FRONT PAGE | Monday, January 5, 2009 | Email | Print | 
How to make Rs 125 cr for free? Ask Xenitis
Durbar Ganguly | New Delhi
The Xenitis story turns even more curious if one takes a look at the gullibility of banks which queued up to fund the promoters. The company had shown secured and unsecured loans at Rs 173 crore and Rs 31.17 crore respectively as on September 30, 2007, as mentioned on page 10 of the Draft Red Herring Prospectus (DRHP).
This is besides the cash credit enjoyed in excess of Rs 200 crore from a consortium of 11 banks, led by UCO Bank, as listed in the DRHP (page 15) and other banks like Development Credit Bank, Shakespeare Sarani branch, Axis Bank etc. The company borrows from one bank to pay another and every year it has to show healthy increase in top line to get higher loans and higher cash credit limits from banks so that the previous liabilities to them can be met by new borrowings. This is blatant abuse of public money.
But siphoning off this money, borrowed from banks, was not the sole purpose of inflating the business volumes. A news item on April 16, 2008, in The Economic Times, Kolkata edition, shows how Santanu Ghosh, the Xenitis owner, sold 5 per cent of his personal stakes in the company to SBI for Rs 25 crore and that another 20 per cent would be offloaded this year. Thus, within this year, Ghosh aims to earn Rs 125 crore by off-loading his personal stakes in the company.
Evidently all the window-dressing was not merely to borrow from banks to run the business, but to create a platform for selling the business itself to earn riches for the promoter. Earning personal riches of Rs 125 crore in five years from the profits of a legitimate business is a Herculean task. By window-dressing the books and logging in huge fake turnover, Ghosh did better to entice institutions into buying his personal stakes in the business.
The company did not claim any manufacturing capacity for the items like monitor, HDD, RAM and motherboard. Therefore, the company obviously traded in such items. In 2006-07, such sales were shown at Rs 225.6 crore, ie 36.33% of the total sales. A similar amount, ie Rs 212.77 crore of trading sales, was achieved in 6ME 30.9.07, constituting almost half of the company’s turnover. A dealer can show any amount of turnover at no cost of paying sales tax or VAT, just by cooking up similar amount of fake purchase because in the VAT regime, tax payable on sales is offset by the tax payable on purchase.
The Central Excise investigation revealed that, to clock up fake turnover, the company had set up a network of phantom dealers, who were registered under the WBVAT Act, 2003, and had no business activity other than transactions with the company or with another entity within this network.
All such transactions were solely on paper and were not backed by any actual transfer of goods and the motif of such mischief was to claim false input tax credit, logging up fake purchases from such phantom dealers.
From verification of bank accounts, it transpired that payments had been made against only a fraction of such purchases and these too had immediately been routed back to the company. One such network of more than 20 phantom dealers was maintained by one Mahesh Kedia, FCA, who had his office at Afreen Plaza, 7 Munshi Sadruddin Lane, Kolkata.
Kedia claims that neither he nor the persons in whose name such paper transactions were run were duly paid for such services. The company allegedly hounded him out of its premises when he went there to collect his charges. As his claims cannot be settled in a court of law, Kedia is resorting to tantriks to collect his dues. In fact, the Directorate of Sales Tax has nailed at least Rs 150 crore of trading turnover in 2006-07 as fake and issued show-cause notices, pointing out evasions of VAT exceeding Rs 60 crore.
Global Automobiles (P) Ltd, another arm of this company, has also been indicted for such fraudulent booking of turnover. But the company is using its proximity to the political bosses in West Bengal to sit pretty over the show-cause notices issued to it by the directorate.
Does the UPA Government require more to investigate activities of such companies working from the Left Front-ruled West Bengal?
(Concluded)
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