GST fraud: Telangana HC nixes relief plea of Sujana group’s front firms

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The Telangana high court on Thursday dismissed the pleas for relief by various directors of Sujana Universal Industries Ltd and several firms believed to be front companies of the Sujana Group from summons or likely arrests by GST officials probing fraudulent claims of input tax credit (ITC) of Rs 225 crore allegedly made by these directors. A bench of Justice V Ramasubramanian and Justice P Keshava Rao, which was hearing the pleas of directors from Sujana Universal, Hindustan Ispat Pvt Ltd, EBC Bearings and others, said: “In essence, the main allegation of the GST department against the petitioners is that they are guilty of circular trading by claiming input tax credit on materials they never purchased and passing on such input tax credit to companies to whom they never sold any goods. The department has estimated that fake GST invoices were issued to the total value of about Rs.1,289 crore and the benefit of wrongful ITC passed on by the petitioners is to the tune of about Rs.225 crore.”

The bench further said: “Generally, in all other fiscal laws, the offences that we have traditionally known revolve around evasion of liability. In such cases, the government is only deprived of what is due to them. But in cases of fraudulent ITC claims, a huge liability is created for the government. The acts committed by the petitioners constitute a threat to the very implementation of a law within a short duration of its inception”. The bench wondered about the ‘foresight’ displayed by the accused directors and the way they exploited a new law that was still at a nascent stage. “If, even before the GST regime is put on tracks, someone can exploit the law, without the actual purchase or sale of goods or hiring or rendering of services, projecting a huge turnover that remained only on paper, giving rise to a claim for input tax credit of about Rs.225 crore, then there is nothing wrong in the thinking of GST authorities that persons involved should be arrested,” the bench said.

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