The Directorate General of Intelligence and Investigation Inland Revenue (IR) Faisalabad has detected a dummy and non-existent textile mill in Faisalabad which has committed tax fraud to evade sales tax on supplies made to unregistered persons using dubious bank accounts.
According to sources, I&I-IR has investigated the tax affairs of the textile mill, Faisalabad after receiving detailed information about evasion of sales tax by the said unit. The inquiry reveals that the registered person got sales tax registration as manufacturer of grey cloth and used the registration to evade sales tax on supplies made to unregistered persons. The initial inquiry reveals that the supply of goods amounting to Rs 446,098,415 during the period July 2011 to March 2016 has been declared to the registered units without physical transfer of goods and thus evaded Sales Tax of Rs 7,082,599. As a matter of fact the said textile mill is a dummy and non-existent unit which has committed tax fraud in terms of section 2(37) of the Sales Tax Act, 1990 with the collusion of various registered persons and caused loss to national exchequer. For recovery of the loss of Rs 7082599, the agency has dispatched the contravention report to Chief Commissioner-IR, RTO, Faisalabad.
Inquiry of the said unit reveals that the registered person declared fake purchases of taxable goods of Rs 446.098 million for the tax period 07/2011 to 03/2016 in its sales tax returns and committed tax fraud as defined in section 2(37) of the Sales Tax Act, 1990 with the collusion of various registered person units and caused loss to the national exchequer for amounting to Rs 7.082 millions. The suppliers of taxable goods are liable to charge and pay Sales Tax @ 5%, 2% and 1% as the case may be, if taxable supplies are made to unregistered person under the provisions of SRO 283(I)/2011 dated 01.04.2011, SRO 1125(1)/2011 dated 31.12.2011, SRO 1058(1)/2011 dated 23.11.2011 and SRO 154(1)/2013 dated 28.02.2013. The modus operandi adopted in this fraud is that textile mill Faisalabad which was a dummy and non existent unit has declared purchases of taxable goods from spinning units to avoid/evade payment of sales tax, whereas the actual supplies were made to unregistered persons.
The preliminary inquiry reveals that the gang of fraudsters is operating Textile mill with the collusion of its suppliers to avoid/evade payment of due Sales Tax on the taxable supplies made to unregistered persons. Further inquiry indicated that a person Attique Ahmad and others, have fraudulently opened and operated different bank accounts. The above stated bank accounts when examined, revealed that a person namely Attique Ahmad in the name of textile mills to operate bank accounts along with the gang of fraudsters namely Pervaiz Khalid Sheikh, Muhammad Yousaf, Imran Ashfaq, Shahzada Khurram and others. The gang of fraudsters has managed to make payment to suppliers through fake/dubious bank accounts to facilitate the suppliers in making compliance of section 73 of the Sales Tax Act, 1990.
The textile unit got sales tax registration as manufacturer of grey cloth on 02.08.2007. The said unit declared electricity meter which is in the name of Dolat Ali and the same is now in the use of another unit ie Weaving Factory, Faisalabad.
It reveals that the unit is non-existent unit and the sales tax registration is used to avoid/evade sales tax payable at the rate of 5%, 2% & 1% (as the case maybe) on supplies made to unregistered persons under SRO 1125(1)/2011 dated December 31, 2011 read with SRO No 283(1)/2011 dated April 1, 2011 by certain enterprises registered as Spinning Mills and others. The soft data of unit reveals that the gang of fraudsters filed multiple sales tax returns of the said unit belongs to various tax period on the same date to activate the sales tax registration status. The inquiry in the case is under process and the initial inquiry reveals that the suppliers have declared supply of goods amounting to Rs 446.098 million during the period (07/2011 to 03/2016) to the aforementioned registered unit without physical transfer of goods to avoid /evade payment of sales tax at Rs 7.082 million on such supplies, which are actually made to unregistered persons. Prima facie, the registered unit and the suppliers have committed tax fraud as defined in section 2(37) of the Sales Tax Act, 1990.
In view of the said above legal and factual discourse, there are material evidences that the above mentioned registered person, its suppliers, beneficiaries and others have violated the provisions of sections 3, 6, 7, 8, 8A, 22, 23, 25, 26, 37 & 73 read with 2(14), 2(20), 2(33), 2(35), 2(37), 2(40) & 2(41) of Sales Tax Act, 1990, SRO 283(1)/2011 dated 01.04.2011, SRO 1125(1)/2011 dated 31.12.2011, SRO 1058(1)/2011 dated 23.11.2011 and SRO 154(I)/2013 dated 28.02.2013 read with the Sales Tax Rules notified vide SRO 555(1)/2006 Dated 05.06.2006 and committed tax fraud as defined under section 2(37) of the sales Tax Act, 1990. Further, the sales tax is recoverable under Section 11(2) read with 11(3) of the Sales Tax Act, 1990, along with default surcharge under section 34(1) of the Sales Tax Act, 1990. The offences committed by are punishable under Sections 33 (11), 33(13) and 33(22) of the Sales Tax Act, 1990.