Islamabad - The Inquiry Commission assigned to probe the sugar crises in its 46 pages forensic audit report noted the following violations of various laws and offences committed by the sugar mills owners;

According to the forensic audit report, there have been gross violations of section 250-(2) of Companies Act 2017.

The report says as per law the audit of cost accounts shall be directed by the Commission (SECP) subject to the recommendation of the regulatory authority supervising the business of relevant sector.

Application of International Financial Reporting Standards (IFRS) is mandated by section 225 of Companies Act 2017.

According to the report there have been violation of various laws including Section 7 of Auditors (Reporting Obligations) Regulations 2018 r/w Section 249 (duties of auditors) of Companies Act 2017, Sections 220 (true & fair view of books of accounts), Section 401/ 402/496 (falsification of books of accounts) r/w Section 204 (duties of directors) and Section 453 (prevention of fraud & money-laundering) of Companies Act 2017 r/w, 406/ 409 PPC (misappropriation) r/w  and Section 3 Anti-Money-laundering Act 2010.

It also found violation of Section 3 (abuse of dominant position), Section 4 (prohibited agreement), Section 10 (deceptive marketing practices) of Competition Act 2010 r/w Section 26 (Prohibited Business of a Company) of Companies Act 2017.

According to forensic audit report, the hoarding is cognizable under section 7 of the Price Control & Prevention of Profiteering & Hoarding Act, 1977.

To claim zero-rating on the stocks exported, ‘Import Realization Certificates’ from Afghan Customs are required to be submitted vide Export Policy Order, 2016 issued under section 3 of Imports & Exports (Control) Act, 1950.

It says that Para 7 of Export Policy Order, 2016 on ‘Exports to Afghanistan and through Afghanistan to Central Asian Republics’, sub-para 2 (i) read: “The proof that goods exported from Pakistan have reached Afghanistan shall be verified on the basis of copy of import clearance documents by Afghan Custom Authorities across the border”.

It further said that Section 33 item 13 (Penalty for Tax Fraud) r/w 37-A-(5) (Culpability of Directors for Tax-Fraud) of Sales Tax Act 1990 covers this tax-fraud. Section 32-A (falsification in information in GD forms) of Customs Act, 1969 takes care of the fraud through fake GDs.

Ban by the Government of Punjab vide Notification dated 6th December 2006 under section 3/11 of the Punjab Industries (Control on Establishment & Enlargement) Act, 1963.

 

Mandate available with the FBR under section 40(B) of Sales Tax Act, 1990 to appoint on-site inspectors/ monitors from IRS to monitor production, sale of taxable goods (sugar) and stock-positions on a daily basis;

It pointed out that Section 22 (a) & Section 23 (1) b Sales Tax Act 1990, obligates all registered sellers (sugar-mills) to record name of customer/ CNICs, address, description, quantities and value/ price of the goods (sugar) on the sales-tax invoice and provide the same data to FBR in the monthly sales-tax returns.

Also,  Section 3-(b) of the Anti-Money Laundering Act, 2010 and section 4 of Benami Transactions (Prohibition) Act, 2017 empowers federal government to confiscate property or its proceeds, which are subject matter of benami transactions.

It also noted violation of the Section 3/11 of the Punjab Industries (Control on Establishment & Enlargement) Act, 1963.

Not only that, Hunza-II availed an (inadmissible) tax-credit of Rs. 42.5m on purchase of plant & machinery for this enlargement u/s section 65 (b) of Income Tax Ordinance.

However, section 250-(2) of Companies Act 2017 changed the scenario in that which says that the audit of cost accounts shall be directed by the Commission (SECP) subject to the recommendation of the regulatory authority supervising the business of relevant sector.

Any subsection of section 9 (a) of National Accountability Ordinance 1999 especially with regard to sugar-mills which are controlled by Politically Exposed Persons (PEPs).