Editor's Note: On 17th December, 2024, a criminal judgement was issued by a local people's court in a case of false invoicing of refined oil products by an enterprise trading refined oil products with a total of more than RMB 1.5 billion in value-added tax (VAT), in which the team of Hwuason Law Firm cooperated with each other and was represented by Wang Qiang in the court. The person in charge of the enterprise was transferred by the investigating authorities for examination and prosecution of the crime of false VAT invoices, and the prosecuting authorities and the people's court adopted the defence opinions of the lawyers, corrected the application of the crime by the investigating authorities, and finally sentenced the person in charge of the enterprise to the crime of illegally purchasing VAT invoices and applied probation. The judgement in this case has put into practice the rules of the two high tax-related judicial interpretations of the second paragraph of article 10 of the crime of false invoices, and has a positive reference significance to the case of false invoices in the field of refined oil products.

Translated with DeepL.com (free version) The person in charge of the enterprise was transferred by the investigating authorities for examination and prosecution of the crime of false VAT invoices, and the prosecuting authorities and the people's court adopted the defence opinions of the lawyers, corrected the application of the crime by the investigating authorities, and finally sentenced the person in charge of the enterprise to the crime of illegally purchasing VAT invoices and applied probation. The judgement in this case has put into practice the rules of the two high tax-related judicial interpretations of the second paragraph of article 10 of the crime of false invoices, and has a positive reference significance to the case of false invoices in the field of refined oil products.

01 Brief description of the case

Company A is a trading enterprise engaged in the purchase and sale of refined oil products in City A. It leases tanks at a port, purchases gasoline from refineries across the country and sells it to main organizations such as PetroChina and Sinopec, and receives invoices using the refined oil products trading enterprise module. from 2021 to 2023, Company A was unable to obtain gasoline invoices issued by refineries when purchasing finished products from upstream local refineries, which led to a lack of refined oil products in its refined oil products module. gasoline inventory data, and it is unable to issue special invoices for refined oil products when selling gasoline to downstream main organizations, resulting in its sales business not being able to be carried out normally. In order to solve the problem of the lack of inventory data in Company A's refined oil module, Company A's business leader, Li Mou, was introduced by a friend to Zhang Mou in County B, with whom he negotiated to purchase special invoices for refined oil products from Company B, which was under Zhang Mou's control, at a price ranging from RMB 500 to RMB 800 per ton, in order to fill in its inventory data and use it for the sale of gasoline to the outside world.

Zhang organized a large number of oil-using terminals such as gas stations that did not want invoices in the vicinity of county B. He centrally collected payments for oil purchases from those terminals and, in the name of company B, purchased gasoline from company C in county B to pay for the purchase and to obtain special invoices for refined oil products issued by company C. By manipulating the separation of invoices and goods, without the knowledge of Company C, Zhang, on the one hand, instructed the gasoline purchased to be withdrawn from the gas stations, and on the other hand, Company B, which was controlled by Zhang, obtained the special invoices for refined oil products issued by Company C, and issued these special invoices for refined oil products to Li's Company A. During the period of 2021 to 2023, Company B issued special invoices for refined oil products of 183,000 tons to Company A, and the total amount of invoice price tax amounted to more than 1.5 billion yuan. invoices totaling more than $1.5 billion in price and tax; Company A purchases a total of 184,000 tons of gasoline, sells gasoline and consumes 180,000 tons of gasoline inventory data in the refined oil products module.

At the beginning of 2023, the public security organs of County B received a report of Zhang's suspected false VAT invoices and opened a case for investigation against Zhang and his controlled Company B. In April 2023, the public security organs of County B detained Li of Company A. In September 2023, the public security organs of County B transferred Zhang, Li and others suspected of the crime of false VAT invoices to the Prosecutor's Office of County B for examination and prosecution, and Li feared that she would face more than ten years of imprisonment or even life imprisonment. imprisonment or even the risk of life imprisonment.

02 Main defense ideas and defense work in the case

Li and his family entrusted Hwuason Law Firm lawyers to defend Li during the investigation stage. After accepting the commission, the lawyers of Hwuason Law Firm, based on their years of criminal defense experience in the field of tax related to refined oil products, conducted targeted investigation and research on the purchase and sale of refined oil products of Company A, and visited Company A's business premises and tank leaser on the spot. We analyzed that this case was a typical case of false invoicing for refined oil products, and the reason for Company A's false acceptance of special invoices for refined oil products was not the deduction of value-added tax (VAT), but due to the fact that the upstream suppliers did not provide invoices for refined oil products when they sold gasoline for various reasons such as avoiding the consumption tax, which caused Company A's lack of the gasoline inventory data of the refined oil products module, and Company A was to make up for the inventory data by means of purchasing the VAT invoices, without the lack of input deduction. Company A was compensating for its inventory data by purchasing VAT invoices and did not lack input tax credits, so it did not subjectively have the purpose of cheating the State's VAT and objectively did not cause fraudulent loss of tax. On this basis, we formulated a mitigating defense strategy for Li to apply to the main crime, i.e., Li's behavior should constitute the crime of illegally purchasing VAT invoices and not the crime of falsely issuing VAT invoices.

Based on this defense strategy, our attorneys conducted a comprehensive and effective defense as follows:

1. Proactively collecting and submitting a large amount of evidence materials proving that Company A is an entity operating enterprise and not a shell company. According to our practical experience in handling false invoicing cases, trading companies suspected of false VAT invoices are often easily recognized as shell companies by the authorities, and the current national punishment for violent false invoicing of shell companies is rising, if Company A in this case is incorrectly recognized as a shell company by the authorities, it will be extremely unfavorable to the subsequent overall defense work. Therefore, our lawyers first opened the main battlefield on the issue of shell company, guiding company A to collect and organize a large number of evidence materials, proving that company A is a private entity business enterprises, including company A's various types of business qualification certificates, office space lease agreement, tank lease agreement, more than ten employees of the social security payment records, the period of time involved in the payment of tax records and local water conservancy fund and other expenses payment records, etc., to prove that company A has the qualification of refined oil products business. It proves that Company A has the qualification and ability to operate refined oil products and is not a shell company.

2. Collecting and submitting evidence of the authenticity of Company A's business in both purchase and sale. Our lawyers found that the investigating authorities only collected evidence such as contracts and invoices of the fictitious business between Company A and Company B. However, this could not reflect the whole picture of Company A's business, so our lawyers instructed Company A to collect and organize the evidence such as contracts of purchasing gasoline from various local refineries and trading companies during the period of the case, the work order of the oil depots, the third party's quality inspection report, the list of chemical invoices issued by upstream suppliers, as well as the evidence such as contracts of selling gasoline to the main organization, and the work order of the oil depots. Therefore, our lawyers instructed Company A to collect and organize the evidence such as the contracts of gasoline purchase from various local refineries and trading companies, the warehouse entry work order, the third-party quality inspection report, the list of chemical invoices issued by the upstream suppliers, as well as the contract of gasoline sales from Company A to the main organization, the warehouse exit work order and other evidence, and to submit them to the authorities to prove them:

First, company A in the case of the period is not only accepted company B false invoices of gasoline, but real goods procurement and sales of goods and other substantive business activities, does not have "no goods false invoicing" subjective malicious intent, only "on behalf of the opening", The subjective intent of "reissuing".

Secondly, Company A obtained input VAT special invoices from its upstream suppliers and input VAT special invoices from Company B during the period of time involved in the case, and the total deductible input tax was sufficient, with no objective harm and subjective purpose of fraudulent tax credit.

Third, it further proves that Company A is not a shell company and has substantial business activities.

The provision of the evidence listed above has enabled the investigating authorities to take the initiative to carry out investigation and evidence-gathering activities at the company that leased the oil tanks to Company A, and to recognize the objective factual situation that Company A had purchased and sold oil during the period involved in the case.

3. Opening up another main battlefield: the purpose of obtaining invoices and inventory data of the refined oil module. According to the practical experience of our lawyers, when investigating authorities handle criminal cases of false VAT invoices, they often stick to the underlying logic of "no real transaction" + "tax deduction" = criminal false VAT invoices, and the corresponding core evidence is the statement of no real transaction and the record of tax deduction. The core evidence corresponding to this is the statement of no real transaction and the record of tax deduction. The investigation file of this case also clearly reflects this line of thinking, which obviously does not reflect the purpose of Company A in accepting the invoices in question and the objective actual situation of using these invoices. Since there was no material related to the inventory data of the refined oil module in the objective evidence in the case, and the judicial authorities did not understand the function of the refined oil module in the Golden Tax System, our lawyers opened up another important battlefield in this field, combed through the relevant regulations and operation manuals of the refined oil module issued by the General Administration of Taxation in recent years, and retrieved the records of the use of the inventory data of the refined oil module of Company A. We explained the function and use of the refined oil module to the judicial authorities in detail. We explained in detail to the judicial authorities the functions and usage of the refined oil module.

Through the above defense work, we have completed the established defense goal: to let the judicial authorities understand that company A in the absence of refined oil module inventory data can not be issued special invoices for refined oil, and realize that company A and LiMou to obtain the invoices of company B is not for the purpose of tax deduction, but in order to make up for the inventory data of the refined oil module, so that you can be invoiced for the sale of goods. It is reported that the procuratorial authorities in the examination and prosecution for the lawyer's comments specifically to the local tax authorities to consult and discuss the issues related to the refined oil module, and ultimately admitted the evidence provided by the lawyer's materials.

4. Combined with the Supreme Court, the Supreme Prosecutor's judicial spirit and similar cases with the case-handling authorities to communicate with the application of the crime. On the basis of the above defense work in terms of evidence and facts, our lawyers communicated with the judicial authorities on the charges that should be applied to Li. We proposed that, firstly, according to the Supreme Court's Law Research [2015] No. 58 and the Supreme Prosecutor's "Six Stabilizers" and "Six Guarantees" opinions, the Supreme Court and the Supreme Prosecutor are of the opinion that the act of fraudulent issuance that does not aim at fraudulently offsetting taxes does not constitute the crime of fraudulent issuance of VAT invoices, i.e., the logic of the crime has been adjusted to the crime of "fraudulent issuance of VAT invoices". The logic of the crime has been adjusted to "false VAT invoice" + "offset" + "purpose of tax cheating" = the crime of false VAT invoice; in this case, Li's purpose of obtaining the invoice was not to cheat the tax, but to cheat the tax. is not to cheat the tax, but to make up the inventory data, and objectively did not cause tax loss, does not constitute the crime of false VAT invoices. Secondly, Li's behavior of obtaining invoices by paying RMB500 to RMB800 per ton disturbed the order of invoice management, and he could be held criminally liable for the crime of illegally purchasing VAT invoices.

In addition, in order to solve the problem that the judicial authorities generally hold the thinking of "pair crime" for the crime of false invoicing of VAT, i.e., if the invoicing party constitutes the crime of false invoicing of VAT, the invoiced party also constitutes the crime of false invoicing of VAT, we have also provided the judicial authorities with a number of adjudication cases in which the invoicing party constitutes the crime of false invoicing of VAT and the invoiced party constitutes the crime of illegal purchasing of VAT invoice. We also provide the judicial authorities with many cases in which the invoiced party constitutes the crime of illegally purchasing VAT invoices, and focus on analyzing the difference between the subjective malignancy of Zhang Mou, the invoicing party, the objective harm and Li Mou, the invoiced party, i.e., Zhang Mou, the external invoicing party, has the intentionality and danger of letting the loss of tax money be cheated, which can not be compared with Li Mou, and request the judicial authorities to adhere to the basic principle of the appropriateness of crime and responsibility and to differentiate between the criminal responsibility of the invoicing party and the invoiced party in the present case. And support our lawyer's opinion on the application of the crime.

Procuratorial authorities in the examination and prosecution stage of the case adopted the views of our lawyers, in the indictment corrected the application of the investigating authorities of the crime, and charged Li with the crime of illegal purchase of VAT invoices, the court finally adopted the views of the procuratorial authorities and our lawyers, and sentenced Li to constitute the crime of illegal purchase of VAT invoices and probation, and the goal of the defense was reached successfully.

It is worth mentioning that during the entire criminal proceedings, the investigating authorities did not maliciously seize the company's property or freeze the company's bank accounts, which should be fully recognized. It is gratifying that during the whole process of defense work, Li and his family gave full trust and support to the lawyers of Hwuason Law Firm, and the staff of the company were united after the crime, and they have been insisting on stabilizing the operation in difficult times without collapsing, and carried out a large amount of evidence collection under the guidance of our lawyers, which provided a solid foundation and a strong guarantee for the development of the defense work mentioned above.
03 Against the background of the judicial interpretation of the Supreme Law and the Supreme Prosecutor, the judgment of this case has important reference significance for the case of false VAT invoices for refined oil products

On March 18, 2024, the Supreme People's Court and the Supreme People's Procuratorate jointly issued the Interpretation on Several Issues Concerning the Application of Law in Handling Criminal Cases of Endangering Tax Collection and Administration (Fa Shi [2024] No. 4), which stipulates in Article 10(2) that "for the purpose of inflating performance, financing, and lending without the purpose of fraudulently offsetting the tax, and no fraudulent loss of tax is caused by the offsetting , shall not be punished for this crime, and if it constitutes other crimes, criminal liability shall be pursued for other crimes in accordance with the law." When the explanation was made, it was at the stage of the court trial of this case, which provided our lawyers with a direct and clear basis for the judicial interpretation in arguing that Li's behavior involved in the case did not constitute the crime of fraudulent issuance of value-added tax invoices.

On April 18, 2024, the article "Understanding and Application of the Interpretation of the Supreme Court and the Supreme Prosecutor on Several Issues Concerning the Application of Law in Handling Criminal Cases of Endangering the Collection and Administration of Taxes" written by four judges, including Teng Wei and Yao Longbing of the Supreme Court, was published in the journal Application of Law. The article pointed out that "if the party receiving the invoice illegally purchases VAT invoices, instead of using them to fraudulently offset taxes, the invoices are used for other purposes, and if the other purposes do not constitute a crime, the crime of illegally purchasing VAT invoices constitutes the same crime". This authoritative judicial opinion fits our lawyer's defense that Li should constitute the crime of illegal purchase of VAT invoices.

It can be seen that the judgment of this case adopts all the opinions of our lawyers, which is a vivid embodiment of the function of the judicial interpretations of the Supreme Court and the Supreme Prosecutor in limiting the crime of false VAT invoices, and confirms that the crime of false VAT invoices belongs to the non-statutory purposeful crime. Judicial organs should completely abandon the wrong logic of "false VAT invoice" + "tax deduction" = crime of false VAT invoice, and construct "false VAT invoice" + "tax deduction" = crime of "false VAT invoice" + "tax deduction" = crime of "false VAT invoice" + "false VAT invoice" + "tax deduction" = crime of "false VAT invoice". The underlying logic of "false VAT invoice" + "tax deduction" + "tax cheating purpose" = the crime of false VAT invoice is constructed. In the petrochemical field such as refined oil products, the phenomenon of invoice violation and the types of cases are different, some false VAT invoices are not for the purpose of obtaining illegal tax benefits, and some false VAT invoices are only for the purpose of obtaining unlawful benefits for evading the consumption tax, and for these behaviors with tax deduction but without the purpose of tax cheating, the judicial authorities cannot "one size fits all" characterize them as false VAT invoices. "For these acts, which are indeed tax-deductible but without the purpose of tax fraud, the judicial authorities should not characterize them as crimes of false invoicing of VAT, nor should they act arbitrarily in order to seize local confiscation benefits, but should follow the basic principles of the law of crimes and penalties, subject-objective consistency and appropriateness of crime and responsibility in determining the penalty and conviction, so as to truly realize the legal effect of individual cases.