GST Scam using Dummy Firms: Gurugram Sessions Court denies Bail to Accused

The Additional Sessions Judge, Gurugram has denied bail application of an accused of GST scam allegedly involved in availing and passing on fraudulent ITC to non-existing companies.

As per the prosecution, the accused, Pawan Kumar has committed the offence of availing fraudulent ITC to defraud government exchequer. It was submitted that the conduct of applicant/accused clearly establishes on record that applicant/accused used to manage M/s Laxmi Trading Co. alongwith his nephew Gopal Sharma and was also proprietor of M/s Pawan Traders. It is submitted that applicant/accused is also proprietor /controller of entities like M/s Pawan Traders, M/s Jagannath, M/s Kajuwala, M/s Jatin Sharma, M/s Sai Overseas, etc which are also suspected to be involved in availing and passing on fraudulent ITC to non-existing companies.

Allegedly, M/s Laxmi Trading Company, prima facie, has availed fraudulent ITC for a sum of Rs.22.62 crores and passed on fraudulent ITC of Rs.26.31 crores. During verification of inward suppliers, it has been revealed that M/s Laxmi Trading has availed fraudulent ITC from non-existent or non-traceable firms to the tune of more than Rs.10 crores. It is further submitted that applicant/accused is involved in more than one financial frauds and his past antecedents are tainted.

The Court, after hearing arguments from both the sides, rejected the bail application and held “GST has been hailed as a major tax reform in the post liberalisation era to check the cascading effects of taxation. However, unfortunately, some of the mischievous brains are busy removing the nuts and bolts from the vehicle of tax reforms to hinder the forward course of .to r../ri owth. The Courts of this country cannot afford to take a lenient view.”

Benefit of Additional ITC Available after Introduction of GST on ‘Construction Service

The National Anti-Profiteering Authority (NAA), has found M/s JMD Limited guilty of anti-profiteering since benefit of additional ITC available after introduction of GST on construction service not passed to the purchaser.

The applicant purchased a flat in the respondent’s project ‘JMD Imperial Suits’. An application was filed against the respondent M/s JMD Limited alleging that the respondent had not passed on the benefit of additional ITC available after the introduction of GST on ‘construction services’ by way of commensurate reduction in the price.

The DGAP concluded that during post GST the benefit of additional ITC to the tune of 6.63% of the turnover, has accrued to the respondent and the same was required to be passed on by the respondent to applicant and other eligible recipients, but the respondent failed to do so and contravened Section 171 of the CGST Act.

The Authority observed that ITC, as a percentage of the turnover, that was available to the respondent during the pre-GST period was 3.26%, whereas, during the post-GST period it was 9.89%. this confirms that in the post-GST period, the respondent has benefited from the additional ITC and the same is required to be passed on by the respondent to the eligible flat buyers. The Authority further observed that the computation of the amount of ITC benefit to be passed on by the respondent to eligible flat buyers works out to Rs. 33,35,330/-.

The Coram of Mr. Amand Shah, Chairman, Mr. Pramod Kumar Singh, Technical Member and Mr. Hitesh Shah Technical Member has held that “the respondent has denied benefit of ITC to the buyers of the flats and the shops being constructed by him in his project JMD Imperial Suits in contravention of the provisions of section 171 (1) of the CGST Act, 2017”.

GST Rules does not Intend to Deny Legitimate Export Incentives: Madras HC grants Relief to Exporter

In a significant ruling, the Madras High Court has allowed a refund claim of the exporter and held that that the strict application of GST rules to deny legitimate export incentives to the exporters would defeat the legislative intent of export incentives.

The department, earlier rejected a claim of the petitioner, M/s Abi Technologies, on the ground that there is a mismatch in M/S.Abi Technologies, and GSTR-1.

The petitioner submitted before the Court that the outward supplies ie., exports would have qualified as a zero-rated supply and therefore, the petitioner should have filled the details in Form GSTR-3B in column 3.1 (b). Instead, the petitioner by mistake has given the details of the export as outward taxable supply (other than zero rated, nil rated and exempted).

The department, on the other hand, argued that the refund would be granted subject to the petitioner giving the correct information in the returns, namely GSTR-1 and GSTR-3B. It is only the information, which match and invoices, which were uploaded, the refund would be sanctioned as per Rule 96 of the CGST Rules, 2017.

Justice C Saravanan observed that these Rules have been incorporated under the GST regimes, except that under the GST regime, most of the proceedings are system driven as has been stated by the learned Senior Standing Counsel for the respondent.

“The export incentives have been given to encourage exports, so that there is inward remittance of foreign currency. The procedure prescribed under the aforesaid Rules is not intended to defeat such legitimate export incentives, if indeed on facts there is export on payment of integrated tax under the provisions of IGST Act, 2017 r/w CGST Act, 2017,” the Court said.

“In my view, the procedures under Rule 96 of CGST Rules, 2017 cannot be applied strictly to deny legitimate export incentives that are available to an exporters,” the Court added.

It was also observed that the procedures prescribed under the aforesaid Rules should not be applied strictly so as to defeat the legitimate export incentives, which an exporter otherwise would have been entitled to but for the technicality involved in the system.

Allowing the writ petition, the Court held that “If indeed there was an export and a valid debit of tax by the petitioner on the exports made to foreign buyers, the refund shall be granted. The petitioner is also directed to furnish the details to the respondent within a period of 30 days from the date of receipt of a copy of this order. On receipt of the same, the respondent shall consider, verify the same from the counterparts from the customs department and proceed to sanction the refund claim, if the petitioner otherwise is entitled to such refund. It is made clear that procedural infraction shall not come in the legitimate way of grant of refund under the IGST Act, 2017 r/w CGST Act, 2017 and the Rules made thereunder.