के न्द्रीय कर प्रधान आयुक्त का कार्यालय

OFFICE OF THE PRINCIPAL COMMISSIONER OF

CENTRAL TAX:
बेंगलूरू उत्तर आयुक्तालय, एच्. एम. टी भवन, गंगानगर:
BENGALURU-NORTH COMMISSIONERATE: HMT
BHAVAN, GANGA NAGAR
बेंगलूरू- 560 032 BENGALURU – 560 032.

DIN: Date: ‘As approved’

SCN Sl. No. /2023-24

SHOW CAUSE NOTICE

(Under Section 122 of CGST Act, 2017)

Tax period ACT/s Section/Rules/Notification/Circular

referred
July-2022 to IGST Act, Section 16, 31, 122(1) (ii) of the CGST
September 2022 2017, Act, 2017, Rule 36 of the CGST Rules,
CGST/SGST 2017, Section 20 of IGST Act, 2017,
ACT, 2017 Circular No. 171/03/2022-GST

Shri Aftab Alam, Proprietor of M/s. Aa Traders, having their principal

place of business at 64, 4th Cross, Kanaka Nagar, Bengaluru, 560032
(hereinafter referred to as “registered person”/“Taxpayer”/ “Noticee”), holder
of GSTIN-29ASSPA4827D1ZN, is registered for Supply of Goods falling under
HSN 0702 -Tomatoes, Fresh or Chilled, 0704 -Cabbages, Cauliflowers,
Kohlrabi, Kale And Similar Edible Brassicas, Fresh or Chilled, 0708 -
Leguminous Vegetables, Shelled or Unshelled, Fresh or Chilled, 0709 -Other
Vegetables, Fresh or Chilled And 0712 -Dried Vegetables, Whole, Cut, Sliced,
Broken or In Powder, BUT NOT FURTHER PREPARED and similar goods.

2. Brief Facts of the Case: Whereas, intelligence gathered by the officers

of the Headquarters Anti-Evasion unit and based on the data analytics done
from GST prime [https://gst.kar.nic.in/gstprime_cbic/] revealed that a unit
by the name of M/s. Aa Traders (Prop- Aftab Alam) having GSTN
29ASSPA4827D1ZN has taken registration on 22.04.2022 for the supply of
fresh or chilled vegetables, etc (HSN 0702). On further analysis from GSTR-
3B it was observed that the taxpayer has filed NIL GSTR-3B and GSTR-1
returns from April 2022 to August 2022. However, during the month of
September-2022 the taxpayer has filed GSTR-1 return (attached as
Annexure-A to this Show Cause Notice) showing taxable supply of
Rs.30,34,92,954/- involving GST of Rs.5,46,28,724/- (CGST
Rs.2,73,14,362/- and SGST Rs. 2,73,14,362/-) but the taxpayer has not filed
the GSTR-3B for the said month.

2.1 Whereas, on analysis it was observed that there is no GSTR-2A

available for the taxpayer in GST Prime. On further analysis of E-way bill
from e-way bill portal [https://mis.ewaybillgst.gov.in/] revealed the taxpayer
has neither generated any outward e-way bill nor received any inward e-way
bill. Hence, it appears that the taxpayer is raising fake invoice (without the
actual supply of goods) related to Scrap and passing ineligible ITC to their
recipients.

2.2 Whereas, an inspection was proposed to be conducted by the

Investigating team at the registered place of premises of the taxpayer, i.e. 64,
4th Cross, Kanaka Nagar, Bengaluru, 560032, to verify the veracity of the
ITC passed and the same was granted by the Additional Commissioner of
Central Tax, Bengaluru North Commissionerate. The principal place of
business of the M/s. Aa Traders was visited on 10.11.2022 under
the authorization for Inspection, dated: 09.11.2022 (attached as Annexure-
B to this Show Cause Notice) in the Form GST INS-01, vide
DIN 20221157YW0000013642 by the officers of Headquarters Anti-evasion.

2.3 Whereas, the unit M/s Aa Traders was found to be non-existing at the
address mentioned above and the principal place of business as registered
under GST was found to be a residential property. The owner of the property,
Mr. Mohammed Rafeeq informed that he had never let his premises to any
such person or firm. Vide his letter dated: 10.11.2022 (attached as
Annexure-C to this Show Cause Notice), he further informed that he had
never met any person with the name Aftab Alam and he told that the
signature in the rent agreement and the documents provided by M/s Aa
Traders to the GST department are forged. Further, At the time of GST
registration, TP had provided details of State Bank of India, Sukhpura,
District Ballia, Uttar Pradesh – 277304. Letter was written to branch to
provide KYC details and account statement. As per the KYC documents
received, PAN card (ERUPA8467A) provided in bank is different from that
declared in GST registration (ASSPA4827D) (attached as Annexure-D to
this Show Cause Notice). Bank account was opened in the year 2013. On
verification of account statement submitted for the period 22.04.2022 to
16.01.2023 highest value transaction is credit amounting to Rs.49,000. Sum
of all credit and debit transactions done during the period 22.04.2022 to
16.01.2023 is Rs. 1,37,270.67 and Rs. 1,37,623/- respectively.

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2.4 From the above, it appears that the registered person is involved into
issuance of fake invoices without actual supply of goods/services. It also
appears that registered firm was created/floated by some untraceable
persons in order to generate fake ITC without receipt of goods/services and
registered with GSTIN with a clear intent to pass on fraudulent Input Tax
Credit to their different customers without actual supply of goods/services to
enable them to avail ITC to evade payment of GST in cash.

3. Some of the relevant Provisions of Central Goods and Services Tax

Act (CGST Act), 2017 and Central Goods and Services Tax Rules (CGST
Rules), 2017 : -

3.1 Section 16 of the Central Goods and Services Tax Act (CGST), 2017
mandates the eligibility and conditions for taking Input Tax Credit. The
relevant provisions are re-produced below:

Section 16.
(1) Every registered person shall, subject to such conditions and restrictions as
may be prescribed and in the manner specified in section 49, be entitled to
take credit of input tax charged on any supply of goods or services or both to
him which are used or intended to be used in the course or furtherance of his
business and the said amount shall be credited to the electronic credit ledger of
such person.

(2) Notwithstanding anything contained in this section, no registered person

shall be entitled to the credit of any input tax in respect of any supply of
goods or services or both to him unless,––

(a) he is in possession of a tax invoice or debit note issued by a supplier

registered under this Act, or such other tax paying documents as
may be prescribed;
(b) he has received the goods or services or both.
(c) subject to the provisions of section 41, the tax charged in respect of
such supply has been actually paid to the Government, either in cash or
through utilisation of input tax credit admissible in respect of the said
supply;

3.2 Rule 36 of the GGST Rules, 2017, states as follows:

(1) The input tax credit shall be availed by a registered person, including
the Input Service Distributor, on the basis of any of the following
documents, namely:-

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 (a) An invoice issued by the supplier of goods or services or both in
accordance with the provisions of Section 31.
(b) ……
(c) ……

3.3 Section 31 of the Central Goods and Services Tax Act (CGST), 2017, is
re-produced below:

Section 31:
(1) A registered person supplying taxable goods shall, before or at the
time of,---
(a) removal of goods for supply to the recipient, where the supply involves
movement of goods; or
(b)delivery of goods or making available thereof to the recipient, in any
other case, issue a tax invoice showing the description, quantity and value
of goods, the tax charged thereon and such other particulars as may be
prescribed.

3.4 In terms of Section 122 of the Central Goods and Services Tax Act
(CGST), 2017:

Section 122.

(1) Where a taxable person who—

(i) …..
(ii) issues any invoice or bill without supply of goods or services or
both in violation of the provisions of this Act or the rules made
thereunder;
(iii) …..
(iv) …..
(v) …..
(vi) …..
(vii) takes or utilizes input tax credit without actual receipt of goods or
services or both, either fully or partially, in contravention of the
provisions of this Act or the rules made thereunder;
(viii) …..
(xxi) furnishes any false information with regard to registration
particulars, either at the time of applying for registration, or
subsequently ;

he shall be liable to liable to pay a penalty of ten thousand rupees or an

amount equivalent to the tax evaded or the tax not deducted under section 51

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or short deducted or deducted but not paid to the Government or tax not
collected under section 52 or short collected or collected but not paid to the
Government or input tax credit availed of or passed on or distributed
irregularly, or the refund claimed fraudulently, whichever is higher. …….

(3) Any person who ––

(a) aids or abets any of the offences specified in clauses (i) to (xxi) of sub-
section (1);
(b) acquires possession of, or in any way concerns himself in
transporting, removing, depositing, keeping, concealing, supplying, or
purchasing or in any other manner deals with any goods which he knows
or has reasons to believe are liable to confiscation under this Act or the
rules made thereunder;
(c) receives or is in any way concerned with the supply of, or in any
other manner deals with any supply of services which he knows or has
reasons to believe are in contravention of any provisions of this Act or the
rules made thereunder;
(d) fails to appear before the officer of central tax, when issued with a
summon for appearance to give evidence or produce a document in an
inquiry;
(e) fails to issue invoice in accordance with the provisions of this Act or
the rules made thereunder or fails to account for an invoice in his books of
account,
shall be liable to a penalty which may extend to twenty-five thousand rupees.

4. Quantification:

4.1 Summary of B2B outward supplies month-wise as per the GSTR-1

returns is detailed as below:
Total Taxable
Month CGST SGST Total
Value
Sep-22 30,34,92,954 2,73,14,362 2,73,14,362 5,46,28,724

4.2 From the table above, it appears that the taxpayer has only shown
outward supply of Rs.30,34,92,954/- involving a total GST amount of
Rs.5,46,28,724/- in their GSTR-1 returns, thereby passing on the ITC to
their recipients and the same appears to be irregular in terms of Section 31
of CGST Act, 2017.

Page 5 of 13
5. Contraventions:

5.1 SECTION 16. Eligibility and conditions for taking input tax
credit.
(1) Every registered person shall, subject to such conditions and restrictions
as may be prescribed and, in the manner, specified in section 49, be entitled
to take credit of input tax charged on any supply of goods or services or both
to him which are used or intended to be used in the course or furtherance of
his business and the said amount shall be credited to the electronic credit
ledger of such person.

(2) Notwithstanding anything contained in this section, no registered

person shall be entitled to the credit of any input tax in respect of any supply
of goods or services or both to him unless, —

(a) he is in possession of a tax invoice or debit note issued by a supplier

registered under this Act, or such other taxpaying documents as may be
prescribed;

(b) he has received the goods or services or both.

(c) subject to the provisions of section 41, the tax charged in respect of
such supply has been actually paid to the Government, either in cash or
through utilisation of input tax credit admissible in respect of the said
supply;

Further, in terms of Rule 36 of the CGST Rules, 2017, the input tax credit
shall be availed by a registered person, including the Input Service
Distributor, on the basis of any of the following documents, namely an
invoice issued by the supplier of goods or services or both in accordance with
the provisions of Section 31 of the CGST Act, 2017. From the provisions of
Rule 36 of the CGST Rules, 2017 and Section 31 of Central Goods and
Services Tax Act (CGST), 2017, it is clear that a registered person supplying
taxable goods can issue a tax invoice before or at the time of delivery of goods
but within a prescribed period and as a corollary, the registered person shall
not issue a tax invoice without supply of goods. In the instant case, it
appears that M/s. Aa Traders have contravened the provisions of Section 16
(2) (b) of CGST Act, 2017 read with Rule 36 of the CGST Rules, 2017.

5.2 Section 31 of the Central Goods and Services Tax Act (CGST), 2017, is
re-produced below:

Page 6 of 13
 Section 31:
(2) A registered person supplying taxable goods shall, before or at the
time of,---
(c) removal of goods for supply to the recipient, where the supply involves
movement of goods; or
(d)delivery of goods or making available thereof to the recipient, in any
other case, issue a tax invoice showing the description, quantity and value
of goods, the tax charged thereon and such other particulars as may be
prescribed.

5.3 SECTION 122. Penalty for certain offences.

(1) Where a taxable person who —

(ii) issues any invoice or bill without supply of goods or services or both in
violation of the provisions of this Act or the rules made thereunder;

(vii) takes or utilises input tax credit without actual receipt of goods or
services or both either fully or partially, in contravention of the provisions of
this Act or the rules made thereunder;

he shall be liable to pay a penalty of ten thousand rupees or an amount

equivalent to the tax evaded or the tax not deducted under section 51 or
short deducted or deducted but not paid to the Government or tax not
collected under section 52 or short collected or collected but not paid to the
Government or input tax credit availed of or passed on or distributed
irregularly, or the refund claimed fraudulently, whichever is higher.

5.4 Section 155. Burden of proof-

Where any person claims that he is eligible for input tax credit under this
Act, the burden of proving such claim shall lie on such person.

6. Whereas, it further appears that, M/s Aa Traders has deliberately

suppressed the fact of having indulged in trading of bills without actual
movement of goods, passing on input tax credits on the basis of bills /
invoices issued in the activity of trading of bills without actual supply of
goods/services, with a deliberate and willful intent to hoodwink and defraud
the Department by accommodating fraudulent input tax credits and passing
on the said fraudulent input tax credits, in the guise of paying GST, to enable
the other parties in the cycle of trading of bills to take/avail fraudulent input
tax credit. It also appears that the above would not have come to light but for
the investigation by the Department into the fraudulent trading activity by
some dishonest coterie of companies/firms.

Page 7 of 13
7. Penal provisions

7.1 Vide Circular No. 171/03/2022-GST issued by TRU, the following

clarification has been given on the applicability of penalty under Section 74
and Section 122 for cases involving availment of fake ITC and issuance of
fake invoices.

Sl. No. Issues Clarification

1. In case where a Since there is only been an issuance of tax

registered person “A” invoice by the registered person ‘A’ to
has issued tax invoice registered person ‘B’ without the
to another registered underlying supply of goods or services or
person “B” without any both, therefore, such an activity does not
underlying supply of satisfy the criteria of “supply”, as defined
goods or services or under section 7 of the CGST Act. As there
both, whether such is no supply by ‘A’ to ‘B’ in respect of such
transaction will be tax invoice in terms of the provisions of
covered as “supply” section 7 of CGST Act, no tax liability
under section 7 of Circular No.171/03/2022-GST Page 2 of 4
CGST Act and whether the provisions of section 73 or section 74
any demand and of CGST Act. Also, whether any penal
recovery can be made action can be taken against registered
from ‘A’ in respect of person ‘A’ in such cases. arises against ‘A’
the said transaction for the said transaction, and accordingly,
under no demand and recovery is required to be
made against ‘A’ under the provisions of
section 73 or section 74 of CGST Act in
respect of the same. Besides, no penal
action under the provisions of section 73
or section 74 is required to be taken
against ‘A’ in respect of the said
transaction. The registered person ‘A’
shall, however, be liable for penal action
under section 122 (1)(ii) of the CGST Act
for issuing tax invoices without actual
supply of goods or services or both.

2. A registered person “A” Since the registered person ‘B’ has availed
has issued tax invoice and utilized fraudulent ITC on the basis of
to another registered the said tax invoice, without receiving the
person “B” without any goods or services or both, in contravention
underlying supply of of the provisions of section 16(2)(b) of

Page 8 of 13
 goods or services or
both. ‘B’ avails input
tax credit on the basis
of the said tax invoice.
B further issues invoice
along with underlying
supply of goods or
services or both to his
buyers and utilizes ITC
availed on the basis of
the above mentioned
invoices issued by ‘A’,
for payment of his tax
liability in respect of his
said outward supplies.
Whether ‘B’ will be
liable for the demand
and recovery of the said
ITC, along with penal
action, under the
provisions of section 73
or section 74 or any
other provisions of the
CGST Act.
3. A registered person ‘A’
has issued tax invoice
to another registered
person ‘B’ without any
underlying supply of
goods or services or
both. ‘B’ avails input
tax credit on the basis
of the said tax invoice
and further passes on
the said input tax
credit to another
registered person ‘C’ by
issuing invoices
without underlying
supply of goods or
services or both.
Page 9 of 13
CGST Act, he shall be liable for the
demand and recovery of the said ITC,
along with penal action, under the
provisions of section 74 of the CGST Act,
along with applicable interest under
provisions of section 50 of the said Act.
Further, as per provisions of section
75(13) of CGST Act, if penal action for
fraudulent availment or utilization of ITC
is taken against ‘B’ under section 74 of
CGST Act, no penalty for the same act, i.e.
for the said fraudulent availment or
utilization of ITC, can be imposed on ‘B’
under any other provisions of CGST Act,
including under section 122.
In this case, the input tax credit availed
by ‘B’ in his electronic credit ledger on the
basis of tax invoice issued by ‘A’, without
actual receipt of goods or services or both,
has been utilized by ‘B’ for passing on of
input tax credit by issuing tax invoice to
‘C’ without any underlying supply of goods
or services or both. As there was no
supply of goods or services or both by ‘B’
to ‘C’ in respect of the said transaction, no
tax was required to be paid by ‘B’ in
respect of the same. The input tax credit
availed by ‘B’ in his electronic credit ledger
on the basis of tax invoice issued by ‘A’,
without actual receipt of goods or services
or both, is ineligible in terms of section 16
(2)(b) of the CGST Act. In this case, there
 Whether ‘B’ will be was no supply of goods or services or both
liable for the demand by ‘B’ to ‘C’ in respect of the said
and recovery and penal transaction and also no tax was required
action, under the to be paid in respect of the said
provisions of section 73 transaction. Therefore, in these specific
or section 74 or any cases, no demand and recovery of either
other provisions of the input tax credit wrongly/ fraudulently
CGST Act. availed by ‘B’ in such case or tax liability
in respect of the said outward transaction
by ‘B’ to ‘C’ is required to be made from ‘B’
under the provisions of section 73 or
section 74 of CGST Act. However, in such
cases, ‘B’ shall be liable for penal action
both under section 122(1)(ii) and section
122(1)(vii) of the CGST Act, for issuing
invoices without any actual supply of
goods and/or services as also for taking/
utilizing input tax credit without actual
receipt of goods and/or services.

7.2 From the above acts of omission and commission as mentioned in Sl

no 2, it appears that M/s Aa Traders have rendered themselves liable for
imposition of penalty under the provisions of:

 Section 122(1)(ii) and section 122(1)(vii) of the Central Goods and

Services Tax Act, 2017 for availing input tax credit without actual
receipt of goods/services in contravention of the provisions of the Act
or the rules made thereunder.

8. Wherever the provisions of CGST Act, 2017 are referred above the
corresponding provisions of SGST (KGST) Act / Rules, 2017 and the rules
made thereunder are deemed to have been applied / invoked.

9. Now, therefore, M/s. Aa Traders (Prop: Shri Aftab Alam), with declared
principal place of business at 64, 4th Cross, Kanaka Nagar, Bengaluru,
560032 (GSTIN-29ASSPA4827D1ZN) is hereby required to show cause to the
Additional/ Joint Commissioner of Central Tax, North Division-5, GST North
Commissionerate, No.59, HMT Bhavan, Bellary Road, Bengaluru (Bangalore)
-560032, the adjudicating authority, as to why:

Page 10 of 13
(i) They should not be held as having indulged in the fraudulent activity of
trading of bills without actual movement of goods during the month of
September, 2022.

(ii) Input tax credit of Rs.5,46,28,724/- (CGST Rs.2,73,14,362/- and SGST

Rs. 2,73,14,362/-) (Rupees Five Crores, Forty Six lakh Twenty Eight
thousand Seven hundred and Twenty Four Only) availed by the taxpayer
without actual receipt of goods/services should not be treated as irregular;
and the said ITC should not be demanded, in contravention of the provisions
of Section 16 of the CGST Act, 2017 and the corresponding SGST Act, 2017;

(iii) Interest on the amount at 9(ii) above should not be demanded and
recovered from them;

(iv) Penalty should not be imposed on them under the provisions of section
122(1)(vii) of the Central Goods and Services Tax Act, 2017 / State Goods
and Services Tax Act, 2017, for availing ineligible input tax credit of
Rs.5,46,28,724/- (CGST Rs.2,73,14,362/- and SGST Rs. 2,73,14,362/-)
(Rupees Five Crores, Forty Six lakh Twenty Eight thousand Seven
hundred and Twenty Four Only) without actual receipt of goods/services,
as discussed in Para 2 above, in violation/contravention of the provisions of
these Acts and the rules made thereunder;

(v) An amount of Rs.5,46,28,724/- (CGST Rs.2,73,14,362/- and SGST Rs.

2,73,14,362/-) (Rupees Five Crores, Forty Six lakh Twenty Eight
thousand Seven hundred and Twenty Four Only) passed on to their
supplier by filing their GSTR-1 for the month of September 2022 as input tax
credit without actual supply of goods/services should not be treated as
irregular; in contravention of the provisions of Section 31 of the CGST Act,
2017 and the corresponding SGST Act, 2017;

(vi) Penalty should not be imposed on them under the provisions of section
122(1)(ii) of the Central Goods and Services Tax Act, 2017 / State Goods and
Services Tax Act, 2017, for passing on input tax credit of Rs.5,46,28,724/-
(CGST Rs.2,73,14,362/- and SGST Rs. 2,73,14,362/-) (Rupees Five Crores,
Forty Six lakh Twenty Eight thousand Seven hundred and Twenty Four
Only) without actual supply of goods/services, as discussed in Para 2 above,
in violation/contravention of the provisions of these Acts and the rules made
thereunder;

10. M/s. Aa Traders (Prop: Shri Aftab Alam) is further directed to produce all
evidences upon which he intends to rely upon, in support of their defense, while
showing cause to this notice.

Page 11 of 13
11. M/s. Aa Traders (Prop: Shri Aftab Alam) is also required to indicate in
their written reply as to, whether he desires to be heard in person, before the
case is adjudicated. If no such specific mention is made, it would be
presumed that he does not desire a personal hearing.

12. M/s. Aa Traders (Prop: Shri Aftab Alam) is also required to note that, if
no cause is shown against the aforesaid proposals within THIRTY (30) days of
the date of receipt of this notice, and or if he fail to appear before the
adjudicating authority when the case is posted for personal hearing, the case
will be decided ex-parte, based on merits and evidence available on record.

13. This show cause notice is being issued without prejudice to any other
action that may be initiated against the Taxpayer (s) herein, under the
provisions of CGST ACT, 2017 or the rules made there under or any other
law for the time being in force.

14. Wherever the provisions of CGST Act, 2017 are invoked in the above
Notice, the IGST Act, 2017/GST Act, 2017 of States and the rules made there
under are also deemed to be applied/invoked.

15. Further, this notice is issued without prejudice to the right to support
it with any material evidence which may be collected at a later date and
which may be considered relevant to the proceedings in this matter. The
department reserves the right to add, amend, modify, delete any part or
portion of this notice and any such addendum, amendment, modification,
deletion, if made, shall be deemed to be part and parcel of this notice.

16. The proposals made as above are based on the following documents:

Description of relied upon document

Sl. No.
Annexure A GSTR-1 return for the month of September-2022
Annexure B Form GST INS-01, dated: 09.11.2022
letter dated: 10.11.2022 from the owner of the
Annexure C
property, Mr. Mohammed Rafeeq.
Annexure D KYC and bank details of the taxpayer

(डॉ. प्रदीप के पी /Dr. Pradeep K P)

Page 12 of 13
 संयुक्त आयुक्त / Joint Commissioner

To,
M/s. Aa Traders (Prop: Shri. Aftab Alam),
64, 4th Cross, Kanaka Nagar,
Bengaluru, 560032
GSTIN-29ASSPA4827D1ZN

Copy submitted to:

 The Additional Commissioner/Joint Commissioner of Central Tax,

Adjudication Section, North Division-5, Bengaluru North
Commissionerate- (for Adjudication);

Copy to:
 The Deputy Commissioner/Assistant Commissioner of Central
Tax, North Division-5, Bengaluru North Commissionerate;
 The Superintendent of Central Tax, CND-5 Range, Bengaluru North
Commissionerate;
 Master File/ Office Copy.

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