FBR seeks advice against tribunal’s verdict from Law Ministry

• Says Forvil Cosmetics is involved in massive tax evasion but was given a clean chit by a tribunal of Inland Revenue

The Federal Bureau of Revenue (FBR) has alleged that M/s Forvil Cosmetics (Pvt) Ltd was involved in massive tax evasion but a tribunal of the Inland Revenue cleared the company.

The FBR has moved the Law Ministry to seek advice against a judgment by the Inland Revenue Tribunal Lahore in a tax fraud case against a cosmetics company, M/s Forvil Cosmetics (Pvt) Ltd, the makers of Bio Amla Hair Tonic, in which the appellate tribunal handed a clean chit to the company. The FBR has sought advice from the Law Ministry as it has reservations about this decision of the tribunal.

According to the documents available with Pakistan Today, Inland Revenue Intelligence and Investigation Lahore Director Shahidul Hassan requested that the board should place facts of the case before the Ministry of Law and Justice for seeking an explanation from the bench on a judgment on June 16 (Appeal No.STA/486/LB/2016), which, according to him, was “contrary to the facts available on record as well as against the norms/provision of sales tax law”.

“The decision is contrary to the facts available on record. The decision of the learned ATIR indicated that they assumed that the department failed to establish a connection between the credit entries, computerised and manual record and the appellant’s business,” Director Shahidul Hassan said.

The judgment said that “the whole case of tax fraud was made on the basis of presumption and conjectures which cannot be maintained”.

The director says that the viewpoint of the ATIR Lahore in this judgment is absolutely “incorrect and baseless” as the ACIR, Audit Unit-1 Zone-III, RTO, Lahore, in its decision on October 8, 2015 had said the contrary.

According to documents, a search of the company premises by FBR officials had led to recovery of five CPUs and three laptops, volumes of private records consisting of files, registers, diaries, freight slips and copies of bank cheques etc indicating actual production, stocks, sales, purchase, payments and deliveries to buyers and suppliers etc of the registered persons.

Scrutiny of soft data and private records, books, bank statements for the period between January 1, 2013 to December 31, 2014 revealed that M/s Forvil Cosmetics (Pvt) Ltd produced and supplied 334,341 cartons of Bio Amla brand cosmetics valued at Rs 1,612,980,548 involving sales tax amounting to Rs 268,970,440 whereas during the aforementioned period only an amount of Rs 220, 357 was charged.

Hence, the registered person concealed production worth Rs 1,611,545,277 and M/s Forvil Cosmetics (Pvt) Ltd willfully/deliberately evaded taxes.

Secondly, during the course of investigation, M/s Cosmetics in their letter dated April 29, 2015 informed the FBR that they have voluntarily made payment of Rs 15,000,000 to the National Exchequer and also furnished postdated cheques of Rs 105,000,000 in favor of CIR Zone-III, RTO Lahore. The said postdated cheques were forwarded to the competent authority.

Sources said the cosmetics company was found involved in millions in tax theft but later got a clean chit from the appellate tribunal after paying a huge bribe. Sources claimed the tribunal members received huge amounts for this clean chit to the cosmetics company. The FBR officials, therefore, are seeking advises from the law ministry.

Executive Director of a non-profit organization, Pay Tax, Build Pakistan, Khalid Parvez, working on the same case told Pakistan Today that the said company submitted fake documents to the concerned department. Pointing out the issue, the Pay Tax, Build Pakistan submitted the actual figures to the department and the case was registered against the cosmetics company. The documents showed that M/s Forvil Cosmetic (Pvt.) Ltd was involved in massive evasion of sales tax and the FBR took this case to the court. But the company got a clean chit from the tribunal.

Moreover, Khalid claimed the cheques submitted by the company with the FBR also bounced due to insufficient funds in the account. Hence, he added, the company committed another fraud by filing bogus cheques to the Inland Revenue Department.

“On one hand, the government is making efforts to expand the tax net and on the other, the tribunals are giving clean chits to companies which are found red-handed in tax evasion, even after they have submitted bogus cheques. Such decisions will hurt the resolve and commitment of honest officials in the FBR badly,” he said.