Pune based auto component firm under probe by director general of customs, excise

PUNE: The Pune investigation unit of the director general of customs, excise and investigation (DGCEI) has transferred a city-based auto-component maker’s Central Value Added Tax (CENVAT) fraud case to Delhi.

The auto-component maker (name withheld pending outcome of investigation) has allegedly forged Rs 25 crore of CENVAT on a total documented value of Rs 200 crore. In a raid on December 23, the DGCEI had found “fraudulent” invoices worth Rs 200 crore on which the company had claimed CENVAT credit.

“The company procured the invoices, but did not buy the underlying components. Then the company filed a set-off claim to get credit against the tax already paid on the input component of these invoices,” said a senior excise officer on the condition of anonymity.

CENVAT rules provide for setting-off of duties already paid on the input components of the final product. Typically the producer claims a CENVAT credit against the duties already paid on the input products, but in this case there was no input available. The accused had procured invoices worth Rs 200 crore from the market and got back a credit of Rs 25 crore at the rate of 12.5% of the invoice value.

The Delhi unit will now investigate the case and if the accused is proven guilty, the law provides for imprisonment of up to 7 years. About Rs 13 lakh in new currency notes were also found from the accused.

“Cases with frauds above Rs 2 crore are cognizable and non-bailable offences under the CENVAT rules,” said the officer.

It might take 6 months before the final outcome of the case is known. The DGCEI has recovered Rs 10 crore from the accused so far.

“Such fraudulent misuse of the CENVAT scheme is not uncommon and we keep taking periodic actions. But this is a big one,” the officer said.

Apart from the cash recovered from the accused, the case has “no proven nexus” with the demonetisation exercise. However, the officer said, it is surprising that he had Rs 13 lakh worth of new currency notes. The government has, so far, allowed current account holders to withdraw up to Rs 50,000 per week from branches.