Editor's Note: In recent years, the convictions and sentences of criminal cases of petrochemical invoicing have varied greatly from place to place, and the fates of the parties in different cases have been very different. At present, whether it is the relevant provisions and the latest spirit of the judicial interpretations of the Supreme Court and the Supreme Prosecutor, or the recently disclosed cases of judicial adjudication, they are all confirming that the behavior of petrochemical alteration of invoices should not be treated as the crime of falsely opening VAT special invoices. Parties facing more than ten years or even life imprisonment due to wrongful conviction or heavy sentence should actively seek fair justice through appeals, and the people's courts should also take up the responsibility to take the initiative to carry out special review and supervision of historical cases, correct the mistakes in conviction and sentence, and let each individual case reflect the light of justice.

01 Take stock of six petrochemical variable invoice tax cases, but the parties have very different fates

In a series of cases of evasion of consumption tax by changing petrochemical invoices in recent years, the tax and judicial authorities around the world have handled the cases with very different results, and the fate of the parties concerned has varied. Some of them were found to constitute the crime of false VAT invoices, and the main culprits were sentenced to more than 15 years of imprisonment or even life imprisonment, and the parties concerned faced a long prison term. Now, in March 2024, the People's Court of Chongchuan District, Nantong City, Jiangsu Province, made a judgment that the petrochemical invoicing constitutes the crime of false invoicing, and the main culprit was sentenced to less than four years of imprisonment. There are even cases of petrochemical invoicing that have been characterized as tax evasion in the administrative stage of taxation without being transferred to the judiciary, and the parties concerned do not have to bear the criminal responsibility of false invoicing at all.

(i) (2018) Zhejiang 01 Criminal Chu No. 9: Constituting the crime of false VAT invoices, sentenced to thirteen years and six months

On June 29, 2018, Hangzhou Intermediate People's Court of Zhejiang Province issued a judgment, finding that Cheng's act of issuing fuel oil invoices to downstream companies after accepting invoices with the product names of crude oil, asphalt and heavy oil constituted the crime of falsely issuing VAT invoices, and sentenced Cheng to thirteen years and six months of fixed-term imprisonment. The total value and tax of the invoices in this case amounted to RMB 300 million.

(ii) (2018) Zhejiang Criminal Final No. 361: Constituting the crime of false VAT invoicing, sentenced to fifteen years' imprisonment

On August 7, 2018, the Jinhua Intermediate People's Court of Zhejiang Province issued a judgment finding that Chen's act of obtaining VAT invoices with the name of asphalt and other VAT invoices from upstream enterprises and then issuing VAT invoices with the name of fuel oil to downstream constituted the crime of falsely issuing VAT invoices, and sentenced Chen to a life imprisonment term.On December 21, 2018, the Higher People's Court of Zhejiang Province issued a judgment of the second instance, maintaining the falsely issuing characterization of the crime of VAT special invoices and changed the sentence to fifteen years' imprisonment. The total value and tax of the altered invoices in this case amounted to more than 400 million yuan.

(iii) (2020) Qing Criminal Finality No. 53: Constituting the crime of falsely issuing VAT invoices, sentenced to 15 years' imprisonment

On August 13, 2020, the Intermediate People's Court of Xining City, Qinghai Province rendered a judgment, finding that Wu's act of obtaining VAT invoices with the names of crude oil, heavy oil and asphalt from upstream enterprises and then issuing VAT invoices with the name of fuel oil to downstream enterprises constituted the crime of false VAT invoices, and sentenced Wu to a life imprisonment term.On April 1, 2021, the Higher People's Court of Qinghai Province rendered a judgment of the second instance, maintaining the characterization of the crime of false VAT invoices, and sentenced Wu to 15 years of imprisonment instead. judgment, which upheld the characterization of the crime of false VAT invoicing and changed the sentence to 15 years' imprisonment. The total value and tax of the invoices in this case amounted to more than RMB 900 million.

(iv) (2023) Su 0602 Criminal Investigation No. 762: constituting the crime of false invoicing, sentenced to three years and nine months' imprisonment

On March 20, 2024, the Chongchuan District People's Court of Nantong City, Jiangsu Province, rendered a judgment finding that Gong's act of accepting invoices for crude oil and asphalt and then issuing invoices for fuel oil to downstream companies constituted the crime of false invoicing and sentenced Gong to three years and nine months' imprisonment. The total value of the invoices and taxes in this case amounted to more than 700 million yuan.

(v) (2022) Anhui Criminal Final No. 204: Constitutes the crime of tax evasion and is sentenced to seven years' imprisonment.

On July 3, 2023, the Anhui Higher People's Court issued a judgment finding that Wei's act of obtaining VAT invoices for chemical raw materials and then changing the name of the goods to gasoline and diesel fuel for external use constituted the crime of tax evasion and sentenced Wei to seven years' imprisonment. The total price and tax of the changed invoices in this case amounted to more than 7.8 billion yuan.

(vi) Tai tax investigation and penalty notice [2022] No. 42: tax authorities characterized tax evasion, only administrative treatment without referral to public security

On August 3, 2022, the Audit Bureau of Taizhou Municipal Taxation Bureau of Jiangsu Province issued a notice of penalty to Taizhou So-and-So Commerce and Trade Company Limited, finding that the enterprise's act of selling to the outside world consumption taxable products with the name of heavy oil and fuel oil after purchasing non-consumption tax taxable products with the names of crude oil, raw material oil, and heavy oil during the period of June 2016 to April 2017 constituted tax evasion, and deciding to recover 180 million yuan of consumption tax The company decided to recover 180 million yuan of consumption tax and imposed a fine of more than 90 million yuan.

By comparing the above cases, we can intuitively feel that the impact of different sentences for the same case on the parties concerned is intuitive, profound, extensive and long-lasting. Some of the same acts of invoice-changing were not criminalized, while others were sentenced to three, seven, 13 or 15 years' imprisonment, and some were even sentenced to life imprisonment in the first instance, which inevitably triggered the thinking that, in the background of similar cases, why did the parties concerned at different times bear such vastly different sentencing results?

02 Characterization of the case of petrochemical altered invoices: it does not constitute the crime of false VAT invoices, and should be sentenced to the crime of false invoicing or tax evasion

Throughout the above cases, the act of petrochemical alteration of invoices was often sentenced to the crime of false invoicing of VAT in the past, while now it is dealt with in accordance with the crime of false invoicing and tax evasion. What is the reason for this? In this regard, there are two aspects to consider:

On the one hand, in the case several years ago, many judicial organs did not know the purpose behind the act of changing invoices, and the logic of directly sentencing to the crime of false VAT invoices was that the trading company was a shell company with violent false invoicing, and in the middle there was no physical flow of goods in procurement and sales, but purely took the vouchers, invoices and funds, and the invoices had a change in the name without any production, and the act of petrochemical change of invoices was defined as the act of false invoicing of VAT without actual goods. Accordingly, it is defined that the act of petrochemical invoice change is the act of false VAT invoicing without actual goods. Because some judicial organs did not recognize the logic of consumption tax evasion behind the change of petrochemical invoices, the judgement contained the statement of how much VAT loss was caused, which was obviously a low-level mistake.

On the other hand, with the change of time, the theoretical and practical circles have begun to have some reflections on the judicial practice of the crime of false VAT invoicing. Zhao Jingchuan of the Supreme Prosecutor's Office wrote an article entitled "Judicial Determination of the Behavior of Fraudulently Issuing VAT Special Purpose Invoices by "Changing Invoices"", arguing that the conviction of petrochemical invoicing cases has been controversial for a long time, and that the conviction and punishment of the crime of fraudulently issuing invoices will result in the person concerned being punished too heavily. Academic Chen Xingliang pointed out in the article "The Unlawful Nature and Judicial Determination of the Crime of False VAT Invoice" that "if it is affirmed that the crime of false VAT invoice is committed for the purpose of defrauding the state of tax, such false invoicing behaviors which are not committed for the purpose of defrauding the state of tax can not be recognized as the crime of false VAT invoice." From this, it can be seen that there is a gradual change in the understanding of all sectors of the community of cases of the crime of false VAT invoicing, and the reflection on past cases represents that the past sentences were problematic.

Since March 20, 2024, the implementation of the Supreme Court, the Supreme Prosecutor's Judicial Interpretation (Legal Interpretation [2024] No. 4) is the reflection of all walks of life and the new understanding of the direct affirmation, March 24, 2024 Nantong City, Jiangsu Province, Chongchuan District People's Court of the petrochemical change of invoices in the case of the crime of fraudulent invoicing is made in this context, with a typical reference significance. It can be said that, for the case of petrochemical invoice change to the crime of false invoicing, in line with the basic principle of crime and punishment fit, and the Supreme Court, the Supreme Prosecutor's judicial interpretation of the crime of false VAT invoices of the crime of the crime of the spirit of the crime clause coincides with. Specifically:

(i) The judicial interpretation of the Supreme Law and the Supreme Prosecutor's Office provides a legal basis for the statement that "petrochemical alteration of invoices does not constitute the crime of false invoicing of value-added tax".

Paragraph 2 of Article 10 of the Judicial Interpretation of the Supreme Law and the Supreme Prosecutor stipulates that "if the purpose of fraudulent offsetting of tax is not for the purpose of inflating performance, financing, loan, etc., and there is no fraudulent loss of tax due to the offsetting, the crime shall not be dealt with as this crime, and if it constitutes any other crime, the criminal liability shall be investigated for the other crime in accordance with the law." That is to say, although the act of false invoicing of VAT is committed, if subjectively there is no purpose of tax cheating and objectively there is no fraudulent loss of tax, the crime of false invoicing of VAT shall not be dealt with as the crime of false invoicing of VAT. It should be emphasized that the crime of false VAT invoicing requires that a loss of VAT rather than a loss of excise tax be caused, and that a fraudulent loss of VAT rather than a loss of non-payment of underpayment of VAT be caused.

In order to grasp the essence of the behavior of variable invoicing, it is not possible to artificially sever the connection between invoices of multiple links and make accusations only on the invoice of a certain link, which is one-sided, not objective and not true. Value-added tax (VAT) is an out-of-the-money tax and chain tax. In the petrochemical invoice-changing transaction, each subject issued invoices truthfully, declared and paid VAT truthfully, and all the value-added generated in the oil circulation link was dispersed to each enterprise to be recognized and declared for tax payment, and the VAT rates of crude oil, chemical raw materials and finished oil goods were all the same, so that the change of the name of the product did not affect the VAT payment obligation, and did not result in the fraudulent loss of VAT payment.

(ii) Numerous cases have accumulated practical experience in the area of "petrochemical invoicing constitutes the crime of fraudulent invoicing".

One of the provisions of Article 205 of the Criminal Law on the crime of false invoicing stipulates that "If the circumstances are serious, a person who falsely issues invoices other than those stipulated in Article 205 of this Law shall be sentenced to fixed-term imprisonment of not more than two years, criminal detention or control, and shall be punished by a fine; if the circumstances are particularly serious, the person shall be sentenced to fixed-term imprisonment of not less than two years but not more than seven years, and shall be punished by a fine." This is the provision on the crime of false invoicing, and there are views in practice that the invoices other than those under Article 205 of the Criminal Law refer to ordinary invoices, and the behavior of false invoicing of VAT special invoices does not constitute the crime of false invoicing. This is a wrong understanding that needs to be corrected urgently. It needs to be emphasized that invoices other than Article 205 of the Criminal Law cannot be interpreted as "invoices other than VAT special invoices" but "invoices that do not constitute the crime of falsely issuing VAT special invoices", which means that the invoices without the purpose of tax cheating and without tax payment are not subject to the crime of falsely issuing invoices. This also means that the act of false invoicing of VAT special invoices without the purpose of tax cheating and without loss of tax cheated can be dealt with in accordance with the crime of false invoicing.

The author handled two petrochemical invoicing cases which were sentenced in accordance with the crime of false invoicing, in the case of Cui Moumou ((2019) Shaan 01 Criminal No. 38), the Intermediate People's Court of Xi'an City, Shaanxi Province, rendered a judgment on September 27, 2020, which found that Cui Moumou constituted the crime of false invoicing and was sentenced to four years' imprisonment. The judgment stated that "'other than those stipulated in Article 205 of the Criminal Law' belongs to the boundary elements, not the constituent elements, and VAT invoices also belong to a kind of invoices, and the perpetrator falsely issued VAT invoices but did not have the dangerous behavior of fraudulently obtaining and deducting taxes, and should be convicted and punished for the crime of falsely issuing invoices. " In the case of Zheng ((2022) Hei Criminal Final No. 27), the Heilongjiang Provincial High Court issued a judgment on November 27, 2023, stating that the act of petrifying and changing the invoices did not cheat the tax in the way of offsetting the VAT tax, and that his act would not objectively result in the loss of the state's VAT tax revenue, and that it did not constitute the crime of falsely issuing the VAT invoice, and that it constituted the crime of falsely issuing the invoices.

In the case of petrochemical invoicing, there is an imaginative competition between the crimes of false invoicing and tax evasion, i.e., a single act commits several crimes, and in practice, it is necessary to determine which crime should be punished on a case-by-case basis. If there are obvious clues or evidence proving that the subjective purpose of the person concerned is to evade consumption tax, the crime of tax evasion can be imposed; however, if the judicial authorities do not impose the crime of tax evasion due to the absence of tax penalty by the Tax Bureau, the crime of false invoicing can also be imposed. Of course, according to the provisions of Article 3 of the Judicial Interpretation of the Supreme Court and the Supreme Prosecutor's Office, the administrative front clause should be framed in the case that the public security authorities have not yet filed a case, which means that the crime of tax evasion is not 100% subject to the restriction of the administrative front.

03 How should a party who has already been sentenced to more than ten years or even life imprisonment fight for the same treatment in the same case?

So far, looking back at the past cases convicted of the crime of false invoicing of VAT is indeed problematic, the past sentence of false invoicing of VAT is now sentenced to the crime of false invoicing, tax evasion trial trend is in line with the relevant provisions and spirit of the Supreme Court and the Supreme Prosecutor's judicial interpretations, and in line with the principle of the appropriateness of the crime and the punishment. Then, what should be done for those who were sentenced to more than ten years in the past according to the crime of false invoicing of VAT special invoices? This is a historical mistake. Should it be allowed to make mistakes again and again, or should it take the initiative to act and actively rectify the situation? We certainly cannot let the mistake be forgotten, and those who are serving their sentences are still bearing the unbearable weight of the life of being heavily sentenced. On the one hand, the person concerned should take up the weapon of law and bravely move towards the battlefield of complaint. In the past, the effective judgment, there are often qualitative errors or part of the case factual errors, such as the determination of value-added tax losses, etc., for these issues complaints, the law provides need to provide new evidence to have the right and opportunity to appeal. Therefore, it is necessary to consider the issue that the judicial interpretations of the Supreme Court and the Supreme Prosecutor can be used in decided cases. On the other hand, local judicial organs should actively fulfill their social responsibilities, take the initiative to correct mistakes and errors, and actively learn from the correct treatment and practices that have been made in other regions.

(i) Petrification of the case of the change of the invoices has been resolved can be applied to the Supreme Law and the Supreme Prosecutor's judicial interpretations

For the petrochemical tax-related cases heard before the implementation of the judicial interpretations of the Supreme Law and the Supreme Prosecutor's Office, the judicial authorities should adopt the principle of purposeful interpretation and revert to the standard of guilt omitted from the Criminal Law and the old judicial interpretations, i.e., those cases that do not aim at fraudulently offsetting the VAT, and those cases that do not cause fraudulent loss of VAT due to offsetting, do not constitute the crime of fraudulent invoicing. If the judicial organs do not make a determination of the loss of VAT and impose a sentence that constitutes the crime of false invoicing without considering the criteria for the crime, it is obvious that they have made an error in determining the facts and applying the law incorrectly.

The judicial interpretation of the Supreme Law and the Supreme Prosecutor came into force on March 20, 2024, and according to the relevant provisions of the Criminal Procedure Law, the Provisions of the Supreme People's Court and the Supreme People's Procuratorate on the Application of the Temporal Effectiveness of the Criminal Judicial Interpretation (No. 5 of the High Procuratorate's Interpretation [2001]), the criminal act took place prior to March 20, 2024, and belonged to the resolved cases at the time of the entry into force of the Supreme Law and the Supreme Procuratorate's Judicial Interpretation. If a case is found to be erroneous in the determination of facts and application of law in accordance with the provisions of the old law, the trial supervision procedure shall be initiated. Therefore, for the case of the crime of false invoicing of VAT which has been convicted by the petrochemical alteration, if the court does not take into account whether the party concerned has the purpose of fraudulently offsetting the VAT or whether it has caused fraudulent loss of VAT, and wantonly oversteps the boundary between crime and non-crime, and arbitrarily convicts the person who has constituted the crime of false invoicing, the legislative intent of the criminal law clarified in the Judicial Interpretation of the Supreme Court and Supreme Procuratorate should be applied to activate the trial supervision procedure.

(ii) Complaint defense strategies in petrochemical invoice-changing cases

Tax-related disputes can be mainly divided into audit response, penalty hearing, administrative reconsideration, investigation, examination and prosecution, first trial, second trial and retrial according to the time line. Generally speaking, we will suggest the parties to resolve the risk in the front-end as far as possible, but for various reasons, the parties should not give up on themselves if the tax-related disputes are pushed backward. In practice, there is no lack of two trial decisions are unfavorable to the parties, and ultimately through the retrial to achieve a reversal of the false driving case. The intervention of professional lawyers is conducive to helping the complainant to grasp every opportunity to appeal, maximize the probability of success, and strive for the early realization of the purpose of re-trial and re-sentencing. The complaint defense strategy of the petrochemical invoice-changing case should focus on the following three points:

1. In the factual determination, the broken "false invoicing" is reduced to a complete "change of invoices". At the factual level, a single change in the invoice link is reduced to a complete chain of upstream and downstream transactions. In the complete transaction chain, it is equipped with real goods, and each subject declares and pays VAT in full, which does not cause fraudulent loss of tax. By restoring the transaction chain and consolidating the evidence, the problem of characterization of tax loss can be solved.

2. In terms of the application of law, it is advocated that the provisions of the criminalization clauses of the judicial interpretations of the Supreme Court and the Supreme Procuratorate should be applied. The reason why the criminal law stipulates the behavior of false VAT invoices as a crime lies in the fact that after the implementation of the VAT invoice system in the country, some unlawful elements make use of the function of special invoices that can offset the tax to seize the national tax. However, in the case of petrochemical alteration of invoices, the subjective purpose of the parties concerned is not to cheat the tax, and objectively the loss of tax has not been caused by cheating, so it should be applicable to the provisions of the second paragraph of Article 10 of the Judicial Interpretation of the Supreme Court and the Supreme Procuratorate, and it does not constitute the crime of falsely issuing VAT special invoices.

3. Legal application of the crime of false invoicing and tax evasion. By elucidating the principle of VAT taxation and the principle of consumption tax loss, it can be argued that petrochemical alteration of invoices does not constitute the crime of false VAT invoicing and constitutes the crime of tax evasion or false invoicing. For those found guilty of tax evasion, it can actively advocate the application of administrative pre-procedures to circumvent criminal penalties. If the party concerned is only deceived by the upstream and downstream enterprises to change the invoices without infringing the purpose of national consumption tax, or the judicial authorities advocate that the tax evasion crime should not be sentenced due to the non-application of the administrative preliminaries, it can be argued that it constitutes the crime of false invoicing.

04 Conclusion

The maximum sentence in the case of petrochemical invoice-variation and false invoicing is not more than seven years. For the past cases of invoice-variation and false invoicing that were sentenced to longer prison terms or even life imprisonment, it is recommended that the parties concerned have the courage to take up the legal weapon and actively resort to the complaint procedure, in order to strive for the opportunity of re-trial of the case, and to maximize the maintenance of their due legal rights and interests. We are well aware that in the long journey of criminal complaints, it is inevitable to face the heavy resistance of judicial inertia, the hardships of exploring the correction of errors, as well as the heated debates on characterization and application of law. But more than that, we seek a determination to persevere and trust in the power of professional lawyers, believing that everything will eventually see the light of day and usher in the dawn of hope.

In addition, for Zhejiang and other places where the crime of false invoicing of VAT is particularly serious, we propose to carry out a special review and supervision, to look back to see whether there are errors in factual findings or errors in the application of law in the petrochemical invoicing cases that have already been tried, and to consciously and spontaneously rectify the phenomenon of different judgments in the same case, so that the parties involved in each and every invoicing case can feel the fairness and justice of the judiciary.