Case Law Details
Mahendra Kumar Singhi Vs Commissioner of State Tax (High Court of Madras)
Section 132 of the Act will apply with all force the moment an invoice or a bill is issued without, movement of goods or Input Tax Credit has been wrongly availed. In the present caser the preliminary investigation reveals that the entities have formed a cartel by doing circular trading between seven Companies whereby nearly 98 per cent of the transactions are among themselves and 2 per cent of the supply have been wade to other entities. In other words, the very same goods are being repeatedly shown as being supplied by way of purchase/sales amongst the entities only with a view to defraud the revenue and to distribute the credit illegally and fraudulently. That apart, there are also prima facie materials to show that the E-way bills generated by the entities are found to be totally false since on verification it was found the so-called movement of goods which is Iron and Steel has been done in vehicles which are two wheelers/three wheelers, vehicles which have already been seized by the finance companies and vehicles where the transporter himself says that no such movement of goods took place. The total turnover shown by the petitioners and the corresponding tax paid by them after adjusting the Input Tax Credit is almost minuscule. It was also brought to the notice of the Court that even though the petitioners were bound to maintain the accounts and records in the principal place of business, all that was kept at Bangalore, in total violation of Section 35 of the Act. The amounts that are reflected in the material produced by the respondent and shown in the interim report are staggering.
It will be relevant to reiterate the earlier order passed by this Court under similar circumstances in Crl. O.P. Nos. 30467, 30470, 30474, 30477, 30481, 30488 30490 of 2018 dated 20.02.2019. The relevant portions of the order is extracted hereunder:
“14. The enactment in question has cone into force very recently with a laudable object of one country one tax. Therefore wherever the department finds that certain provisions in the Act is misused by creating fake invoices and input tax credit is being availed without any movement of goods, the same has to be curbed and nipped in the bud to ensure that it does not grow into another mega scam having a direct impact on the economy of this nation. Since the department has collected some prima facie materials , they want to act fast before it becomes a huge racket, failing which the entire economy of this country would weaken and collapse.
15. If the petitioners are conducting genuine business through the above said companies, they can easily prove during the investigation the actual movement of goods, which will all be borne out by documents. If the department is satisfied regarding the same, the department will leave out the companies belonging to the petitioners and proceed further with the investigation.
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