Tax evasion of over Rs 2,600 cr detected

Coming down heavily on tax defaulters, financial intelligence agencies have detected tax and duty evasion of over Rs 2,600 crore (Rs 26 billion) in the last quarter ended December.

The Directorate General of Central Excise Intelligence (DGCEI) and Directorate General of Revenue Intelligence (DRI) - two lead financial intelligence agencies under the Revenue department - have detected service tax and central excise and customs duties evasion of Rs 2,670.51 crore (Rs 26.70 billion) and recovered over Rs 880 crore (Rs 8.8 billion) from various defaulters during the period.

In addition to crackdown on tax evaders, the DRI has seized contraband worth Rs 504.39 crore (Rs 5.04 billion) which was attempted to be smuggled into or out of the country.

The agency detected 143 cases of customs duty evasion to the tune of Rs 701.17 crore (Rs 7.01 billion) during Oct-Dec 2012, Director General of DRI, Najib Shah said.

As many as 62 persons were arrested under the Customs Act, 1962 by DRI alone in this quarter on charges of evasion of customs duties, he said.

"Customs duties to the tune of Rs 369.34 crore (Rs 3.69 billion) were recovered by the DRI in the third quarter of the current financial year which is more than the total recoveries of Rs 362.04 crore (Rs 3.62 billion) made in the last financial year," Shah said in a press release giving details of DRI's performance.

Investigations are also underway in cases of misuse of exemption notifications and undervaluation of imports involving evasion of customs duty of more than Rs 1,000 crore (Rs 10 billion) by the DRI, he said.

Another stringent action taken was preventive detention of 13 persons under the COFEPOSA (the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act), 1974 in FY 2012-13 (up to December 2012).

A person can be detained for a year with a view to, inter-alia, prevent him from smuggling goods or abetting in smuggling of goods under COFEPOSA.

The trends of smuggling indicate gold smuggling not only by way of outright smuggling but also through commercial manipulations including misuse of Free Trade Agreement with Thailand, the official said.

Other trends in outright smuggling include smuggling of Fake Indian Currency Notes (FICN) from Bangladesh, heroin from Pakistan across the Indo-Pak Border, hashish from Nepal, miscellaneous contraband like cigarettes, scotch whiskey, branded shoes, Ozone depleting refrigerant gases, branded shoes etc from China, smuggling of high-end watches from Europe etc, he said.

Red Sanders, an endangered species of sandalwood much in demand in China

and Japan, continues to be smuggled in container loads out of India, he said.

On commercial side, the frauds detected by DRI, include apart from several cases of undervaluation of imports and overvaluation of exports, novel cases such as undervaluation and misuse of exemption relating to import of aircraft by non-scheduled operators, money laundering by over invoicing of imported drawings/designs, illegal export of Urea etc.

The Directorate General of Central Excise Intelligence (DGCEI), the apex law enforcement agency responsible for checking evasion of central excise duty and service tax evasion, has similarly been targeting evaders and taking stringent action.

Since October, 2012, the DGCEI has detected 315 cases of evasion of service tax involving an amount of Rs 1,700 crore (Rs 17 billion), its Director General J Chaturvedi said giving details of the department's performance.

Further, about Rs 445 crore (Rs 4.45 billion) towards service tax has been either recovered or the payment in the near future has been committed by the evaders, he said.

The amount is more than double the amount of service tax realised during the corresponding period of the last financial year, the official said.

"The trend in evasion in service tax indicates that in a large number of cases, the evaders had collected service tax but had not deposited the same with the government or had provided taxable services without filing any return or depositing service tax," he said.

In many of such cases the service receivers had also taken cenvat credit of the service tax though the same was not paid by the service providers, thereby affecting adversely the revenue collection, Chaturvedi said.

Revenue Secretary Sumit Bose had earlier this month strongly advocated government's zero tolerance policy against tax evaders and cautioned customs, central excise and service tax defaulters of stringent action.

Since October, 2012, the DGCEI has detected 97 cases involving evasion of central excise duty of Rs 268.80 crore (Rs 2.68 billion) and has also recovered nearly Rs 70 crore (Rs 700 million) towards central excise duty, the Director General said.

Further, the DGCEI has already sanctioned prosecution of offenders in twelve cases and is also contemplating launching of prosecution against several other offenders.

"The modus operandi involved in these cases are clandestine removal without payment of central excise duty, and misuse of cenvat credit scheme by manufacturers and registered dealers by indulging in paper transactions only without the movement of goods," he said.

The trend shows evasion largely in iron & steel and non-ferrous metals, Chaturvedi said.