The intelligence wing of the Investigation Federal Board of Revenue (FBR) has decided to file an FIR against the management of a Mardan-based cigarette manufacturing company and their beneficiaries for the recovery of evaded duties and taxes on illegal supplies of non-duty paid cigarette to its distributor in Lahore.
Sources told Business Recorder on Monday that FBR had granted permission to the Directorate-General of Intelligence and Investigation (Inland Revenue) to register an FIR against the management of the company.
Under section 22 of the Federal Excise Act, 2005, the agency is empowered to arrest and prosecute cigarette manufacturers.
The agency is said to have gone a step ahead in its investigation against non-compliant cigarette manufacturers and started lodging FIRs against units involved in evasion of duties and taxes.
The agency is already conducting investigative audits of five Green Leaf Threshing (GLT) plants. As a result, the directorate of intelligence IR has raised a demand of Rs18 million against one unit. Thus, the national drive against non-duty paid and smuggled cigarettes has started showing visible results in the forms of huge detections, seizures and registration of FIRs.
Sources said that the Directorate had received a request from Director, I&I-IR, Lahore for immediate action against a Mardan-based cigarette manufacturer and their beneficiaries.
The agency moved on the basis of credible information that counterfeit/ non-duty paid local cigarettes, liable to confiscation under Section 27 of the Federal Excise Act of 2005, were illegally stored by the cigarette manufacturer in Lahore. The premises was duly searched by the directorate officers in the presence of witnesses and in-charge of the Police Post, Riwaz Garden, Lahore.
The search was conducted under Section 25 of the Federal Excise Act, 2005, after obtaining search warrants from the Judicial Magistrate concerned. The search led to the recovery of 40 packets of 20 cigarettes each of Ranger brand, 20 packets of 20 cigarettes each of Gold Flake brand and some private record/ truck bill ties etc indicating past supplies of cigarettes of local brands.
The record showed that between April and October 2009, February and May 2010, June 7 and June 9 2011 and August 2011 and January, 2012, the cigarette manufacturer supplied 17,908 cartons each containing 500 packets of 20 cigarettes of local brands. The deliveries were made to various persons in Okara, Kasur, Pakpatan, Sahiwal, Faisalabad, Jhang, Sheikhupura and Lahore districts, involving federal excise duty and Sales Tax amounting to Rs161.694 million.
In order to ascertain the factual position, prescribed federal excise record of cigarette manufacturer was examined. The record provided by the registered person as well as available on FBR portal showed that cigarette manufacturer was registered with the department for the purpose of Sates Tax & Federal Excise since January 11, 1993 as a tobacco manufacturer.
However, reportedly, the registered person recommended its production w.e.f. July 3, 2010 after a certain period of closure. During the period between JuIy 2010 and March 2012, the registered person produced 3,327 cartons of 500 packets containing 20 cigarettes each of local brand and cleared 1,366 cartons after payment of federal excise duty and sales tax amounting to Rs10,286,854 and Rs2,795,805, respectively. As per the above record, the entire supplies were shown to various retailers at Mardan while no supply was made to Okara, Kasur, Pakpatan, Sahiwal, Faisalabad, Jhang, Sheikhupura and Lahore districts.
Facts clearly showed that between April 2009 and January 2012, the management of cigarette manufacturer and their beneficiaries violated provisions of sections 3, 4, 6, 17 & 18 of the Federal Excise Act, 2005 and sections 3, 6, 22, 23 & 26 of the Sales Tax Act, 1990. The officials said that the cigarette manufacturer and their beneficieries willfully/ deliberately evaded Federal Excise Duty and sates tax amounting to Rs161.694 million by way of illegal removal of 17,908 cartons each having 500 packets of 20 cigarettes of local brands. The amount is recoverable from them under Section 14 of the Federal Excise Act, 2005 & Section 11(2) and Section 36(1) of the Sales Tax Act, 1990 along with default surcharge under section 8 of the Federal Excise Act, 2005 and section 34 of the Sales Tax Act, 1990. Penal action would be taken against them under sections 19(1), 19(2)(c), 19(3)(a to c), 19(6), 19(7) & 19(10) of the Federal Excise Act, 2005 and sections 33(2)(5)(8)(11c) & (13) of the Sales Tax Act, 1990 read with Section 2(37) ibid.
In order to recover evaded amount of federal excise duty and sales tax from the cigarette manufacturer and the management of the company, the directorate requires further evidence from distributors and goods transporters for which lodging of FIR is necessary before proceeding further in the case.
In view of legal status, the agency had requested the FBR to grant permission to register FIR under Section 22 of the Federal Excise Act, 2005 and Section 37A & 37B of the Sales Tax Act, 1990 against the management of cigarette manufacturer and their beneficiaries/ connivers. The private record of the said company has been recovered from their Lahore office and major illegal supplies of the said company were made to persons falling under the jurisdiction of Lahore directorate, officials of the agency added.