By TIOL News Service

CHANDIGARH, AUG 16, 2013: ALTHOUGH the Union Finance Minister, Mr P Chidambaram, has clearly been calling for non-adversarial tax administration but he has also been equally emphatic on taking harsh measures in case of outright evasion of taxes. And his message delivered at the recent Chief Commissioners' conference has indeed been taken seriously by the Delhi Chief Commissioner, Mr Kaushal Srivastava, who has directed his officers to curb the growing racket of Cenvat credit based on fake invoices and also clandestine clearances. Given the fact that evasion of Central Excise duty is the mother of all tax evasions as it also leads to evasion of income tax and local taxes like VAT. A good case study in this regard can be the latest case booked by the Rohtak Commissionerate.

The manufacturer, M/s P S Raj Steels Pvt Ltd, is engaged in manufacture of high value SS Pipes, used in fabricating steel railings for staircases. On intelligence, the excise sleuths raided the factory and registered premises and allegedly found interesting documents indicating systematic tax evasion. What led to the nemesis of the assessee was its habit of maintaining meticulous record-keeping. In other words, it was allegedly quite organised and structured in keeping records of all the taxes evaded over a period of 15 months. The manufacturer was clandestinely removing goods to one set of buyers and was simultaneously passing on inadmissible Cenvat credit to others by issuing goods-less invoices by collecting sales proceeds. And thus it managed to consume its raw materials and the electricity. A further probe revealed the following findings:

++ It had sent goods to several buyers in Delhi, Agra & Gwalior allegedly without issuing any invoices and without payment of Central Excise duty.

++ it had issued invoices to some buyers showing exact quantity of goods actually sold, but value realized was shown less, thereby evading duty on suppressed value.

++ In some invoices, even the quantity shown was much less than the quantity actually sold.

++ Another eye-popping feature of the case is the record of unaccounted cash amounts received from buyers and maintained datewise. The record is in the form of handwritten loose-sheets, the scanned copies of which were found stored in the seized pen-drives.

++ The most salient feature of this case was found to be the receipt of sale proceeds from customers stationed at far flung cities like Siliguri, Amritsar and Moradabad. It had allegedly opened about 85 Bank accounts in various banks, most of these in Oriental Bank of Commerce in the name of their employees. The outstation buyers would deposit amounts, not exceeding Rs.50,000/- for obvious reasons, from their location and the same would be withdrawn by the manufacturers through ATMs in amounts not exceeding Rs.25,000/-. A detailed list of such Bank accounts was also recovered from the seized accounts.

A quick study of this case has found goods worth Rs 30 Crore on which duty to the extent of Rs 2.8 Cr was evaded. But if this case is sustained in a court of law, the other two taxes, which may be said to have been evaded are the State VAT and the Income Tax. Given the seriousness of the offence, the excise sleuths have arrested its Director Deepak Gupta, who has been remanded in custody till Aug 21. This case apart, a similar trend can be seen across the country, which gives a fllip to generation of black money in the economy. Therefore, it calls for more coordinated efforts for better anti-evasion paradigm.