FBR creates Rs469 bn tax demand against 81 sugar mills

ISLAMABAD/LAHORE: A special audit team of the Federal Board of Revenue (FBR) has created a demand of estimated Rs469 billion tax against 81 sugar mills, some of them directly owned or co-owned by politicians.

The FBR started a probe against the country’s 89 sugar mills’ alleged irregularities pointed out by the Sugar Inquiry Commission (SIC) in 2020. "We have imposed a tax of Rs404 billion on 61 sugar mills till 28th February this year. Our audit teams have created an estimated tax of Rs65 billion against 20 sugar units whose cases are still pending in different courts," a senior official told The News on Wednesday.

The official said the FBR special teams, in months long exercise of the forensic audit of sugar mills, issued notices of Rs404.2 billion to 61 sugar mills in the past two months. In light of the SIC's recommendations, the FBR regional tax offices kicked off a composite audit exercise of income tax and sales tax of sugar mills last year.

The FBR audit team, after evaluating record of JDW Sugar Mills, Ltd. and five other sugar mills from 2015 to 2019, owned by PTI leader Jahangir Khan Tareen, has created some Rs7 billion tax demand, a senior FBR official revealed on condition of anonymity. "Tax demand notices have not been served on these mills yet. This amount may go up even after the audit team's proceeding is concluded," said the official.

The FBR also assessed record of RYK Group Of Sugar Mills, owned by family of Makhdoom Khusro Bakhtiar, Makhdoom Hashim Jawan Bakht and Makhdoom Omar Shehryar, from 2015 to 2019, where officials created a tax demand of Rs9 billion against the group, said another FBR official who is associated with the audit team. Notices of demand have not been issued yet as the matter is sub-judice.

The FBR audit team also generated a demand of Rs8 billion tax against Chaudhry Sugar Mills and Ramazan Sugar Mills, owned by Sharif family, said the official. In May 2020, the SIC submitted its final report to the prime minister recommending, “The FBR may conduct a comprehensive tax audit of all sugar mills for the last five years.”

The FBR team generated a tax demand of Rs25 billion against Fatima Sugar Mills Ltd, Rs18 billion against Ashraf Sugar Mills Ltd, Rs6 billion against Abdullah Sugar Mills Ltd, Rs4 billion against Huda Sugar Mills Ltd, Rs7 billion against Kashmir Sugar Mills Ltd, Rs3 billion against Rasool Nawaz Sugar Mills, Rs4 billion against Haseeb Waqas Sugar Mills, Rs5 billion against Ittefaq Sugar Mills, Rs7 billion against Pattoki Sugar Mills, Rs2 billion against Thal Industries Ltd, Rs4 billion against Noon Sugar Mills, Rs3.6 billion against Al-Moiz Sugar Mills, Rs1.4 billion against Indus Sugar Mills, Rs2 billion against Shakargarh Sugar Mills, Rs470 million against SGM Sugar Mills Ltd, Rs147 million against Husein Sugar Mills, Rs29 million against TMK Sugar Mills Pvt Ltd, and a tax of Rs3 million was generated against Vanguard Sugar Mills, according to official documents.

The FBR audit teams have not found any tax liability against the Consolidated Sugar Mills Ltd, Ghotki Sugar Mills, Noori Sugar Factory, Southern Sugar Mills, Sindhri Sugar Mills, Najma Sugar Mills, Pirjo Goth Sugar Mills and SJ Sugar Mills Pvt Ltd.

After the commission report, special teams of the FBR and FIA started a probe against sugar mills which were allegedly involved in selling sugar and purchasing cane "out of the book" and dodging taxes. The FBR and FIA teams were bound to submit their report by October 2020 but both institutions despite passage of six months failed to submit their final report. Officially, the FBR and FIA told this correspondent that millers went to the court and "they were waiting for the final order of the court on these ongoing proceedings."

President Pakistan Sugar Mills Association Iskander M Khan says, "(FBR team) is just playing to the gallery. (These are) fabricated (tax) notices and (FBR) is misleading Prime Minister Imran Khan."

Jahangir Khan Tareen told this correspondent that "no tax demand has been created against his mills in these audit proceedings as of this date. “We are fully cooperating by providing all details as required by the FBR," he said.

Jahangir Tareen said, "Power of the commissioner to select for audit under Section 177 of the Ordinance and 25 of the Act (as applicable) is a discretion vested in him, to be exercised in accordance with the law and judgments of the superior courts and not on directions of the FBR or federal government. Commissioners have failed to comply with some or all of the requirements noted above. “The above actions/omissions of the commissioner have been challenged in the LHC by a number of sugar mills, including mine,” he said.

The LHC has been pleased to grant interim relief in these and connected cases as far back as October 2020 by restraining the commissioner from passing any final order in these proceedings. Responses of other sugar mills are awaited till filing of this story.

On the other hand, the FIA has constituted 20 teams to dislodge the sugar mafia as stern action will be taken against the profiteers and money launderers involved in the unlawful artificial shortage of sugar along with price increase.

According to the sources in the FIA, the investigation will be carried out by Director FIA Lahore while decision to launch cases and arrests is also made. The massive crackdown will be launched under the Anti-Money Laundering Act.

It has been learnt that the FIA has unearthed a huge financial scam of money laundering by the sugar mafia. The price of sugar was deliberately being increased through artificial shortages and gambling (satta) on the price of sugar. The mill price of sugar was increased from 70 to 90 rupees in just one year through artificial ways, the sources added.

Investigations carried out by the FIA further revealed that the sugar mafia made Rs110 billion in last one year through satta on the price of sugar. Sources claimed that hundreds of fake accounts were made to conceal the money earned through illegal means. All the major sugar groups including Tareen Group, Sharif Group, Alliance Group, Hamza Group and Thal Group were allegedly backing the gamblers, the investigations further revealed. The FIA gathered solid proofs from 32 mobile phones and laptops. The FIA is going to take stern action against said mafia as the alleged mafia was once again trying to increase sugar price artificially during Ramazan when its demand increases.