KARACHI, Oct 10: The Sindh government is to return bank guarantees worth billions of rupees furnished by importers against payment of infrastructure cess on imports made during 2001 to 2006.
This will be in accordance with the verdict of the Sindh High Court, which observed that four finance bills and ordinances introduced during the period under which the cess was charged were invalid.
The court however upheld the Sindh government authority to impose cess on import consignments under the second finance amendment ordinance of Sept 19, 2006 under which the cess was levied on the basis of weight and distance a consignment covered after unloading at the port.
The department announced different slabs for weight and distance covered by consignments to reach its final destination.
The learned court, however, suspended implementation of its order for a period of 60 days to allow time to both the parties to file appeal against the verdict in the Supreme Court, if they so desired.
Meanwhile, the Sindh Excise and Taxation department has informed importers that no bank guarantee against infrastructure cess on imports will be accepted from Sept 19, 2008 onward after the Sindh High Court decision, which gave the powers to the department to charge cess under the Sindh Finance Amendment Ordinance 2006.
The verdict disposed of the long outstanding appeals filed by the importers in the learned court challenging the authority of the excise and taxation department to charge infrastructure cess on imports, which was non-existent in other provinces.
The Sindh High Court Bench comprising Justice Mrs Qaiser Iqbal and Khalid Ali Z. Qazi, however, invalidated the four finance acts and ordinances promulgated between 2001 and Sept 19 2006, as they contained no tangible criteria for calculating the levy, which was meant to cover the additional expenditure incurred by the provincial government on the wear and tear caused by heavy consignments to its road and communication network.
Accordingly, the learned court directed the department to return all bank guarantees submitted against payment of cess during the period from 2001 to 2006.
However it gave powers to the department to encash all bank guarantees submitted against cess after Sept 19, 2006 when the Sindh Finance Amendment Ordinance was promulgated.
Director General of Excise and Taxation Asif Marghoub Siddiqui told Dawn that a huge amount of cess had stuck up in bank guarantees and the payment of cess in cash in line with the court verdict would increase the Sindh government revenue substantially.
On average infrastructure cess amounting to Rs400 to Rs500 million was paid by the importers in the form of bank guarantees every month.
The infrastructure cess is the biggest contributor to the Sindh revenue. It fetched Rs6,063 million in 2007-08 and the target for 2008-09 is Rs6,630 million.
General Secretary of Karachi Customs Agents Group Arshad Jamal declined to comment on the court verdict and said that he was in touch with the importers to find out their future line of action.
The infrastructure cess was introduced at the rate of 0.25 per cent of the f.o.b. value of the import consignment in 1994 and importers obtained stay in the court against payment of the cess.
The Sindh government increased the cess rate to 0.75 per cent in the budget for 2008-09.