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December 13, 2020

Chartered Accountant Arrested by GST Officials for Fake ITC Claim in GST Know Punishment

by facelesscompliance in GST

Chartered Accountant Arrested by GST Officials for Fake ITC Claim in GST Know Punishment

GST Officials Arrest Chartered Account for availing Fraudulent Input Tax Credit using Fake GST Invoice in Mumbai on 12 December 2020

Central Goods and Services Tax, Mumbai West, Investigation team has announced the arrest of Mr. Chandraprakash Pandey, Partner of M/s. C.P. Pandey & Associates. He was arrested on account of indulging in circular trading by way of issuing fake invoices, availing and passing on fraudulent Input Tax Credit (ITC) involving GST of Rs 10.63 Crores (approx.) on turnover of Rs. 59.10crores (approx.)

On the basis of specific intelligence gathered by the GST Officials of Investigation Wing, Mumbai West Commissionerate, investigation was conducted revealing that Mr. C.P. Pandey, CA & Partner have created numerous companies in the name of his family members which were indulging in issuance of invoices without any actual supply of goods/services. Also was enabling other companies to avail ITC on invoices for which no goods/services were supplied, in violation of provisions of the CGST Act, 2017.

This modus operandi enabled buyers/other companies to avail inadmissible ITC thereby causing loss to the government exchequer and also to inflate the turnover in these companies enabling them to obtain bank loans. These transactions are nothing but paper transactions with no actual supply of goods, which in commercial parlance is circular trading.

The preliminary investigation has unveiled a network of around 50 firms registered in the same premises and involved in fraudulent activity of circular trading. Mr. C.P. Pandey, was arrested on 10th December, 2020 and produced before the Magistrate Court, Mumbai on 11th December, 2020, wherein he was remanded to judicial custody f or14 days. Further investigation is under progress.

Prosecution Under GST

The prosecution is conducting legal proceedings against someone in respect of a criminal charge.

A person committing an offense with the deliberate intention of fraud, becomes liable to prosecution under GST, i.e., face criminal charges. A few examples of these offenses are-

  • Issue of an invoice without supplying any goods/services- thus taking input credit or refund by fraud
  • Obtaining refund of any CGST/SGST by fraud
  • Submitting fake financial records/documents or files, and fake returns to evade tax
  • Helping another person to commit fraud under GST

What is the penalty for CA helping someone to commit fraud under GST?

Any person who does the following will have to pay a penalty extending upto Rs. 25,000

  • Helps any person to commit fraud under GST
  • Acquires/receives any goods/services with full knowledge that it is in violation of GST rules
  • Fails to appear before the tax authority on receiving a summons
  • Fails to issue an invoice according to GST rules
  • Fails to account/vouch any invoice appearing in the books

Can CA be Jailed for GST Fraud?

Yes, GST has corporal punishments (jail) for high value fraud cases as follows-

Tax amount involved100-200 lakhs200-500 lakhsAbove 500 lakhs
Jail termUpto 1 yearUpto 3 yearsUpto 5 year
FineIn all three cases

These punishments are applicable along with monetary penalty.

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