By TIOL News Service

NEW DELHI, MAR 05, 2021: GST officers have arrested two former Essel Group employees for defrauding the exchequer of Rs. 392 crore by passing on fake Input Tax Credit (ITC) to the group through a network of fictitious firms.

In an endeavour to uproot fake billing operations, officers of Central Goods and Services Tax (CGST) Commissionerate, Delhi (East) unearthed a massive syndicate that issued bogus invoices of more than Rs. 3,000 crore without actual supply of any goods or services, thereby availing fake ITC.

Investigations indicate that a layer of genuine looking fictitious intermediatory companies was created to pass on bogus ITC from non-existent firms to Essel Group companies, allowing them to avail ITC, book expenses to evade Income Tax (I-T) and inflate their turnover to push the share prices of their listed companies.

The network of fictitious companies was being operated by a Mr Naresh Dhoundiyal in connivance with Mr Devender Kumar Goyal who is a Charted Accountant (CA) by profession.

"Both Shri Naresh Dhoundiyal and Shri Devender Kumar Goyal are former employees of Essel Group. Though they are presently not working with the Essel group officially, however, they are passing on inadmissible ITC to the said group," said the tax officials.

Mr Dhoundiyal incorporated multiple fictitious intermediatory companies for Essel Group whereas, Mr Goyal arranged the fake invoices.

"The total fake ITC passed on by such fictitious intermediatory companies is quantified to be Rs. 92.18 crore whereas, the total fake ITC passed on by other fictitious and non-existent firms pertaining to the larger network is quantified to be more than Rs. 300 crore," said the Ministry of Finance.

The syndicate has thus defrauded the government exchequer of more than Rs. 392 crore by issuing bogus invoices of more that Rs. 3,000 crore without actual supply of any goods or services which is likely to increase as the investigation progresses.

Both men were arrested for having "hatched a deep-rooted criminal conspiracy" and remanded to judicial custody of 14 days on March 4.

Notably, since the inception of GST Central Tax, the Delhi Zone has made 30 arrests in various cases involving GST evasion amounting of more than Rs. 4,450.86 crore.