FBR to Take Action Against Senior Officials for Fraud

The Federal Board of Revenue (FBR) will take strict action against senior tax officials involved in the issuance of the exclusion/adjustment certificates to steel units for not charging sales tax on power consumption against cheques, which were not deposited in the national kitty.

Sources told Propakistani here on Thursday that the matter will be discussed in the Public Accounts Committee (PAC) meeting to be held at the Parliament House on Friday.

According to details, the FBR has initiated disciplinary proceedings against commissioners Inland Revenue, who issued exclusion/adjustment certificates to the steel units, but cheques were not deposited in the national kitty. Notices were served to the commissioners of Inland Revenue who violated the law and caused huge revenue loss, sources added.

The steel units are using electricity for steel and iron products and are required to pay sales tax as per rates specified in the Sales Tax Special Procedure Rules 2007 (steel sector).

However, the department had issued exclusion/adjustment certificates of sales tax in which it was mentioned that the taxpayers have paid sales tax through various cheques, but it has not deposited the cheques in the national exchequer for which the department has issued the exclusion/adjustment certificates.

The FBR is investigating that how much such kind of exclusion/adjustment certificates were issued to the steel units in Lahore and what was the actual revenue loss on this account.

The auditor designated by the Director-General (Audit) Lahore of the Auditor General of Pakistan had pointed out some glaring discrepancies in the collection of sales tax from Steel units falling under the jurisdiction of the Corporate Tax Office (CTO), Lahore, which needed stern action besides reconciliation by the concerned zone/CTO.

The details revealed that in CTO, Lahore, the Commissioners issued Exclusion certificates under Sub Rule 3(A) of Rule 58H of the Sales Tax Special Procedure Rules, 2007, to the registered persons so the LESCO did not charge sales tax per unit against advance payment (postdated cheques) but these cheques were not deposited in the government treasury and payments are not subsequently appearing in the sales tax collection/ledger of the registered persons.

The loss of revenue specified in the Audit Report 2019-20 is about Rs.900 million in only 40 cases for the period july-2016 to June 2019. There are more than 350 steel units which are registered in CTO, Lahore. The Member IR (Operation) FBR constitutes a fact finding committee to investigate this matter, quantify the actual loss of revenue and the responsibility of this alleged tax fraud be fixed to commence action internally and recommend the case to any external agency for criminal proceedings.

A fact-finding inquiry committee examined discrepancies in the collection of Sales tax from Steel units of Lahore. The chairman of the inquiry committee submitted its report, confirming the fraud of non-deposit of sales tax payment collected through cheques in 39 cases only.

The CTO Lahore has succeeded to recover the amount of Rs. 153.667 million till now. The first information reports (FIRs) have been registered against the registered persons in 17 cases and the amount of Rs. 505.074 million is still under-recovery. The pending recovery in the sub judice cases confirmed the viewpoint of the Audit of fraud.

The Fact-Finding inquiry Committee observed that loss of revenue in these cases is deliberate. Furthermore, the Fact-Finding inquiry Committee observed that the two exclusion certificates involving revenue Rs. 436.63 million have been issued to the un-registered persons and no cogent reasons were provided by the CTO for the issuance of this exclusion certificate to a non-existing entity. The issuance of exclusion certificates to unregistered persons was a serious lapse on part of the concerned Commissioner(s).

The fact-finding inquiry committee observed that this situation is alarming in the sense that if the same exercise is replicated on an overall basis in 350 Steel Sector cases, within the zone of CTO, Lahore, the quantum of irregularity in lieu of missing/dishonored cheques would be much higher.

The FBR has initiated disciplinary action against the commissioners who issued such exclusion certificates and investigation has been started in the remaining 310 cases in which exclusion certificates have been issued against post-dated cheques and the subject cheques were not deposited in the government treasury.



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