Court orders probe into motor vehicles tax scam worth crores

There’s news for car dealers distorting invoices to duck tax on the sale of motor vehicles. The Bombay High Court on Wednesday ordered a probe into a tax scam where dealers manipulate cost figures, skimming tens and tens of crores off the exchequer.

The court directed the regional transport office (RTO) and the state transport commissioner to look into the con, after a member of a Nashik-based NGO filed a public interest litigation describing the method of the white-collar loot.

The activist, Sujit Nadkarni, stumbled upon the scam when he purchased a Maruti Swift VDI on March 30, 2008. He was issued an invoice, which said the car’s actual price was Rs 4,35,866 and the final amount after taxes Rs 4,90,349. “

Nadkarni, however, noticed that another copy of the invoice under the same invoice number was prepared by the car dealer for submission to the road transport authorities,” the petition stated.

The price of the car in this copy was shown as Rs 4,21,766 while the final amount was Rs 4,74,487. “While selling the car to Nadkani, the car dealer prepared two invoices under one number, one for the customer and the other for submission to the RTO. The motor vehicle tax of Rs 1,110 was thus evaded, although the same was collected by the car dealer from Nadkarni,” the petition added.  The offence of duplication of invoices is punishable under the sales tax laws.

Shot in the dark
Nadkarni then conducted a sample survey of tax evasion by fraudulent invoicing. Under the Right to Information Act, he requested the Nashik RTO to furnish copies of all vehicle invoices sold in the area during 2006, 2007 and 2008.

Since the cost involved in obtaining the information for all the vehicles was too high, Nadkarni restricted himself to 33 randomly chosen vehicles. Documents accessed by him showed that the exchequer had been cheated of around Rs 36,038 for those vehicles.

“If this figure is extrapolated to cover sales of all the cars sold in the state of Maharashtra, loss of revenue to the state, which would have otherwise accrued to the state under provisions of the Motor Vehicles Tax Act, would be crores of rupees,” stated the petition.

Nadkarni brought the issue to the notice of the authorities that conducted their own inquiries. In 2008, acting on his grievances, the RTO issued a circular on September 2, 2008 to all dealerships, saying the issue would be “viewed with seriousness”. But the cautionary word has not deterred dealers and the practice continues, the petition alleged.

The petitioner, Akhil Bharatiya Grahak Panchayat, represented by advocate SS Patwardhan, urged that data be collected and “reconciled” to bring the sweeping fraud to light.

“There is, prima facie, a loss to the exchequer… The transport commissioner is to conduct a detailed inquiry and file a report,” the division bench of justices AM Khanwilkar and AP Bhangale ordered. 

Sidestepping the law
How dealers dupe the govt:
>> On sale of a car, give customer a tax invoice showing that motor vehicle tax has been paid.
>> Make a facsimile of the invoice, watering down the actual cost of the car and tax payable on it
>> Give the first invoice to the customer, and the second to the government
w Pocket the difference in the amount, duping both customer and state exchequer8

Rs 1,500 Amount in motor vehicles tax evaded for every four-wheeler sold, as opposed to Rs 300 to 400 on the sale of a two-wheeler  

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