Mumbai Sales Tax fraud – INR10 billion

Mumbai: In what has the potential to rock the diamond market, the state sales tax department is probing diamond imports worth Rs 1,000 crore for tax evasion.
An investigation carried out by the department's vigilance wing has revealed that several importers based in Mumbai manipulated details, to evade tax payment on rough polished diamonds, imported from Dubai and Hong Kong. "At least 27 firms registered in Mumbai and operating from the diamond hub near Opera House are under the scanner following the discovery," a senior department official, requesting anonymity, said.

Raids conducted by Maharashtra Sales Tax department have unearthed tax evasion of Rs 1,000 crore, involving 1,150 hawala dealer and 37,000 beneficiaries. "The checks were carried over last six months and FIRs have been filed in several cases," sales tax commissioner Sanjay Bhatia said.
The official attributed the accomplishment to the computerisation of the department. Of the total amount, Rs 400 crore have already been collected and the process to collect the remaining amount is underway, Bhatia said.
The sales tax department formed a special cell called Economic Intelligence Unit three years ago. It looks into cases of dealers claiming false credits, hiding turnover, and even hawala transfers. Hawala entails making bogus invoices to allow a trader to claim tax credits. In this racket, the hawala operator, posing as the 'seller', exists only on paper and gets a cut in return.

Some beneficiaries had even dragged the department to the Bombay High Court challenging the provisions of VAT Act, but the transparency and handling of voluminous transactions with precise accuracy as a result of the IT initiative, led to the Court upholding the actions of the department, he said.
The department raided major beneficiaries who have evaded a huge quantum and also sent notices to around 37,000 dealers across the state, giving them an opportunity to make payment and escape actions like prosecution, another department official said.
Police complaints against 125 dealers have been filed before the special Economic Offence Wing of police assisting Sales Tax department at Vikrikar Bhavan, Mazgaon and around 25 FIRs have been filed, the official said.
More police complaints under Indian Penal Code against hawala operators and the beneficiaries are in the offing. The department is ahead of commercial tax departments across the country as far as computerisation and effective e-governance initiative is concerned, he said. The hawala dealers defrauded the state government of Rs 1,000 crore rvenue through incorrect VAT claim of input tax
credit by their beneficiaries, he said.
The list of 1150 dealers has been published on the department's website www.mahavat.gov.in, he said.
The Sales Tax department has asked traders to come forward and voluntarily deposit the revenue that has been defrauded and escape prosecution. The official pointed out that the Nagpur Bench of Bombay High Court had given 45-day police custody to a CA who aided these hawala dealers.
He pointed out that even the Income Tax department has used information from Sales Tax department to raise demands of income tax evaded due to use of hawala bills for either reducing profit by accounting bogus turnover of purchases or showing fake expenses.

SOURCES : Times Of India