HS Code, the government lost 46.46 per cent revenue for every such consignments. This came to light after holding the consignment of Butterfly Manufacturing Co. Ltd. A total of Tk 5.98 crore has now been realised from the company, including evaded duties and fines,” Chakrabarty said.
“The entire amount of duties which has been evaded by the company would be realised through PCA, if the audit finds the company was responsible for this,” he added.
Mostafizur Rahman, commercial manager of Butterfly Manufacturing Co. Ltd, said, “It’s not a matter of evading duties. This was simply a misunderstanding. All of a sudden, based on a letter from NBR issued in 2010, the customs held our goods and forcibly demanded the duties. This letter is not a public notification or a public circular. In the past, we had released our consignments as had been directed by the customs authorities themselves. Both the customs officials and importers were ignorant about this issue. This is nothing but a conspiracy against our company.”
As per documents, from 2013 to April 2016, Butterfly Manufacturing Co Ltd had imported 386 consignments, of nearly 6,817 tons, worth Tk 140.15 crore, declaring the products as ‘aluminum pipe raw materials for refrigerator’, ‘spares parts for refrigerator foam case’, ‘magnetic strip raw materials for refrigerator’, etc., using the HS code 84189910.
In this period, the company paid Tk 69.15 crore as duties, which, customs officials now say, was Tk 79.89 crore short of the actual.
Most of the 398 consignments of Butterfly Manufacturing Co. Ltd, including the 12 held last month, were released by C&F agents Sharothi Enterprise and KM Enterprise. Among the 12 consignments, eight were released by Sharothi Enterprise.
Mushfiqul Mowla, manager at Sharothi Enterprise, told The Independent, “This is an NBR order from 2010. But the customs authorities had never implemented this order in the last five years. Suddenly, for generating higher customs duties, they have implemented it now. Why did they not implement it in these last five years?”
Among the 12 consignments, four were released by KM Enterprise. Md Obadiul Haque, proprietor of KM Enterprise, told The Independent, “Refrigerator cabinets were imported under HS Code 84189910. Many companies have released similar goods using the same HS Code, but customs authorities never said anything. Now, they have suddenly started asking for the new HS Code.”
When asked why they chose to release the goods by paying fines and the excess customs duties stipulated under HS Code 84189100, Haque said, “As customs had held the consignment, the shipping charges and port charges were increasing day by day. In view of the upcoming surge in the Eid market, we chose to release the consignment as per the demand raised by the customs.”
When contacted, Mukitul Hasan, assistant commissioner of AIR department of Chittagong customs, told The Independent, “If the government loses revenue due to the mistake of an importer, the customs can always demand the money. The HS Code for importing refrigerator cabinets or foam cases has been clearly mentioned by the NBR. As per law, the goods which were released will be checked in Port Clearance Audit, and letter will be issued to the importer to pay the evaded duties.”