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 ACIT, Central Circle 07, New Delhi. vs. M/s. R. J. Corp Ltd., F 2/7, Okhla Indl. Area, Phase I, New Delhi.
 Experion Hospitality Pvt. Ltd. F-9, First Floor, Manish Plaza 1, Plot No. 7, M. L. U, Sector-10, Dwarka Delhi Vs. ACIT Circle-8(2) New Delhi
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  Sh. Chakra Dhari Sureka, M-14B, South Extn. Part-II, New Delhi Vs. The Asstt. Commissioner of Income Tax, Central Circle-3, New Delhi
 ASHOK KUMAR GUPTA, 299, DEEPALI ENCLAVE, PITAMPURA, NEW DELHI Vs. ITO, WARD 40(3), NEW DELHI
 B.M. Malhotra & Sons Ltd., C/o Kapil Goel, Advocate, F-26/124, Sector 7, Rohini, Delhi Vs. Income Tax Officer, Ward 4(1), New Delhi.

Tax department cannot block import export code (IEC): Bombay High Court
November, 10th 2020

The Goods and Services Tax Department (GST) blocking the import export code (IEC)—a 10 digit identification number similar to a license for exporting— is illegal and invalid a Bombay High Court ruled.

The court was hearing a matter where the indirect tax department after investigations found that an exporter was using fake input tax credit to set off GST liabilities. Input tax credits are essentially part of the tax paid by a company that can be used to set off future tax liability.

Tax department alleged that the exporter was intending to get ineligible return and trying to “defraud” the government. Following this, the tax department attached the bank account and blocked IEC code.


The exporter had then approached the court in the matter. The court ruled that suspension and cancellation of IEC can only be done under FTDR Act (Foreign Trade (Development and Regulation) by the DGFT or an officer of DGFT a report by Asire Consulting said.

The tax department meanwhile has found several discrepancies in input tax credit. The tax department is keen to stop the fake input tax credit usage as it directly impacts revenue of the government.

ET had on November 4 reported that the tax department has started blocking input tax credit of many companies suspecting that they were fraudulently availing it either by creating a fake trail of shell companies or through fake invoices.

The tax department has triggered a particular section— section 86A — to block the credit for a year under the Goods and Services Tax (GST) framework. Input tax credits are essentially part of the tax paid by a company that can be used to set off future tax liability.

People in the know say that the tax department’s investigations revealed that several companies were manipulating the input tax credit mechanism.


Blocking of the tax credits comes after the revenue department started arresting promoters for allegedly claiming tax credits through fake invoices and escaping GST. The dispute over the taxman’s power to arrest promoters of companies and attach their bank accounts over suspected evasion of goods and services tax was challenged in courts.

Experts however opine that there are in fact several instances where individuals and companies are using the GST system to manipulate and benefit. Like in a recent case, a 25-year-old student of chartered accountancy (CA) was arrested by the tax officials for committing a fraud to the tune of Rs 50.24 crore through input tax credit manipulation, TOI reported on October 22.

 
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