DGGI Detects Over Rs.17 Crore GST Evasion by Cement Manufacturer

The Directorate General of GST Intelligence (DGGI) office stated on 12 August 2020, saying that they have detected more than Rs.17 crore Goods and Service Tax (GST) evasion by a major cement manufacturer in Madhya Pradesh (MP) and arrested one of its directors. The statement contains the following details regarding the one-week long search operations which were conducted in 28 different places.

The department also conducted multiple searches in the states of Madhya Pradesh and Uttar Pradesh (UP) from 5 August 2020 to 11 August 2020 at various premises belonging to the cement manufacturer located at Satna, Maihar and their registered dealers and distributors. The searches have indicated that large quantities of cement and clinker have been supplied illegally without GST payment in the states of MP and UP. The searches were conducted at Satna, Maihar, Allahabad, New Delhi, Kanpur, Agra and Kushinagar.

A mob of people surrounded the team of DGGI officials during the factory search who threatened and interfered with the official proceedings. Immediate assistance from MP State Police was requested, which was provided spontaneously. The operation was further conducted under the security cover provided by the MP Police.

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It also revealed that more than four lakh tons of limestone had been procured more than what has been declared in the company records during the period from January 2020 till July 2020. The company appears to have manufactured cement and clinker by suppressing the procurement of limestone. The same was supplied illegally to various dealers and units in MP and UP without the payment of the GST.

The DGGI preliminary estimates GST evasion of Rs.15.1 crore during the seven months from January 2020 till July 2020. The officials also noticed that more than 12 lakh cement bags were found short in physical stocks when compared with the records maintained by the company.

The officials also recovered cash transactions in private records from company officials which revealed unaccounted cash credit of more than Rs.7.5 crore for a few months in the year 2018. The GST implication on these transactions is estimated at Rs.2.1 crore. The central GST officials have also recovered unaccounted cash of Rs.52.39 lakh during these searches.

Given the severe offences committed and the evidence collected, two directors of the company were identified as organisers and financial beneficiaries of this GST evasion case. One of the directors has been arrested on 12 August 2020 under the provisions of Central GST Act, 2017.

Another director has not joined the investigations despite being summoned for three times. Also, he produced a medical opinion with COVID-19 symptoms. However, he has now fled and is being traced by the officials. It is noticed that the absconding director has earlier convicted for an offence under Indian Penal Code (IPC) in the coal block allocation case by the Delhi District court in the year 2017.

The statement added that given the COVID-19 situation, all officials followed government directives on physical distancing and wore masks, gloves and other protective equipment during these search operations.

For any clarifications/feedback on the topic, please contact the writer at dvsr.anjaneyulu@cleartax.in