Fake invoice

[ajay chharia]

Mr. A, an Importer and whole seller of Dry fruits sells its goods in open market after taking full amount in advance. As per trade practice transactions take place through brokers/ commission agents and buyer pay the brokerage or commission. Mr. A has sold the goods during tax period when E way bill was not implemented. As alleged by the department that buyer of Mr. A has indulged in passing the fake credit to its customers and at present he is not traceable. on the basis of same now Mr. A received the penalty notice for issuing the fake invoice. Mr. A has duly deposited the output tax and has only invoice copy issued to him against supply made and payment received in advance. Being local sale he has no builty/proof of dispatch as import consignment directly send to him either full or in parts to different customers. Mr. A has no storage facility of his own. no sale has been made to that particular customer after may,2018.Whether onus of proof is on Mr. A, pl provide legal decision in support of same, if any

[Sadanand Bulbule]

Dear Sir

Proof of actual supply of goods is indispensable besides other associated documents. Refer the landmark judgement dated 13/03/2023 of the Hon'ble Supreme Court rendered in the case of M/s.Ecom Gill Coffee Trading Pvt Ltd - 2023 (3) TMI 533 - SUPREME COURT

[Sadanand Bulbule]

State of Karnataka Vs. M/s Ecom Gill Coffee Trading Private Limited [2023 (3) TMI 533 - SUPREME COURT],

[ajay chharia]

Thanks, Mr. Sadanand Bulbule ji

In my query, Mr. A is seller, he has duly paid the gst. Allegation against him is of issuing fake invoice. Whether even such case onus of proof that he has supplied the goods and not fake invoice lies on him. Mr. A is dealing only in dry fruits from last about 10 years, even before GST era. Pl . give your valuable comments

[Sadanand Bulbule]

Dear Sir

1] Please clarify yourself as to what made to use the title " Fake Invoice" when admittedly there is payment of tax and the allegation of issuing fake invoice. In such allegation, the primary onus is on the taxpayer to prove its credibility. Otherwise it is on the department to prove with empirical evidence and the tax payer has every right to seek such evidence which needs to be supplied.

 However I expand my understanding of Tax Invoice Vs. Fake invoice as bellow:

2] The life of genuine ‘tax invoice’ is legally permanent, whereas the fate of "fake invoice" is stillborn-lifeless & useless. Fake invoice is “shadow invoice” which has no statutory power or substance. Such fake invoice symbolises the “impotent invoice” – the state of being flameless lamp.

3] The authority does not oppose or challenge genuine tax invoice which spontaneously reflects truth and harmonious mind and consequently wins ITC. Whereas in fake invoice, there is constant fear of denial of ITC and it is bound to be denied. There cannot be any justifying argument on such fake invoices. 

4] The scheme of GST Act is to pay tax on every of supply of goods or service or both on advalorem basis.Therefore assuming merely there is payment of margin amount of "GST", such transaction would not culminate into genuine supply unless the other statutory conditions  are complied properly.

I welcome your further query.

[KASTURI SETHI]

Sh.Ajay Chharia Ji,

The onus of proof is cast on the person  'A' to prove his innocence.

Full facts have not been disclosed in this query. Without full facts,  correct and concrete reply is not possible. 

In case the ingredients of mens rea  are present, no technical advice can help  as allegation of fake invoice is very grave and must have been levelled on some basis. The allegation of fraud cannot be taken lightly. This is my view. 

I agree with  all the replies of Sh.Sadanand Bulbule, Sir.

Declaimer : These are my personal views and meant for education purpose and not for any court proceedings.

[Shilpi Jain]

Mr. seems to have imported all his goods that he sells in the local market.

One way he can prove he has not issued bogus bills maybe is to correlate the imports quantity with the sale invoice quantity.

Imports cannot be made up as these are backed up by BoE.

[Shilpi Jain]

Also, is there any specific reason why department is alleging bogus invoicing by Mr. A? That has to be countered specifically.

AI Summary

Importer Faces Penalty for Allegedly Issuing Fake Invoices; Burden of Proof Under Scrutiny; Importance of Evidence Highlighted An importer and wholesaler of dry fruits, referred to as Mr. A, is facing a penalty notice for allegedly issuing fake invoices. Despite having paid the GST and having invoice copies for transactions made, Mr. A is accused of facilitating fake credit to customers, with the buyer now untraceable. The discussion revolves around whether the burden of proof lies with Mr. A to demonstrate the legitimacy of his transactions. Participants suggest that Mr. A should provide evidence of actual supply and counter the allegations by correlating import quantities with sales invoices. The importance of addressing the department's specific allegations is emphasized.