LAHORE, April 13: The Lahore directorate of customs intelligence has arrested two more men – Abbad Muhammad Zuberi and Muhammad Ejaz – for their alleged involvement in a major tax fraud case of around Rs10 billion.

The fraud involves issuance of fake sales tax invoices for generating illegal input tax adjustment/refund. The directorate has so far recovered Rs1.2 billion in the case over the last one year.

The directorate had earlier arrested six people – Khalid Mehmood, Khalil, Rana Saqeem, Rana Shahzad, Muhammad Azam Qadri and Ikhlaq Ahmad – in connection with the same case on March 25 and April 1.

The alleged fraudsters, according to the sources in the directorate, were involved in the issuance of fake sales tax invoices for generating illegal input tax adjustment/refund on behalf of 144 “dummy” supplier registered persons making fake transactions with the recipient registered persons, primarily located in Lahore, Faisalabad, Gujranwala and Karachi but generally spread all over the country.

The sources said the instant detection of sales tax evasion of Rs7.5 billion was linked to an earlier investigation and detection of Rs2.5 billion ST evasion in which the fraudsters, who earlier issued fake sales tax invoices to recipient registered persons for claiming illegal input tax adjustments included accused Muhammad Azam, Ejaz Latif, Asif Hanif, Iftikhar Ali, Muhammad Fayyaz and others. The cases were registered against these and others persons involved followed by the arrest of another accused Ejaz Latif. The warrants for arrest of the absconding accused have already been issued by the special customs judge. The principal accused, Muhammad Azam and Mirza Arif Baig, an employee of the Regional Tax Office in Lahore, have already been convicted by the special judge.

The investigations show that 4,200 recipient registered persons, spread across the country, have claimed illegal input tax adjustment/refund, including the 127 registered persons mentioned in the FIR by name.

The directorate has asked all the regional tax offices to investigate the issue of fake sales tax registrations in respect of 144 dummy registered persons in order to initiate action against those responsible for such dummy registrations. At the same time, banks, where fake business accounts were opened and operated by the fraudsters, are also under investigation.

The sources said that “certain recipient registered persons including Lion Steel (Pvt) Ltd, Lahore, Sahah Industrial Enterprises, Lahore, M.B. Dyes Chemicals (Pvt) Ltd, Swabi, and Interwood Mobel (Pvt) Ltd, Karachi, had invoked writ jurisdiction before the Lahore High Court agitating that the directorate was not competent to audit/investigate/criminally proceed against petitioner registered persons on the law point of jurisdiction. The court, however, directed the petitioners to appear before the investigators on Saturday along with relevant record.

The court also directed the directorate that the petitioners be not arrested till April 27, the next date of hearing in the petitions, so as to give opportunity to the petitioners to explain their view in the matter before the investigators.