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GST evasion: Country’s first prosecution complaint filed in Ludhiana court

The prosecution complaint has been filed against two proprietors of Delhi based firms — Jatinder Menro of Pingashk Enterprises and Sammy Dhiman of Shree Radha Group.

punjab Updated: Sep 04, 2018 11:15 IST
Aneesha Sareen Kumar
Aneesha Sareen Kumar
Hindustan Times, Ludhiana
GST evasion,GST,Ludhiana
(Representative image )

Nearly two months after the Ludhiana unit of directorate general of GST Intelligence (DGGI) unearthed a racket that used fake bills to claim input tax credit worth Rs 40 crore, the investigating agency has submitted a detailed prosecution complaint in the court of chief judicial magistrate in Ludhiana.

DGGI officials say this is country’s first prosecution complaint with regard to GST evasion. The prosecution complaint has been filed against two proprietors of Delhi based firms — Jatinder Menro of Pingashk Enterprises and Sammy Dhiman of Shree Radha Group.

The two proprietors continue to be in judicial custody and the trial is set to begin on the next date of hearing. “This is country’s first prosecution complaint filed in court as we managed to establish the evasion of taxes in crores,” said Rachana Singh, deputy director, DGGI, Ludhiana.

The prosecution complaint has been filed in the court under Section 132 of CGST Act (supplying invoices without supply of goods to evade tax).

What is input tax credit

The proprietors of the two firms were arrested for availing input tax credit (ITC) in a fraudulent manner by issuing fake invoices. There was no actual movement of goods and the entire sale-purchase took place on paper only.

Input credit means that at the time of paying tax on output (final product), the manufacturer can reduce tax paid on inputs. For instance, if tax payable on output is Rs 550 and tax paid on input (purchases) is Rs 400, the manufacturer can claim input credit of Rs 400 and will only need to deposit Rs 150 in taxes.

The bogus trail

After registering the first ever case of this type in Ludhiana in July this year, further investigations by the DGGI officials established evasion of Rs 40 crore by Menro and Dhiman.

“A thorough scrutiny of the documents such as purchase details, financial details, sale detail and further sale of goods to approximately six firms, all based in Punjab, revealed that no transactions were ever made and the documents were bogus,” said Rachana Singh.

Investigations regarding these six firms were undertaken by the additional commissioner, excise and taxation department, Punjab. The officials also found that the factories shown on paper never existed and multiple deeds were made on the same fake stamp paper, which was used again and again.

“Sammy and Jatinder showed sale and purchase of goods from each other’s companies and prepared counterfeit bills. They (the firms) were only exchanging invoices for so-called sale and purchase. They were raising invoices only on paper, but no actual sale or purchase of goods took place,” added Rachana Singh.

First Published: Sep 04, 2018 11:13 IST