Put 40,300 meters of fabric on the books, match it against 86,947 garments, and only 0.47 meters remain per garment on average. This is not "material saving" but an arithmetic problem that fails common sense.
Case file sketch
Disclosure date
July 10, 2026
Company involved
Tianjin Xinya Garment Co., Ltd.
was found to have issued false invoices
51 special VAT invoices, with an amount of ¥4.5336 million and tax of ¥589,400
Handling result
A fine of ¥410,000, and the case was transferred to the public security authorities in accordance with the law
The inspection first calculated the fabric
What the company purchased on its books was not only fabric, but also large quantities of cotton and cashmere; yet on the sales side, everything became garments.
The problem then emerged: if it produced in-house, where were the equipment, personnel, production capacity and energy consumption? If it outsourced processing, where were the processing contracts, settlement records and invoices?
There were none.
The inspectors then put the purchase and sales quantities together: 40,300 meters of fabric corresponding to 86,947 garments, producing the anomalous figure of 0.47 meters. An average alone certainly cannot determine the nature of a company, but it was enough to prompt the inspection to extend to the production site, upstream and downstream parties, and fund accounts.
Inspection approach
01
Large quantities of cotton and cashmere appeared in input items, while all output items were garments, with no production basis for the change in product names
02
The input details showed no water charges and no outsourcing processing invoices, casting doubt on actual processing capacity
03
The registered address could not be used to locate the company, and 4 of the 5 downstream companies involved in output items had already been deregistered
04
Invoices, production capacity, goods quantities and fund records could not explain one another
Visual illustration: reconciliation of fabric input and garment output (not the site involved in the case)
The books did not answer two simple questions
Where did the fabric go? And how were the clothes made?
Manufacturing operations always leave traces. After purchased materials are received into inventory, they either enter material requisition, cutting, sewing and finished goods receipt, or enter outsourced material issuance, processing acceptance and settlement. Even for a very small company, this path does not disappear entirely.
The problem of the company involved lies precisely here: the invoices showed raw materials and finished garments, but the production process was empty. Combined with the quantity contradiction of 0.47 meters per garment, the alleged business is difficult to ground in reality.
No funds and no normal business operations
The fund flows tell a different story. The official notice stated that the accounts involved showed clear "in-and-out" patterns, with none of the fund retention typical of normal operations; some upstream and downstream parties lacked corresponding fund information, and there were also large unpaid and uncollected payments for goods.
At this point, it is no longer a matter of a single form being filled out incorrectly; rather, how the goods came to be, how they were transformed, and how the money moved cannot be plausibly explained.
An invoice (fapiao) can only prove that an invoice was issued; it cannot replace the actual process by which a garment was produced.
Which "production traces" should manufacturing enterprises retain
Financial records and production records should not be managed separately. At month-end reconciliation, at least the following items should be reviewed together in the same table:
Operator self-check
□
Whether raw material procurement, material requisition quantities, reasonable losses, and finished goods warehousing can be reconciled
□
Whether owned equipment, worker wages, and water and electricity consumption can support the declared output
□
Whether outsourced processing has records of material issuance, transportation, acceptance, settlement, and payment
□
Whether large long-term unpaid and uncollected payments for goods have genuine commercial reasons
□
Whether existing transactions are re-verified after abnormal operating conditions are found at upstream or downstream parties
If the reconciliation relationships are found to be abnormal over a long period, first ask the business side to investigate the cause. Creating a set of "seemingly complete" documents cannot solve the problem that the production process itself does not exist.
Source: Tianjin Municipal Tax Service, State Taxation Administration, "Garments Appearing Out of Thin Air," published on July 10, 2026.
This article is compiled from publicly available tax case notices and is intended for general risk alerts; it does not replace professional judgment for specific enterprises.