Special Court to Take Up Mega Tax Fraud Case Against Leading Tractor Manufacturer

Special Judge Customs & Excise Taxation Karachi will take up the matter of alleged tax fraud on fake/flying sales tax invoices being committed by a Lahore-based leading tractor manufacturing company on the next date of hearing i.e. August 27, 2024. ProPakistani has learnt that the CEO of the said company is accused in FIR Number 1 of 2022 lodged before Customs & Taxation Court Karachi. The Court started further proceedings in FIR No:01/2022 over the Application filed by the Sindh Chamber of Agriculture Karachi. The prosecution was directed to receive a copy against Chairman/Director of Millat Tractors Sikandar Mustafa Khan who is accused in FIR No:01/2022. It has been alleged by complainant Nabi Bux Sehto from Sindh Agriculture Chamber of Commerce that the CEO of the said tractor manufacturing company has committed tax fraud with farmers worth billions of rupees as he has not allowed the benefit of SRO.1248(I) 2020 & SRO.563(I) 2022. According to the order sheet of Special Judge Customs & Excise Taxation Karachi, on the request of SPP, the case was adjourned to August 27, 2024, for framing charges, recording statements of Investigating Officer (IO) report regarding NBWs against the absconding accused, and confirmation of bail or otherwise of accused persons and hearing of applications filed by Nabi Bux Sathio. There are multiple issues involved in the said tractor manufacturing company. On the directions of the President of Pakistan, the Large Taxpayer Office (LTO), Lahore has concluded the audit of a leading tractor manufacturing company, detecting serious sales tax discrepancies to the tune of Rs. 13.286 billion. According to the audit report submitted by the LTO Lahore to the Federal Tax Ombudsman (FTO), the LTO has also calculated a penalty of Rs. 5.414 billion besides the sales tax involved of Rs. 13.286 billion. The applicant before the Special Judge Customs & Excise Taxation Karachi accused that the case mainly related to the CEO of the tractor manufacturing company has demonstrated the propensity for tax fraud as sales tax invoices of sales tax from the fraudulent units involved in the chain of supply for adjustment of input sales tax to understate its sales tax liability. The final challan was submitted by the IO of the Case before the Special Judge Customs & Excise Taxation Karachi under FIR Number 1 of 2022 Karachi. The challan/report revealed that the scheme of massive sales tax fraud was unearthed under a collusive arrangement involving fictitious transactions between a number of buyer companies. The alleged beneficiaries of the mega sales tax fraud of Tamna Industries included a number of companies including a based company in which its Director has been implicated in Challan in connection with FIR No:01/2022 lodged at Karachi which was submitted before the Trial Court at Karachi. It has been alleged in the interim Challan that a number of other persons/companies have taken benefit from the scam. It was discovered that a domestic “shell” company with the name and style of Tamna Industries was involved in paper transactions with a number of big corporate entities to evade inadmissible tax adjustment. In this connection, an interim challan before the special judge (customs, taxation, and anti-smuggling) Karachi was submitted in connection with the ongoing investigation on FIR No:01/2022 in terms of section 2(37) of the Sales Tax Act 1990 against fake & fraudulent unit/firm which was working with name & style of Tamana Industries. This firm had only existed on “paper- and it was not doing any genuine physical operations. Hence. it could also be called a domestic “shell” company- which got registered with FBR by fraudulent means on the basis of misrepresentation. The registration was given bonafidely by the Department for the purpose of broadening of tax base keeping in view the low tax-to-GDP ratio in the country. The said FIR initially involved government revenue of nearly Rs 1,202,744,754. The civil liability is determined under section 11 of the Sales Tax Act 1990 while in cases of tax fraud criminal law is brought into motion without any delay, the order added.