ISLAMABAD (June 30 2009): Collector of Sales Tax, Lahore has unearthed a cartel of steel melters in Punjab allegedly involved in massive evasion of sales tax by adopting unique kind of fraudulent techniques. Sources told Business Recorder on Monday that the regional collectorate has detected fraudulent techniques during deputation of sales tax officials at the manufacturing premises of certain units under section 40-B of the Sales Tax Act, 1990. A cartel of many steel units operating within same premises was collectively using the same modus operandi to evade the authorities. The provisions of section 40-B were invoked to verify that the units have been engaged in manufacturing of stainless steel and paying sales tax on rates prescribed for ingots and billets. The rates of sales tax were five times higher on stainless steel as compared to the rates specified for ingots and billets. During investigation it has also been found that they are using self generation formula which was not approved by the board. The relevant steel association is helping the department in investigation against the cartel. The investigators found during physical monitoring of units that the steel melters have adopted a number of methods to evade the authorities within Punjab. Details revealed that the steel melters and re-rollers operating on self generation basis by producing electricity with the help of gas generators shall discharge their tax liabilities on the basis of the gas bill for the relevant month as per the specified formula. They have to follow Rule 58HA of the Special Procedure Rules 2007 for discharging their sales tax liability. However, a few big steel units in the form of cartel within the jurisdiction of Lahore collectorate used techniques to evade sales tax. They moved to court against the formula and started making payment according to self-determined formula. In this way the cartel has caused revenue loss to the tune of around Rs 153 million to the national exchequer. It is important to mention that the court disposed of the petition in June 2008 with a directive to FBR to determine the formula in consultation with stakeholders. However, progress on the issue was comparatively slow due to unknown reasons. The issue came to light when present Collector of Sales Tax posted staff in the units\' premises, allegedly involved in tax evasion. The cartel has persuaded smaller units not to make payment as per notified formula. Initially they approached the department to make payment. It is apprehended that these relatively small units might also suppress their production for evasion of sales tax. As per sources, the big cartel which earlier was making stainless steel has stopped production at their factories or outlets at Gujranwala. All this stainless steel is used in the production of stainless steel utensils in cottage industry. They evaded the taxes on stainless steel by using rates which were notified for ingots and billets which is a small faction of the former. According to sources, this cartel has also claimed and self adjusted input tax paid on goods exported through self-generation using formula not covered under the Rules, which is not authorised. This adjustment is not permissible for this purpose and they had to apply for refund. They did not apply, but were adjusting on a self-determined formula not legally authorised. The collectorate has stepped up investigation and it is suspected that more scams are likely to be unearthed. This whole exercise is being conducted transparently in consultation with Steel Melters Association. Since the formula is being challenged by these units running power on self-generation basis, the steel melters and re-rollers association has been requested to involve itself in discussions and a meeting is being convened with all stakeholders including technical personnel of the power generation units to arrive at a consensus regarding the formula for assessment