Two more cases registered last week
Fronting: The Office of the Attorney General (OAG) registered two more cases with the Phuentsholing dungkhag court last week bringing the total number of fronting cases to more than 35.
While filing a criminal case against the proprietor of Yoezer Import House, Leki Dema, who evaded sales tax and customs duty of more than Nu 11.045 million (M) for goods imported from third countries, OAG on August 29, also registered a civil suit against the proprietor of RK Motors, Tshewang Lham, simultaneously.
In addition to fines and license cancellations as per trade rules in place for fronting trade licenses, the OAG asked the court to restitute more than Nu 0.297M from Tshewang Lham and Pawan Agarwal, who used her trade license of RK Motors as a front.
The Anti-Corruption Commission (ACC) implicated Tshewang Lham on three counts of commercial bribery for knowingly and purposely hiring out her trade license to Pawan Agarwal from Jaigaon, India from March 2014 to June 2015 on rental charges of Nu 5,000 per month. Pawan Agarwal was able to import goods worth Nu 0.603M in 2014.
Tshewang Lham also leased out her import license to Pawan Agarwal in 2015 for a monthly commission of Nu 10,000 and enabled him to import third country goods worth Nu 1.416M. The OAG, however, converted it into a civil suit and submitted before court for the restitution of Nu 90,000 from Tshewang Lham, who made the amount through wrongful gains.
The commission also recommended the prosecution to charge Tshewang Lham on three counts of official misconduct for breaching her commitment and not maintaining the books of accounts.
As required by the ‘Procedure for Liberalisation of Trade and Service, Licenses in Phuentsholing, Gelephu, Samdrupjongkhar and Samtse towns’, Tshewang Lham had signed the undertaking explicitly stating that she will not engage in fronting. However, she violated her commitment by leasing out her license to Pawan Agarwal.
The ACC has also charged Pawan Agarwal for three counts of active commercial bribery and two counts of official misconduct. The OAG also requested the court to restitute Nu 0.196M for imports worth Nu 2.020M as the interest component of the remittance made by Pawan Agarwal while importing from both India and third countries.
The commission’s findings revealed that Pawan Agarwal was able to import goods worth Nu 1.416M from Indonesia using Tshewang Lham as a front after obtaining an import license. Pawan Agarwal, who was not eligible to avail any foreign currencies under any circumstances, availed the privileges of a genuine import license holder and remitted USD equivalent to Nu 1.416M, consequently aggravating Bhutan’s already depleting foreign currency and the Indian Rupee (INR) reserves.
After the emergence of the Rupee crisis, the royal government to sustain economic activities had borrowed INR 15 billion from India at an interest rate of 9.75 percent and 10.5 percent so that genuine businesses can avail the required INR. “However, Pawan Agarwal had abused the privileges extended to genuine Bhutanese businesses for his illegal business,” the commission’s report states.
With the registration of more than 35 cases, the total amount of commission, evasion of taxes and deflection of INR to be restituted to the state comes to Nu 262M from more than 40 license holders.
To encourage private sector development and subsequent job creation and revenue generation, the government had enacted a plethora of trade liberalisation and facilitation legislations.
Attributable to these policy initiatives, the commission’s findings stated that the total number of trade license holders in the country as of December 31, 2014, stands at 27,048 creating a source of income and livelihood for its people across the country. Of the total, Chukha alone has 2,637 license holders of which Phuentsholing alone has 518 micro, 108 production and manufacturing, 1,158 service, 1,029 retail and 133 wholesale trade licenses.
The trade rules and regulations of 1988 and 1995 for carrying out commercial activities and establishment and operation of industrial and commercial ventures in Bhutan prohibits a trade license from being “sold, leased, converted or transferred to any other persons”. The general guidelines for industrial and commercial ventures, 1997, also states that violation of these rules shall result in payment of a fine of Nu 10,000 and immediate cancellation of the trade license.