Sugar mill having nine Benami accounts being probed


Directorate General of Intelligence and Investigation Inland Revenue Lahore has initiated action against a sugar mill, falling within the jurisdiction of Large Taxpayer Unit (LTU) Lahore, which concealed/suppressed its sales to the tune of Rs 2.04 billion. The sugar mill of Lahore was maintaining nine Benami bank accounts in different banks to evade the authorities and committee massive suppression of sales and evasion of tax.

The intelligence agency has framed the Contravention Report and communicated the same to Chief Commissioner-IR, LTU, Lahore for adjudication and consequent recovery of the evaded amount of taxes. 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.

The Directorate General of I&I-IR under the leadership of Khawaja Tanveer Ahmed is zooming-in on influential and powerful sectors involved in tax evasion. 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 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 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 (i) Siddiqui, (ii) the sugar mill and (iii) farmers/agents which on examination confirmed the contention as alleged in the information.

In addition to this, 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 scrutinised. 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, ie, Rs 4.549 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 Rs 7.184 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 Rs 61.99 million.

The sugar mills was given 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 Rs 163.319 (M) 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 Rs 816.596 (M), ie, five times of FED involved. Total tax amount including penalty is Rs 979.915 (M). Accordingly, Contravention Report has been sent to Chief Commissioner-IR, LTU, Lahore for adjudication and consequent recovery.