DGI & IIR unearths bogus refund claim scam: over 40-50 ST returns being filed in a day

Directorate General of Intelligence and Investigation Inland Revenue (IR) has unearthed a new kind of tax fraud involving registered units, who have never filed their sales tax returns from 2007-12 and suddenly started filing over 40-50 returns on a single day to file bogus refund claims.
Sources told Business Recorder here on Wednesday that the directorate has taken pre-emptive measures to check fraudulent sales tax refund claims, which were filed using entirely a new method to evade the authorities. The modus operandi of the fraudsters is that the units have obtained registrations with the sales tax department five years back. They deliberately skipped filing sales tax returns during the last five years and suddenly filed past monthly sales tax returns on a single day.
The units have declared fake imports and fictitious brought forward input tax amount. The agency has directed the Regional Tax Office-II Karachi and RTO Hyderabad to remain cautious as the companies would fraudulently invoke the facility extended to the registered persons according to which the carry forward amount of previous 11 months is claimed for refund by declaring it in 'row 24' of sales tax return. The directorate has warned the RTOs that such units would try to misuse section 66 of Sales Tax Act, 1990 along with Sales Tax Rules to file bogus refund claims.
In a letter issued to the RTO-II Karachi, Directorate General of I&I IR informed the RTO about the case of M/s A. A. Packages. Directorate General I&I-IR has conducted discreet intelligence check and analysis of monthly Sales Tax returns of subject unit reflects some serious discrepancies which are worth sharing with concerned RTO. Details revealed that the said unit got registered with the sales tax department since January 3, 1997 and filed NIL or NULL Sales Tax returns since its registration to December 2008 while it stopped filing the Sales Tax returns for the period January 2009 up to May 2009.
Analysis of unit's data obtained from Pral reveals that the Sales Tax returns for the period June 2009 to October 2012 (i.e. 40 returns) are filed on a single date i.e. December 2, 2012. The subject unit declared fictitious brought forward amount of input tax of Rs 83, 273,428 in the month of June 2009 without any previous carry forward amount.
Directorate of intelligence IR is of the view that the subject unit would fraudulently invoke the facility extended to the registered persons in Section 66 of Sales Tax Act read with rule No 34(c) of Sales Tax Rules 2006, according to which the carry forward amount of previous 11 months is claimed for refund by declaring it at 'row 24' of sales tax return.
Directorate has recommended that reportedly, the fraudulent refund seekers are waiting for the right opportunity to launch the refund claim and the submissions of 40 returns for the period January 2009 to October 2012 on a single day is a step in this direction. RTO-II Karachi may initiate immediate investigative audit of the subject unit by competent officers enjoying good reputation so as to determine the genuineness of the said refund, directorate's letter added. Through another letter issued to RTO-Hyderabad, Directorate General of I&I IR informed the RTO about the case of M/s Sindh Poly Propylene. According to the directorate, Directorate General I&I-IR has conducted discreet intelligence check and during the aforesaid scrutiny of monthly Sales Tax returns of the subject unit some strange patterns of evasion and fraud have been observed which are worth sharing with RTO concerned. Details revealed that the said unit got registered in Hyderabad RTO since October 9, 1997 and filed NIL or NULL sales tax returns since its registration to November 2008 and stopped filing the same for December 2008 up to May 2009. Analysis of unit's data obtained from Pral reveals that the Sales Tax returns for the period July 2008 to October 2012 (i.e. 51 returns) have been filed on a single date i.e. November 25, 2012.
The subject unit has declared fake import valuing Rs 155,277,079 with an input sales tax of Rs 27,949,873 along with fictitious brought forward amount of input tax of Rs 129,939,039 in June 2009 without any previous carry forward amount. In the light of aforesaid, it is expected that the subject unit would fraudulently invoke the facility extended to the registered persons in Section 66 of Sales Tax Act read with rule No 34(c) of Sales Tax Rules 2006, according to which the carry forward amount of previous 11 months is claimed for refund by declaring it at 'row 24' of Sales Tax return.
It has been recommended that reportedly, the fraudulent refund seekers were waiting for the right opportunity to launch the refund claim and the submissions of 51 returns from June 2009 to October 2012 on a single day is a step in this direction. RTO Hyderabad may initiate immediate investigative audit of the subject unit, to be conducted by competent officers enjoying good reputation, so as to determine the genuineness of the said refund in pipeline, the letter added.