FBR Uncovers Complex Chain of Fake Invoices and Fraudulent Tax Claims,
A leading cement company has been implicated in a massive tax fraud scheme involving a ghost company registered in the name of a deceased Wapda pensioner. The scheme, uncovered by the Directorate of Internal Audit in Karachi, involved fake invoices, fraudulent tax claims, and non-existent addresses.
This multi-city operation, with a web of fake transactions, has come to light from the Directorate of Internal Audit, IR, Karachi.
DG now has filed a complaint to Customs & Taxation Court, Karachi, on the scam that resulted in causing a loss of around Rs 11.3 billion to the exchequer.
According to the document, the ghost company that was a primary accused in the case, which investigators claimed was at the centre of an elaborate network of fake invoices and fraudulent tax claims, was found operating from non-existent addresses.
Investigation showed that, on going to the declared business locations in Karachi, other businesses were found operating on those places; occupants at those places maintained that the said ghost company had never existed at those addresses.
Prima facie, no signs of any legitimate business operation were observed concerning the accused company. The accused company did not have basic elements of an office staff, godowns, or vehicles that would correspond to the volume of transactions declared.
Once again, astonishingly, one such ghost company involved in this fraud was registered in the name of a retired Wapda pensioner, who drew less than Rs 10,000 per month and who died on January 7, 2019.
The shockingly surprising thing emerged that long after his death, the company continued doing its tax returns and transacted several billion rupees.
Reports said the deceased man’s company reflected a bogus turnover of Rs 66.5 billion, which is impossible and unthinkable for a company registered to a deceased pensioner. It further said the investigation has unraveled a complex chain of companies passing on fake invoices and fraudulent input tax claims. It said this chain involved several firms across different tax jurisdictions.
It claimed the leading cement company, falling within the jurisdiction of LTO-Karachi, emerged as the major beneficiary of this fraud chain that on the face value reflected flying/fictitious purchases to the tune of Rs 1.6 billion, yielding a shock of Rs 316 million in the shape of sales tax to the national exchequer.
Our Questions to Spokes Person Sehar Mangi
How did the ghost company continue to operate and file tax returns after the pensioner’s death?
What is the current status of the case filed with the Customs & Taxation Court, Karachi?
Can you clarify if Power Cement Limited had any direct or indirect business dealings with the ghost company registered under the name of a deceased Wapda pensioner named as Muhamamd Ajmal?
Response from, Power Cement’s statement to be attributed to Company Representative – Power Cement
In 2022, the cement industry, including Power Cement Limited, transitioned to local coal due to escalating international coal prices and freight costs. This strategic shift ensured continuity of operations and conserved significant foreign exchange for the country.
The Federal Board of Revenue (FBR) has initiated inquiries into local cement vendors suspected of sales tax evasion through fraudulent invoices. As part of their standard procedure, FBR is examining the entire supply chain.
Power Cement Limited reaffirms its unwavering commitment to compliance and is confident in its ability to provide comprehensive documentary trails for all transactions related to coal purchases and consumption. We assert that our domestic and export sales volumes vividly justify the volume of coal purchased during these periods.
All transactions with local coal vendors were conducted through banking channels, and inputs claimed have been through the FBR portal, evidencing the declaration of sales by the vendors. This transparent and documented approach underscores our adherence to regulatory requirements.
For further clarity on the cement industry’s stance, please refer to the All Pakistan Cement Manufacturers Association’s (APCMA) letters dated January 25, 2024, to the Special Investment Facilitation Council and February 20, 2024, to the Minister of Finance, Revenue & Economic Affairs.
Upon receipt of the FBR’s communication, Power Cement Limited will provide the entire transaction trail, supported by apt documentary evidence.
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