DGGI detects GST evasion of over Rs 108 cr
   Date :01-Aug-2020

DGGI_1  H x W:
 
 
Business Bureau ;
 
ON THE basis of intelligence regarding massive evasion of GST, searches were conducted by the officers of Directorate General of GST Intelligence (DGGI), Aurangabad Regional Unit on July 28 and 29 at the business premises of a manufacturer at Nanded of grain based alcoholic liquors, molasses based alcoholic liquors and malt spirits. In addition, searches were also conducted at the distillery of an Aurangabad based manufacturer of alcohols which are not fit for human consumption.
 
During the searches, it was revealed that the Nanded based distillery was suppressing the clearances of malt spirits (not fit for human consumption) by clearing them under the invoices with the classification ‘0000’ to other distilleries for manufacture of alcoholic liquors, malt spirits were found to be manufactured from barley which is malted, fermented and partly distilled to approximately 63% alcohol concentration. The scrutiny of the documents revealed that during the period July 2017 to June 2020, the taxpayer had cleared malt spirits valued at over Rs 70.03 crore without payment of GST of Rs 12.61 crore leviable thereon. The searches also revealed that while the taxpayers were paying Goods and Services Tax (GST) on a part of the clearances of alcohols not for human consumption, the clearances of an extremely large quantity of alcohols not fit for consumption were suppressed and such clearances were neither being reflected in the GSTR 3B returns filed by them nor was any GST being paid on such clearances.
 
The scrutiny of the documents revealed that during the period July 2017 to June 2020, the taxpayers had cleared alcohols not fit for human consumption, other than malt spirits, valued at over Rs 476 crore without payment of GST of Rs 85.68 crore leviable thereon. An ancillary aspect of evasion was also detected during the investigations that the taxpayers were clearing distillers grains with solubles by misclassifying these goods under heading 2302 (NIL GST) instead of under heading 2303 (5% GST). During the period from July 2017 to June 2020, the taxpayers had cleared these goods valued at over Rs 77 crore without payment of GST of Rs 3.85 crore leviable thereon.
 
The TRAN 1 credits availed by the taxpayers were thoroughly scrutinized from Central Excise/Service Tax angle and it was observed that the taxpayers had availed inadmissible credit of Rs 14,83,467 on cesses which are not allowed to be transitioned. The investigations were extended to the period prior to July 1, 2017 and it was observed that the taxpayers had availed CENVAT credit on common inputs and input services which were used for manufacturing of exempted goods (extra neutral alcohols and alcohols for human consumption) as well as non-exempted goods (denatured spirits/special denatured spirits). However, neither were separate accounts of these common inputs/input services maintained nor was any credit reversed by the taxpayers.
 
Therefore, the total amount payable by the taxpayers under Rule 6 of the CENVAT Credit Rules, 2004 is estimated to be approximately Rs 5 crore. The taxpayers have paid Rs 2.50 crore on the spot against the above liabilities. One of the taxpayers has requested for payment in instalments over the next two months which is being scheduled.