KARACHI: The Directorate of Post Clearance Audit & Internal Audit (South) has lodged a First Information Report against Muhammad Ismail, proprietor of M/s Royal Textile, alleging tax evasion of Rs256.56 million through fraudulent claims of manufacturing status to avail unlawful exemptions on imports.
The FIR, registered on Feb. 27, 2026, follows an accelerated audit conducted under the direction of Director General Yaqoob Mako, who has pushed for expedited scrutiny of suspected tax evasion cases. A specialized audit team comprising Director Afzal Watto, Deputy Director Tauseef Gorchani and Assistant Director Shakeel Ahmed carried out the investigation that led to the criminal complaint.
According to the complaint filed by Appraising Officer Hafiz Muhammad Qasim Rabbani, the importer cleared 125 Goods Declarations between December 2022 and 2025 with a declared import value of Rs2.55 billion. The firm claimed exemption from Additional Sales Tax and concessionary rates of Withholding Income Tax available only to registered manufacturing units.
A physical verification team visited the registered premises at Bengal Godown House, Harris Road, Kharadar on Sept. 4, 2025, and found no manufacturing machinery installed. Staff present — identified as Mr. Waris Khan and Mr. Junaid-ur-Rehman — confirmed the location operates solely as a warehouse for storage of imported fabric.
“The audit team found that the subject premises is only a warehouse/godown and there is no machinery installed at the premises,” the FIR states. Staff confirmed there are no other premises of M/s Royal Textile in operation.
Inventory conducted during the visit recorded 325,414 kilograms of assorted fabrics including net fabric, polyester pile fabric and coated fabric — but no manufacturing equipment.
Authorities allege the firm misrepresented itself as a manufacturer ab initio — from the time of registration — to claim tax benefits. The evasion comprises Rs87.14 million in Additional Sales Tax and Rs169.37 million in withheld Income Tax.
Audit notices dated Sept. 12, 2025, Nov. 4, 2025, and Feb. 2, 2026, sought justification and payment of evaded amounts. The importer responded through legal counsel Sept. 24, 2025, asserting that manufacturing status was granted by Inland Revenue after inspection, but failed to provide supporting evidence, officials said.
The investigation identified three clearing agents involved in processing the GDs: Najmi Zergham of M/s Junaid Qumar Enterprises, House of Trade, and Abdul Wahid of M/s S.S.S Enterprises. Their roles are under investigation under Section 209 read with Section 32A of the Customs Act, 1969.
The case invokes Sections 26, 26A, 32, 32A, 155L, 155M and 209 of the Customs Act, 1969, read with provisions of the Sales Tax Act, 1990 and Income Tax Ordinance, 2001. Offenses are punishable under Section 156(1) of the Customs Act and Section 33(5) of the Sales Tax Act.
Director General Mako, known for his stringent anti-smuggling stance, has been granted extensive powers under SRO 1655(I)/2025 to pursue fiscal fraud investigations, including authority to arrest without warrant and establish data analytics capabilities for enforcement.
“Further investigation is underway and all other aspects in commission of offences will be examined,” the FIR states. A detailed report will be submitted to the court.
The accused faces criminal prosecution for tax evasion, concealing facts and non-production of records under customs and tax laws.