GOVERNMENT OF PAKISTAN

MINISTRY OF FINANCE AND ECONOMIC AFFAIRS

 

NOTIFICATION

 

Islamabad, the 31st May, 1997

 

CUSTOMS

 

                S.R.O.400(I)/97.-  In exercise of the powers conferred by section 19 of the Customs Act, 1969 (IV of 1969), and sub-section (2) of section 13 of the Sales Tax Act, 1990 (VII of 1990), the Federal Government is pleased to exempt the machinery, equipment, materials, specialized vehicles, accessories, spares, chemicals and consumables, as are not manufactured locally, if imported by the Exploration and Production Companies including OGDC, their contractors and sub-contractors (hereinafter called E&P companies), and Service Companies for the projects mentioned in column (2) of the table below for the phases mentioned in column (3) thereof, from customs-duties including regulatory duty and sales tax, subject to the following conditions, namely:-

 

 (1)          Only such machinery, equipment, materials, specialized vehicles, accessories, spares, chemicals and consumables shall be entitled to the exemption under this notification as are recommended by the relevant Regulatory Authority from time to time.  The relevant Regulatory Authority shall, however, take such measures as it deems necessary to ensure that the concerned companies are entitled to avail exemption under this notification only on machinery, equipment, materials, specialized vehicles, accessories, spares, chemicals and consumables as is necessary to meet their actual project requirement.

 

 (2)          Exemption available under S.No. 1 of this notification shall be admissible only to such E & P companies who hold permits, licences, leases and who enter into supplemental agreements with the Government of Pakistan in terms of the said Petroleum Policy or those who sign new petroleum concessions agreements or to Service Companies.  Exemption under S.No. 2 to S.No. 7 shall be available to E & P Companies without any such conditions.

 

 (3)          In respect of goods imported under S.No. 1 of the Table of this notification, after the first Commercial Discovery has been made in the concession area, as certified by the relevant Regulatory Authority, the respective E & P Company shall pay to the Collector of Customs on an annual deferred basis a consolidated fee equal to 3% of the total invoice value as determined by the Collector of Customs at the time of import of the equipment, materials, specialized vehicles, accessories, spares, chemicals and consumables imported by it, its contractors and sub-contractors.  All the activities subsequent to such first commercial discovery in the concession area will attract the aforesaid fee of 3%.  Goods imported free of import duties under S.No. 2 to 7 of the Table, shall not be subject to such consolidated fee.

 

 (4)          Items imported by Service Companies free of customs duties and sales tax if sold to E & P Companies as part of their services which are rendered after first commercial discovery in a concession area, will be included in the total invoice value for calculation of the fee payable as aforesaid.  The value to be taken for such items imported by Service Companies under this notification for inclusion in the total invoice shall be their value as determed by the Collector of Customs at the time of import.

 

 (5)          The E&P Company shall submit an account of all import invoices to the Regulatory Authority and the Collector of Customs for confirmation with their record at the time of annual payment.               

 

 (6)          The companies availing benefits under this notification shall furnish to the Collector of Customs an Indemnity Bond in the form set out in the Annex-I to the extent of customs duties and sales tax exempted under this notification on the import of items of the value as accepted  or determined by the Collector of Customs.  The Indemnity Bond shall be valid for a period of five years for the amount of custom duties and sales tax payable and exempted under this notification.

 

 (7)          The Indemnity Bond shall be discharged on production of a certificate set out in the Annexure-II issued by the Assistant Collector of Customs and Central Excise in whose jurisdiction the project is located to the effect that items imported under this notification have been duly installed, consumed, used or have been scrapped in the prescribed manner or continue to be held in project inventory of the company or have been transferred to another company.

 

 (8)          The Indemnity Bond may be extended by the Collector of Customs for a further period of one year if the relevant Regulatory                 Authority recommends such extension for any reason.  The Collector of Customs may, however, require for substitution of such Bond from transferee company for outstanding amount of custom duties and sales tax on items transferred to such transferee company which is entitled to import such items under  this notification.

 

 (9)          In the event of non-production of a certificate as required under sub-para (7) and (8) above, the Collector of Customs shall enforce the Indemnity Bond and proceed to recover Government dues under section 202 of the Customs Act, 1969 (IV of 1969) and section 48 of the Sales Tax Act, 1990 (VII of 990) and the rules made thereunder;

(10)         In the event a dispute arises whether any item is entitled to the exemption under this notification, the item/consignment will be immediately released by the Collector of Customs against a corporate guarantee from the company.  A subsequent certificate from the relevant Regulatory Authority that the item is covered under this notification shall be given due consideration by the Collector of Customs or the Central Board of Revenue as the case may be, towards finally resolving the dispute;

 

 (11)        In the event that an emergency condition occurs in connection with operations by a E&P Company which seriously endangers life or property or the operations of the project, the relevant Regulatory Authority shall declare an emergency and the company shall be allowed to import any item or items considered necessary by the said company to deal with the emergency under intimation to the Regulatory Authority and Collector of Customs without fulfilling such formalities as are likely to cause delay and such formalities will be attended to thereafter as soon as practicable; and

 

 (12)        Items imported free of Customs duties and sales tax under this notification which become surplus, scrap, junk, obsolete or otherwise required to be disposed of, shall be disposed of in the following manner, namely:-

 

(i)           In the event an item other than vehicles, is sold, under intimation to the Central Board of Revenue,  to another company entitled to the benefits of this notification, no customs duties and sales tax shall be levied or charged.  If the item is not sold to such a company, it shall be sold through a public tender/auction and import duties and taxes shall be recovered at the consolidated rate of 5-1/4% of the sale proceeds;

(ii)          For vehicles there would be a minimum retention period of five years after which the vehicles may be disposed of in the manner provided in (i) above except that import duties and taxes shall be charged at full rates subject to an adjustment of depreciation @ 2% per month upto a maximum of twenty-four months.  Vehicles can be surrendered at any time to the Collector of Customs without payment of any import duties and taxes under intimation to the Central Board of Revenue; and

(iii)         Any item imported free of import duties and taxes under this notification may be exported for replacement, repair, modification or renovation and may be re-imported without payment of any customs duties and taxes subject to the production of a certificate from the Regulatory Authority to the effect that the item needs to be exported for replacement, repair, modification, or renovation, as the case may be, and all the conditions prescribed in the notification shall, mutatis mutandis,  apply on the re-import of such items.

 

                                Provided that the items which, for having been rendered scrap with change in their physical status/composition/condition and PCT classification, will be dealt with as scrap and chargeable to Customs duties and sales tax accordingly at standard rates.             

 

Explanation.-         (i)           "Regulatory Authority" means the Regulatory Authority as specified in

Annexure VI to the Petroleum Policy, 1994.

(ii)          Exploration and Production Companies and Service Companies can import single or double cabin pickups and vehicle with moiunted equipment and other specialized field vehicles without any restriction, keeping in view their work requirement and on the recommendations  of a committee headed by Joint Secretary (Admn), Ministry of Petorleum and Natural Resources with a representative each of the concerned Regulatory Authority.  PEPPCA and Sevice Companies as its members.   

(iii)         For the purposes of this notification the expression "not manufactured locally" shall mean the goods which are not included in the list of locally manufactured goods, specified in the General Order, issued by the Central Board of Revenue.

 

TABLE

 

S.No.                       Project Description                                                                                               Project Phase

(1)                                   (2)                                                                                                         (3)

 

1.             Petroleum Projects, convered under Petroleum Concessions Agreements,                Exploration, Development, Production, Permits, Licences and Leases                              Compression and Enhanced

                                                                                                                                Recovery.

2.             Refinery projects.                                                                                    Establishemnt (Initial Installation),

                                                                                                Expansion,               Modernization, and Upgradation.

3.             Oil and Gas Pipeline Projects.                                                                  Oil Transportation and Gas

                                                                                                                                Transmission Distribution (as

                                                                                                                                determined by the relevant                                                                                                                                                                       Regulatory Authority).

4.             Liquefied Petroleum Gas (LPG) Projects.                                                 Establishment (Initial Installation),                                                                                                                          Expansion of LPG Processing and

                                                                                                                                Extraction Plants, LPG Bottling and

                                                                                                                                Handling Facilities.

 

5.             Compressed Natural Gas (CNG) Projects.                                                 Establishemnt of Natural Gas

                                                                                                                                Compression, Re-filling and Outlet

                                                                                                                                Facilities, the Conversion of Vehicle 

                                                                                                                                in  CNG and Transportation of CNG                                                                                                        through specialized Vehicle

                                                                                                                                Mounted Systems (SVMS).

6.             Petroleum Terminal Projects.                                                                  Establishment of port terminals

                                                                                                                                mainly used to handle petroleum

                                                                                                                                products including crude and                                                                                                                                                     fuel oil, LPG and CNG whether for import or                                                                                                                                                           export.

7.             Energy Conservation, Environment and Safety Control Projects.                            Energy Conservation, Efficiency

                                                                                                                                Enhancement, Pollution,

                                                                                                                                Environmental  and Safety Control.

8.             Construction and Erection of Projects listed at S.No. 1 to S.No. 7 above.                During all phases listed at S.No. 1 to

                                                                                                                                S.No. 7 above.

 

ANNEXURE - I

( On appropriately stamped non-judicial paper )

INDEMNITY BOND

 

                THIS DEED OF INDEMNITY is made on the _____________________ day of __________BETWEEN Messrs _________________ having registered office at _______________ (hereinafter called "the importer which means and includes their successors, administrators,  executors and assignees), of the one part, AND  the President of Pakistan through the Collector of Customs, (hereinafter called "the Collector of Customs"), of the other part;

 

                WHEREAS the Government of Pakistan has, by its decision contained in Notification S.R.O._____(I)/97, dated the _____May, 1997 and subject to the conditions given in the said notification, been pleased to direct that machinery, equipment, materials, specialized vehicles, accessories, spares, chemicals and consumables, as are not manufactured locally, shall be exempt from all customs-duties and sales tax, leviable thereon, if imported for the projects specified in the table of the said notification.

 

                AND WHEREAS M/S_____________________ having registered office at __________have imported the items mentioned in the Schedule (please specify in the Schedule, description, quantity and value of the items imported ) to this Bond for the purpose of (please specify the particulars of the project and phase of the project).

 

                NOW, THEREFORE, in consideration of the release of the goods without payment of customs duties and sales tax the importer binds himself to pay on demand to the Collector of Customs the sum of Rs._________being the Customs duties and sales tax leviable on the goods, if the importer fails -

 

 (i)           to produce a certificate of verification on the format set out in Annexure-II from the concerned Assistant Collector of Customs           and Central Excise as required under the said notification within the period as approved by the relevant Regulatory Authority.

 (ii)          to produce such other evidence as the Collector of Customs may require to satisfy himself that the goods have been installed, used, consumed, scrapped, retained in the project inventory or transferred, as the case may be, in accordance with the conditions of                the said notification.

 

                The importer further agrees and binds himself that the amount covered by this Bond may be recovered as arrears of customs duties and sales tax under section 202 of the Customs Act, 1969 (IV of 1969) read with Section 48 of the Sales Tax Act, 1990 (VII of 1990) and the rules made thereunder.

 

                This Bond shall be rendered void when the aforesaid certificate has been produced and the Collector of Customs is satisfied that the importer has fulfilled all the conditions of this Bond and the aforesaid notification.    

 

                Signed by the importer on this ________________day of ___________19__.

( Authorised Officer  )

Name and peremanent address

 

Collector of Customs

(On behalf of the President )

 

Witness    ______________________________________

                (Signature, name, designation and full address).

 

Witness    ______________________________________

                (Signature, name, designation and full address).

 

Note.-      The amount of Indemnity Bond may be reduced by the Collector of Customs, if any company produces a certificate from relevant Assistant Collector of Customs and Central Excise to the effect that part of the goods covered under the Indemnity Bond has been installed, used, consumed or transferred as the case may be in terms of the said notification during the validity period of Indemnity Bond.

ANNEXURE - II

CERTIFICATE

 

                Certificate No._________dated__________I, _______________________, Assistant Collector, Customs and Central Excise, __________ am fully satisfied that the goods imported by Messrs ______________________ under the provisions of notification No. S.R.O.______(I)/97, dated the ______ May, 1997, against Bill of Entry No.______dated_____and IGM No._____dated______and Index No._____have been duly installed, used, consumed, scrapped, transferred to Messrs _______________as per permission granted (if required) by the Central Board of Revenue vide its letter No.___________dated____________, as the case may be, in terms of the conditions of the aforesaid notification in their project (give details of the projects).  These goods were covered under Indemnity Bond No._____dated_____deposited with the Collector of Customs,_____and cleared without payment of Customs duties and sales tax on the basis of recommendation No._____dated_____, issued by the Regulatory Authority as defined in Annex-VI of Petroleum Policy of 1994.

 

                This certificate is issued to meet the requirements of Notification S.R.O._____(I)/97, dated the _____May, 1997 and the Collector of Customs concerned may charge fee @ 3% as and if required under the said notification after confirmation of the actual phase of the said project from the Regulatory Authority.

 

Note:-     Copies of this certificate should be sent to the concerned Collector of Customs, Regulatory Authority, Secretary (Machinery), C.B.R., besides the importer.  The Collector of Customs concerned will inform the concerned Regulatory Authority, Secretary (Machinery), C.B.R. and the Assistant Collector who has issued this certificate about the discharge of the Indemnity Bond and the payment of aforesaid fee if required from and made by the importer in terms of notification S.R.O._____(I)/97, dated______.

 

( Name, Stamp and Signature of Assistant Collector )

 (F.No.3(9)Mach/97)

 

RIAZ AHMAD MALIK

Additional Secretary

As amended

 

S.R.O.750(I)/98,      -      dated 29.06.1998.

S.R.O.719(I)/99,      -               dated        12.06.1999