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Rs52.8m refunds claimed on fake invoices

December 20, 2012

ISLAMABAD, Dec 20: A gang of fraudsters who are believed to have issued fake invoices in the name of bogus companies to claim millions of rupees in refunds or input tax adjustments from the sales tax department has been busted in Karachi.

An FIR has been registered against M/s Mars Chemicals and 24 other firms which received Rs52.806 million against bogus/fake invoices, an official in the Regional Tax Office-II, Karachi, told Dawn.

He said the customs department arrested Allah-Rakha, son of Abdul Qadir, who is alleged to be frontman of the operation. The Special Judge, Customs Court, has remanded Allah Rakha for seven days.

“Efforts are being made to arrest other accused and recover the money,” the official said.

The FBR had recently admitted that bogus firms had received Rs63 billion in refunds and illegal input tax adjustment on fake and flying invoices, mostly in Karachi, in the first four months of the current financial year.

M/s Mars Chemicals (NTN 3239404-7, STRN 1700-3239-404-17) was engaged in a massive evasion of sales tax and tax fraud in collusion with its suppliers and buyers by way of buying and selling fake/flying invoices without actual or physical transactions of goods. An investigation has been initiated.

Data on FBR web-portal revealed that M/s Mars Chemicals declared its main activity as “Importer” and business activity as “Retailer”. It got sales tax registration on July 26, 2010, and filed its first sales tax-cum-federal excise returns for the tax period July 2010.

In the returns, it claimed input tax adjustment of Rs2.987m against goods declarations having dates prior to the company’s registration. Cross-checking with customs data confirmed that no such imports had been made by the company and the imports declared by it were fake/bogus.

The company showed supplies to M/s Textile Creation (STRN 1712-6200-281-32) involving sales tax of Rs320,195 enabling it to take unlawful input tax adjustment.

According to FBR investigation, M/s Mars Chemicals did not file any sales tax returns from August 2010 to March 2011 and declared “Nil” business activity in the returns for tax periods from April to December 2011 (except May, showing minor imports).

The sales tax returns for January 2012 was filed on June 17, and huge purchases of Rs903.243m were shown from M/s Fabrivo Industries (STRN 1200-5907-614-73) involving sales tax of Rs171.450m.

According to its profile available on e-FBR, M/s Fabrivo Industries declared its main activity as “Weaving of Textiles”. It got sales tax registration on April 22, 2003, but started showing transactions since 2011.

In its returns, the company showed imports of Rs84,362m in April 2001, Rs479.185m in May, involving sales tax of Rs81.461m and Rs420.119m in June, involving sales tax of Rs92.426m.

By these transactions it showed carry-forward of Rs173.776m from June to December 2011, the entire amount of which was shown as supplied to M/s Mars Chemicals in January 2011.