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False charges of tax evasion against sugar mills
Sales Tax Collectorate identifies 10 sugar mills in Sindh; Sugar Mills Association terms charges as an attempt to cover up shortfall in revenue collection

  1. Charges of tax evasion against sugar mills
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  3. Pakistan Steel: Outstanding/defaulted debt
  4. ChenOne opens in Karachi
  5. Support price policy for paddy crop
  6. Ban on setting up new flour mills

July 12-18, 1999

Credibility of an individual, business or industry, is one of the keynote factors behind their success. It is usually maintained at all costs. However, sometimes it is hurt due to carelessness of others. This exactly happened when names of 10-sugar mills of Sindh were recently published in a section of the press against whom sales tax evasion was inadvertently detected by the Sales Tax Collectorate, Hyderabad.

The sugar mills, identified, included: Matiari Sugar Mills, Kahirpur Sugar Mills, Mehran Sugar Mills, Mirpurkhas Sugar Mills, Mirza Sugar Mills, Pangrio Sugar Mills, Sakrand Sugar Mills, Sanghar Sugar Mills, Shahmurad Sugar Mills and Sindh Abadgars Sugar Mills.

The report was, however, a product of sheer over-enthusiasm on the part of the Sales Tax Collectorate, Hyderabad, presumably in a bid to show extra efficiency in tax recovery or crudely to cover up its shortfall in the given target for revenue collection.

The Sales Tax Collectorate, Hyderabad, had recently issued "demand-cum-show cause notices" covering (a) sales of by-products (b) disposal of fixed assets (c) deposits/advances received from the customers (d) acquisition of lease assets on expiry of its period like other items. Most of such demands have been created since 1994 i.e. for the past five years now.

The sugar mills explained their position in the matter to the Collectorate in writing on their appearance as demanded. In certain cases hearings have yet to take place. Actual assessment has not been made in any case.

The status of the issues is a demand, seeking clarification and at the most a "dispute" for settlement of which a prescribed process of pursuit exists in tax laws. Before it is carried to its logical end, declaring an assessee as evading tax is highly uncalled for and an arbitrary act.

Ignoring the principles of law and equity, releasing the names of industries as evading tax, has been a serious charge, causing humiliation and irreparable loss to the business and social standings of the sugar mills.

There have been instances in which sales tax has been paid but not accounted for by the department while notifying the tax liability.

The sugar mills concerned and the Pakistan Sugar Mills Association (Sindh Zone) are shocked by such an irresponsible approach of the Sales Tax Collectorate as the actual position is contrary to crude attempt of impression created.

The tax authorities should exercise care and caution in such matters as lapse on their part would be highly damaging to the tax payers.

Nisar Effendi, former Chairman, Pakistan Sugar Mills Association (Sindh-Balochistan) told PAGE that Sales Tax Collectorate issued demands for sales tax on the basis of old balance sheets inadvertently. The sugar mills consulted with auditors of repute before opening a dialogue with the collectorate as well as with the CBR. They agreed with the representation and have decided to withdraw the notices, he said.

Ashraf Tabani, the newly elected Chairman of PSMA, while replying to CBR, has regretted the attitude of the Sales Tax Collectorate over its ambitions to collect revenue from the industry. He said that the Collector, Sales Tax, Hyderabad Division, has been issuing notices like barrage for assumed "sales tax recovery" on sales of by-products, disposal of fixed assets, deposits and advances received from the customers and acquisition of lease assets on expiry of its period and like other items. The demands have been created since 1994.

Tabani pleaded that none of the four categories, now subjected to Sales Tax, bears justification.

He clarified that position upto June 30, 1998 was that all goods were exempted from tax under S.No.33 of 6th schedule except made by the persons provided under this entry. As sugar mills did not fall under any category of exceptions, sales made by them were not liable to Sales Tax.

After June 30, 1998, 6th schedule was amended and the non-taxability of old vehicles and machinery etc. was covered under the amended definition of "taxable supply". Only those supplies mean taxable supplies which are made in Pakistan by an importer, manufacturer, wholesaler including dealer and distributor or retailer.

Sugar mills are neither importers nor manufacturers or wholesalers or distributors or retailers of vehicles and machinery. As such, supply of such items does not mean "taxable supply"

Sugar mills are manufacturers of sugar and specific exemption granted under Section 13 through 6th schedule was withdrawn to amend 6th schedule through Sales Tax (Amendment) Ordinance 1998, dated April 1, 1998 and as such they became liable to Sales Tax on "supplies" which they manufactured.

The sugar mills are not averse to pay taxes but willing to do so in time, provided the demands are appropriate.