Directorate General of Intelligence and Investigation Inland Revenue (IR), Federal Board of Revenue (FBR), has arrested two financial officers of a textile mill in Khyber Pakhtunkhwa found involved in around Rs 650 million evasion of sales tax. Sources told Business Recorder here on Friday that arrests were made under the ongoing crackdown against tax evaders in the textile sector. A special team of DG Intelligence and Investigation IR Peshawar headed by Deputy Director Muhammad Ayaz raided Sarhad Textile Mills Ltd Peshawar and arrested General Manager Muhammad Asad Ullah Fatami and Manager Accounts Faiq Ahmed Khan. The FIR No 1 of 2013 dated February 21, 2013 has already been registered against the unit. The agency has obtained approval of the Board for registration of the FIR under section 37 (A) of the Sales Tax Act, 1990. The analysis of sales tax returns for the tax period May 2011 to January 2012, filed by Sarhad Textile Mills Ltd Peshawar revealed that it has declared total sales at Rs 658.452 million to Fateh Textile Mills Ltd Hyderabad. Sales tax was charged at zero percent, in view of SRO 283(1)/2011 dated 01/04/2011. The internal cross verification with the Sales Tax Returns of Fateh Textile Mills Ltd for the corresponding period however, did not reveal any such purchases from Sarhad Textile Mills Ltd Peshawar. Out of abundant caution vide letter C.No I&I(IR)/Desk Finding/ST Fateh Textile Mills Ltd was requested to confirm whether any purchases were made from Sarhad Textile Mills Ltd during the aforementioned period. Vide their letter Fateh Textile Mills Ltd has totally denied to have made any purchases from Sarhad Textile Mills Ltd during the tax period May 2011 to January 2012, sources said. It is apparent that Sarhad Textile Mills Ltd has in fact made these sales to un-registered person which were liable to sales tax at six percent and five percent under SRO No 283(1)/2011 dated 01/04/2011 & No 1125(1)/2011 dated 31/12/2011 respectively. However, to evade payment of sales tax leviable on sales to un-registered persons supplies were deliberately declared to Fateh Textile Mills Ltd which they have denied. The total amount of sales tax thus not charged and paid by Sarhad Textile Mills Ltd amounts to Rs 39.120 million as principal amount and Rs 12.511 (M) as default surcharge. The Directorate of Intelligence IR had reasons to believe that Sarhad Textile Mills Ltd had committed tax fraud as defined in sub section (37) of section 2 of the Sales Tax Act, 1990, and in view of sub section 5 of section 37 (A) of the Sales Tax Act, 1990, the directors and officers of the company were personally responsible for action of the company in committing tax fraud hence arrests had been made for further proceedings under the law, official added.