FTO directs FBR to take action against officers/officials, special audit in steel smelters case

 KARACHI: Federal Tax Ombudsman (FTO) has directed Federal Board of Revenue (FBR) to take action against delinquent officers and officials and conduct special audit in steel smelters cases.

In this land mark case, Federal Tax Ombudsman, exercising own motion jurisdiction/powers under section 9(1) of the Federal Tax Ombudsman Ordinance, 2000 took cognizance of connivance in gross misuse of Sales Tax Special Procedure Rules, 2007 on steel sector.

This in-house analysis also unearthed specific instances of misuse of powers, negligence, inattention, delay, incompetence, inefficiency and ineptitude, of FBR officers, in the administration of duties and responsibilities in the cases of steel melters at Lahore, assigned to CTO Lahore.

The FTO,s In-House Analysis report confirmed that glaring instances of an organized fiscal fraud are visible in handling of cases of steel smelters. Initially it was found that;

1. in 39 cases of Registered persons (during 2016-19) 881 Exclusion Certificates (ECs) were issued without ensuring payment of tax in state exchequer rather only against bank Cheques. Thus state Revenue was compromised.

2. 347 cheques (out of 881) were found missing/not presented for clearance.

3. Another 29 cheques were bounced/dishonoured.

4. As the total number of steel cases is around 200 therefore the fate of other unattended cases can be well judged from this sample.

5. Though this special provision was solely meant for Registered persons yet in some cases ECs were issued even to unregistered persons i.e.: an outright bogus ECs.

6. In certain cases evidence on record proves that in addition to the issuance of ECs, original Cheques were returned to the Registered Persons after the receipt of bribe.

7. In some cases cheques submitted by one taxpayer were credited to some others who thus availed ECs without paying any tax.

8. Despite having solid evidence of fraud in 39 cases only in 08 cases FIRs were registered against the culprits.

9. Despite the above solid documentary trail thus far only one formal inquiry has been initiated and that too against a UDC. The state of affairs of this inquiry can be judged from the fact that This hushed up inquiry was initiated by an officer who himself was part of the team, alleged to have issued bogus ECs. Even the alleged official was granted leave Ex-Pakistan and currently he is in Dubai.

Thus for the fraudulent issuance of ECs which is an exclusive domain of Commissioner-IR the department has held a UDC responsible: a mockery of internal accountability.

10. Despite all above department is portraying the whole scam as a minor procedural lapse.

Observing the above malpractices the Federal Tax Ombudsman held that In view of above the instant case reflects all the major ingredients of maladministration. It involves the exercise of powers for corrupt or improper motives, incompetence, inefficiency and ineptitude, in the administration or discharge of duties and responsibilities.

Directives were issue to FBR to;

(i)Conclude the unending trail of Fact Finding Inquiries and some formal administrative proceedings, based on the valid observations made by external audit, internal inquiry officers, be initiated against the officers/officials who have been playing havoc with the state exchequer;

(ii)Conduct Special Audit of all steel cases at Lahore and other stations to gauge the quantum of similar loss at other stations. This audit needs to be assigned to Directorate General I&I-IR so as to ensure an objective and independent exercise.

Compliance by FBR has been sought in 45 days.

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