KARACHI, June 13: The Sindh High Court dismissed on Friday bail applications of two industrialists accused of tax fraud amounting to Rs 57 million.
Abdul Majeed and Abdul Rasheed, director and chief executive, respectively, of Universal Gum (Pvt) Limited were booked and arrested by the collectorate of sales tax and central excise on April 18, 2003. Both are in judicial custody. Their bail pleas were dismissed by the trial court.
The company was registered with the collectorate in August 1997 as manufacturer of gum and “guar split” and exporter of polyester fabric. In the monthly sales tax returns pertaining to the January 2000-September 2002 period, it declared no business activity at all and paid no taxes.
In October 2002, a routine audit of the company revealed that it had consumed gas and electricity in large quantities in sharp contrast to its declaration of “no business activity”. The sales tax authorities visited the factory premises at Dhabeji and found it operational, processing “guar” for production of “guar split”. They also detected an invoice (dated August 16, 2000), confirming sale of taxable goods (gum) to a Karachi textile mills. The sales tax due on the transaction was deducted by the company at source.
The sales tax authorities issued the company a notice requiring it to produce its sale and purchase registers along with the invoice book, record of all bank accounts and month-wise production reports, etc. The company wrote back that no sale or purchase register was maintained by it and that it had only one bank account with the Picic Commercial Bank.
A detailed inquiry, conducted by the authorities, revealed large-scale sales, purchases and exports by the company during the period of “business inactivity”. A large number of invoices evidencing the sale of its products to several concerns were recovered. As many as six banks had received cheques issued in favour of the company. It maintained an account in the name of “Usman” with one of them, the Metropolitan Bank.
Appearing for the applicants, Advocates M. Ilyas Khan and Khalid Javed Khan argued that the prosecution had exaggerated the quantum of tax-evasion. The prosecution case at worst disclosed an evasion of Rs 9 million. The offence allegedly committed by them was punishable only with five years’ jail and was also compoundable.
Contesting the applications, standing counsel Mahmood Rizvi submitted that one tax fraud was punishable with five years but the offence the accused were charged with was exceptional inasmuch as it involved repeated and continuous fraud.
Dismissing the applications, Justice M. Ashraf Laghari observed that the “huge documentary evidence” collected by the prosecution furnished reasonable grounds to believe that the applicants were involved in commission of tax fraud “regularly, constantly and repeatedly”. The offence, no doubt, was punishable with five years’ jail but it was an organized and planned white collar crime affecting the society at large.
Citing a Supreme Court judgment, Justice Laghari also observed that the mere fact that an offence did not fall within the prohibitory clause of Section 497 (1) of the code of criminal procedure did not make it bailable. The discretion still remained with the competent court. For instance, a person accused of narcotics trafficking was not the kind of a person who qualified for discretionary relief. The judge referred to another Supreme Court judgment which upheld refusal of bail by the Sindh High Court to a sales tax fraudster.