Catching VAT refund scam perpetrators not easy

Sushil Manav

Tribune News Service

Chandigarh, December 2

The registration of FIRs by the police and money laundering cases by the Enforcement Directorate (ED) notwithstanding, chances of recovery of wrongful gains made by traders in the multi-crore VAT scam in Haryana is a Herculean task, according to insiders.

Sources in the Excise and Taxation Department maintain that though recovery demands worth several hundred crores have been raised against firms responsible for duping the department, it is almost impossible to recover the money.

Those in whose names the firms had been registered were merely faces for others who actually perpetrated the crime in connivance with certain unscrupulous department officials. The ED recently registered enforcement case information report against 58 firms, including over 15 from Haryana, for the scam. The sources said recovery demands worth around Rs 300 crore had been raised by the department in Sirsa district alone, where FIRs were lodged against 14 firms, 12 in Sirsa and two in Mandi Dabwali. Similar FIRs had been lodged and demands raised in some other districts, including Kaithal, Jhajjar and Gurugram.

The sources said real perpetrators of the crime had reputed firms in their respective towns and were involved in various trades, mostly in grain markets.

Their modus operandi, that largely started in 2008-09 and continued till 2013-14, was to get firms registered in the names of poor workers, mostly migrant labourers from UP and Bihar, with the help of some unscrupulous officials of the department and claim fake refund through the firms. The firms procured fake purchase bills of commodities with high VAT, like cigarettes with 20 per cent tax, and showed sale outside Haryana. Since no VAT was to be recovered except for central sales tax while selling goods outside the state, the firms would claim VAT refund from the department based on fake sale and purchase bills. For this, the perpetrators had opened their firms in Gujarat, Chandigarh, Punjab, Rajasthan and other states so that bills could be easily raised or procured. A refund of Rs 1 crore was possible by procuring fake cigarette bills worth Rs 5 crore. In Gujarat, VAT on cigarettes was higher at 30 per cent.

The Gujarat Police had been inquiring about 31 fake firms from Sirsa after their role in illegal transactions worth Rs 250 crore by cigarette traders in Gujarat using fake bills. They could not find any person in whose name the firms had been registered.