ISLAMABAD: The Federal Board of Revenue has imposed hefty fines on 10 sugar mills for tax violations as part of a campaign to improve compliance and similar action against 10 other mills is nearing completion, Dawn has learnt from official sources.

After start of the sugarcane crushing season for 2024-25, the Federal Board of Revenue launched an improved production monitoring system for sugar. As a result of this drive, cash penalties were imposed on five mills each in Sindh and Punjab for tax violations.

The FBR recovered millions of rupees in tax evasion and additional penalties from these mills.

In addition, nine tax officials of the FBR found to be involved in malpractice and working in connivance with the mills to evade taxes, were suspended on the basis of reports from monitoring agencies.

The FBR replaces tax officers at sugar mills after every 10 days and digitally monitors their performance.

There are five oversight systems in place — Track and Trace Stamps, automated counters for counting of bags, video recording and digital eye counting, track invoicing system for all despatches of sugar and posting of staff for overseeing manufacturing and supervised sale of sugar.

“We have identified 10 more sugar mills for violation of tax laws,” a senior tax official told Dawn on Saturday. He said these mills would face monetary fines and seizures in order to encourage sugar sector tax compliance.

Officials from the Federal Investigation Agency and the Intelligence Bureau are also monitoring the situation.

There are 80 sugar mills in Pakistan which produce sugar for local consumption as well as for export. The sugarcane crop is estimated at 70 million tonnes this year, resulting in production of seven million tonnes of sugar.

The opening stock at the start of the current crushing season was more than one million tonnes, and current production is adding to the available stock of sugar.

According to FBR, the efficacy of the new system has been ensured by posting of FBR personnel at every mill and monitoring of the system and personnel through integrated CCTV cameras and frequent visits by senior officers of FBR.

In addition, the board’s inland revenue enforcement network carries out field inspections. The enforcement measures are further augmented by the support of police and Rangers, which provide assistance in the monitoring and enforcement measures.

According to an official, posting of staff in the previous season resulted in controlling sugar smuggling. This brought about drastic reduction in sugar prices and hoarding was controlled because of adequate supply.

In Lahore, the Large Taxpayers Office (LTO) sealed a big sugar mill for non-installation of cameras and for not handing over the Network Video Recorder to FBR staff. Production was stopped at the mill till the installation of cameras and compliance with other legal requirements.

In another incident, the LTO sealed the godowns of a sugar mill in Khushab district on Friday for examination of stocks to find out whether there were any unstamped bags at the premises.

Action is also expected against a sugar mill in Faisalabad district for non-compliance of legal provisions.

In Sindh, the Karachi LTO discovered a concealed chute (final production point in sugar milling process) at a mill in Shaheed Benazirabad district. The chute was installed by creating a diversion line and it was placed at a remote point behind a high brick wall.

The concealed chute was not declared to the authorities for installation of FBR’s integrated production monitoring system. The undeclared chute was immediately sealed and 1,200 tonnes of sugar obtained from it was confiscated. The action brought Rs25 million to the exchequer through payment of 300 per cent penalty and sales tax.

In another incident, FBR personnel stationed at a mill in Mirpurkhas division repor­ted that the management had refused to hand over custody of the Network Video Recorder to FBR staff — a violation of sales tax rules.

A team of 20 personnel from Karachi sealed the production chutes. The mill management paid a penalty of Rs0.5 million for getting the chutes de-sealed.

In Tando Allahyar district, FBR learnt that a sugar mill had disconnected production chutes from the board’s integrated production monitoring system. With assistance from the Hyderabad office, a team from Karachi

LTO reached the mill and sealed all production chutes. As a result, 150 tonnes of non-tax paid sugar was confiscated. Five vehicles being used to transport the commodity were impounded.

Published in Dawn, December 15th, 2024