FBR unearths massive tax evasion by sugar mill

ISLAMABAD: The FBR has found a sugar mills allegedly involved in massive evasion of federal excise duty by suppressing its actual production and causing losses of multi-million rupees to national exchequer.

Keeping in view the volume of business and hiring of high profile professionals including lawyers, there are only few cases in the pocket of FBR and its Intelligence agencies that were made against large manufacturing concerns especially sugar mills. 

On the basis of credible information that a leading sugar mill is involved in massive evasion of federal excise duty by way of suppression of its actual production and subsequent supplies in the market without payment of Federal Excise Duty due thereon making payments to the farmers against out of books purchases of sugar cane through undeclared bank account titled Zubair Siddiqui, the Directorate of I&I-IR, Lahore has initiated investigations in the case. 

Details of amount debited in aforesaid bank account were obtained. The examination of same revealed that payments were made to the different farmers/agents by Zubair Siddiqui on behalf of sugar mill against purchase of sugar cane. 

Thereafter, bank statements of concerned farmers were obtained from the respective banks to establish the link vis-à-vis (i) Zubair Siddiqui, (ii) The Sugar Mill and (iii) farmers/agents which on examination confirmed the contention as alleged in the information. 

In addition to above, it was also informed that nine Benami bank accounts in different banks were also maintained by the sugar mill. After preliminary inquiry, proceedings under section 38 of the Sales Tax Act, 1990 and under section 45 of the Federal Excise Act, 2005 were initiated. 

The investigators of I&I detected massive suppression of sales and evasion of tax thereon spread over several years. Due to complexity of the case, the investigators opted to split it in different periods. At first the period started from 01.10.2011 to 30.09.2012 was scrutinized. Scrutiny of the record produced under section 45 of the Federal Excise Duty Act, 2005 & section 38 of the Sales Tax Act, 1990 and its comparative analysis with results declared in their sales tax returns revealed that subject person has declared 99% of the total declared sales i.e., Rs4.549 billion to two unregistered persons. Contrary to the above, examination of bank payment vouchers, bank receipt vouchers, bill journal vouchers, cash payment vouchers, journal vouchers, statement of accounts, trial balance statement etc for the period 01.10.2011 to 30.09.2012 provided by the registered person revealed that during the above said period the Sugar Mills have received an amount of Rs7.184 billion on account of sale proceeds of sugar. It was noticed that, in addition to concealment of actual sales made to unregistered persons, the sugar mills have also concealed its actual supplies made to six registered persons with a difference of Rs61.99 million. 

The sugar mills was given an opportunity to explain its position regarding discrepancies and after considering their reply, submitted on 10.03.2017, It was found that during 1.10.2011 to 30.09.2012,, the sugar mill has concealed/suppressed their sales to the tune of Rs.2.04 billion exclusive Sales Tax/Federal Excise Duty involving sales tax/federal excise duty amounting to Rs163.319 million which falls within the meaning of “Tax Fraud” under section 2(37) of the Sales Tax Act, 1990 read-with section 19(3) (b) & (c) of the Federal Excise Act, 2005. The penalty on this violation of tax laws amounts to Rs816.596 million i.e., five times of FED involved. Total tax amount including penalty is Rs979.915 million. Accordingly, Contravention Report has been sent to Chief Commissioner-IR, LTU, Lahore for adjudication and consequent recovery.