Federal Board of Revenue (FBR) has busted an organised gang of sales tax officers and exporters in Sialkot, allegedly involved in tempering with sales tax record and putting aside objections raised by Sales Tax Automated Refund Repository computer system' (STARR) that the refunds are being claimed on fake invoices.
Preliminary investigation revealed that about 80 cases have been detected in Sialkot where millions of rupees of illegal sales tax refunds were claimed by the cartel.
Sources told Business Recorder on Sunday that the FBR has suspended a senior programmer of STARR and a senior auditor, who deliberately ignored the STARR objections. The computer record was deliberately changed to facilitate over 80 exporters for claiming illegal refunds.
The FBR has also scrutinised data of exporters belonging to Sialkot, revealing names of companies who obtained refund on fake sales tax invoices in connivance with the STARR officials.
The FBR has decided to hand over the case to the Directorate General of Intelligence and Investigation to extend the scope of investigation across Punjab.
The DG intelligence is already investigating separately a case where 14 units of Gujranwala obtained illegal refunds on sketchy documents within the jurisdiction of Collector, Gujranwala. Both these scams related to the past years ie 2006 to 2004, but the recent series of events has pointed towards large-scale corruption of sales tax officers in Punjab.
Sources said that the relevant collector office would issue show cause notices to all the exporters, who obtained huge amounts of illegal refunds on forged documents. The FBR would also lodge necessary FIRs against the fraudulent companies of Sialkot to arrest the exporters.
Details revealed that the refund sanctioning officers and computer programmer changed the data and rejected the valid objections raised by the STARR programme. The modus operandi applied by the gang was to ignore all relevant queries and formalities required under the sales tax law for issuance of refunds to the exporters.
For this purpose, it was necessary to change the records in the computers for which the programmer of STARR has to intercept and change the database. During the processing of claims, the STARR programme raised a number of valid objections that were ignored and refunds issued in millions. The sales tax sanctioning officers knew about the STARR objections, which were deliberately ignored to facilitate the unscrupulous exporters.
The board would further investigate the matter to initiate disciplinary proceedings against other sales tax officers involved in the scam, sources added.
It is important to mention that the DG Intelligence had started detailed scrutiny of all refunds issued from June 2004 onwards to nab sales tax officials, involved in verifying ghost companies. In the case of 14 fraudulent export companies, the agency had detected serious violations of the FBR's different instructions issued from time and again. The scam covers two types of registered units including commercial exporters and those involved in issuing fake invoices.
It was found that certain companies only exist on paper for claiming refunds. The aspect of fake companies would be examined to check whether refunds were issued on bogus documents. One of the company ie Sky Star Metal Industries is physically non-existent and points towards the aspect of ghost companies.
The refunds were issued to commercial exporters without obtaining prior approval of the additional collectors. This is a clear violation of the FBR Sales Tax Wing directive that approval of additional collector is required while sanctioning refund claim exceeding rupees one million to commercial exporters.
The sanctioning authorities also ignored another important FBR instruction on procedure for over ruling system of objections for issuance of sales tax refunds. Under the ruling, the aspect of exceeds declared, output tax and scrutiny for verification of input tax etc were not adhered by the staff. Further investigation revealed that sales tax officials did not carry out the profile analysis of suppliers in cases of refund claims sanctioned to commercial exporters under Refund Rules 2006 (SRO.555(I)/2006).
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