SEPTEMBER 20, 2023

By Vijay Kumar

THIS story starts in Pune in August 2018 when the Directorate General of GST Intelligence (DGGI), Pune Zonal Unitarrested a person who was allegedly the manager, operator and controller of over 200 shell companies.

The Bridge Chronicle of Pune reported on 3 rd August 2018,

Intelligence collected by the DGGI, Pune Zonal Unit, indicated that ‘ACI' holding service tax registration is a shell company, which is raising tax invoices charging service tax without providing any service. Moreover, these invoices are further being used by big companies viz M/S DesignTech Systems Ltd and M/S Skillar Enterprise India Private Ltd, for taking input credit.

"These big companies are part of a tripartite agreement entered in 2015 between Andhra Pradesh State Skill Development Corporation (APSSDC), M/S DesignTech and M/S Siemens Industry Software India Ltd (Siemens) for setting up and operating skill development centres in Andhra Pradesh. It is astonishing to reveal that government contracts are subcontracted to companies such as ACI which do not exist," the DGGI said in a statement.

Around the same time, the Indian Express reported:

Pune-based Designtech Systems Ltd had in 2015 entered into a contract with the Andhra Pradesh State Skill Development Corporation to set up and operate skill development centres in the state. As part of the contract, Rs 300 crore was given to Designtech Systems as advance.

And the Times of India reported:

According to a DGGI note, DesignTech was a part of a tripartite agreement entered between Andhra Pradesh State Skill Development Corporation (APSSDC) and Siemens Industry Software for setting up skill development centres across the state.

"It is astonishing to reveal that government contracts are sub-contracted to companies like ACI which do not exist." the DGGI said in a statement.

The DGGI said under the contract, DesignTech Systems received Rs 300 crore from APSSDC and it transferred Rs 200 crore to Skillar Enterprise, which used the fake invoices raised by ACI to misappropriate public funds.

"The amount received against the invoices was also deposited in the bank account of ACI from respective companies," DGGI said.

Some excerpts from the order of the High Court of Andhra Pradesh in Vikas Vinayak Khanvelkar vs The State Of Andhra Pradesh , on 17 January 2022 in CRIMINAL PETITION Nos.7265, 7339 of 2021 and 31 of 2022.

A tax investigation by the Additional Director General, GST, Intelligence, Pune in respect of the claims of CENVAT credited by M/s. Design Tech Systems Private Limited and M/s Skillar enterprises India private limited led to huge financial scam involving crores of rupees by M/s. SIEMENS Industry Software India Private Limited and M/s. Design Tech Systems Private Limited.

As per the investigation conducted by the Additional DGGI, Pune concluded that both the service provider and service receiver had taken contradictory stands regarding the nature of services.

The allegations are that all the companies are shell/defunct companies and they were issuing invoices without providing any services and further alleged that all these companies have formed into a cartel to siphon the public funds running into crores of rupees. Basing on the said report, the Managing Director of APSSDC has lodged a report with CID through his written complaint dated 07.9.2021.

The officials of Directorate General, GST Intelligence Unit, Pune, registered a case under the provisions of GST Act and Finance Act and conducted a detailed investigation in the year 2018. According to the said investigation it is established that the APSSDC funds, which were released to DesignTech and it was transferred to others through Hawala transactions with the help of shell companies by raising fake invoices for layering the funds.

Extracts from CRIMINAL PETITION NO. 4451 OF 2022 – Vipin Sharma V State of Andhra Pradesh - order dated 19 th July 2022, of the Andhra Pradesh High Court:

The tax investigation by Additional Director General, GST, Intelligence, Pune in respect of claims of availing of CENVAT credit by M/s. Design Tech Systems Private Limited and M/s. Skillar Enterprises India Private Limited led to unearthing a huge financial scam involving crores of rupees by M/s. SIEMENS Industry Software India Private Limited and M/s. DesignTech SystemsPrivateLimited.The fundsrelatetothe Corporation/APSSDC.

The companies referred to supra are Shell/Defunct companies and they were issuing invoices without providing any services. All these companies formed into a cartel for siphoning public funds tuning to Crores of Rupees. The Managing Director of M/s. DesignTech admitted before Assistant Director General that he has no evidence to show that services have been received from these companies.

Learned counsel for the petitioner would contend that petitioner is Chartered Accountant by profession, and he is offering services to various clients and institutions. He contends that petitioner never received any booties from any companies, which are arrayed as co-accused in the crime. He contends that the respondent is relying on the statement, which was allegedly made by him before GST Intelligence, Pune, however, petitioner already submitted protest petitions to all the authorities concerned. Learned counsel submits that even after lapse of four years, no action was initiated by GST Intelligence wing. Learned counsel further submits that provisions of the PC Act will not apply to the petitioner since petitioner is self-employee and the punishment for other offences is less than seven years and hence, petitioner is entitled for notice under Section 41-A of Cr.P.C. Thus, learned counsel prays to grant pre-arrest bail to the petitioner.

Learned Standing Counsel submits that in pursuance of the common intention of A6 and A8, in connivance with A1 and other government officials, an amount of Rs.371,00,00,000/- was released to M/s. Design Tech to execute the SIEMENS project. He further submits that A6 and A8, as per their plan of diverting funds created a company by name M/s. PVSP IT Skill Projects Pvt. Ltd., New Delhi as a project management company and entered into an agreement for executing the project and diverted Rs.241,00,00,000/- to the said company from M/s. Design Tech Systems Private Limited. He submits that A23 managed to get fake invoices from A24, Sourabh Gupta, Chartered Accountant and A25 i.e. the petitioner herein. He submits that petitioner admitted that he kept M/s. Patrick Info Services, M/s. IT Smith solutions and M/s Inweb Services Pvt. Ltd., of New Delhi under his control for issuing fake invoices. He submits that petitioner purchased shell companies i.e. M/s. Patrick Info Services, M/s. IT Smith solutions and M/s Inweb Services Pvt. Ltd., of New Delhi with an intention to earn easy money and issued bogus invoices in the names of said companies.

During the year, 2017-2018 the GST officials, Pune examined the petitioner where he confessed the offence of managing shell companies by issuing fake invoices without providing any services and after receiving the invoice amount, the same was remitted back to M/s PVSP through the companies furnished by A21, A23 and A25.

The Hindu reported on December 10, 2021:

The Crime Investigation Department (CID) has begun an investigation into an alleged financial scam involving crores of rupees by Siemens Industry Software India Ltd and Design Tech Systems Pvt Ltd, involving funds of the A.P. State Skill Development Corporation.

Investigation conducted by the Directorate General of GST Intelligence (DGGI), Pune, in 2017-18, had reportedly established that at least Rs. 241 crore was allegedly misappropriated of the Rs. 371 crore fund given by the Government of A.P. The investigation further said that this was done through utilisation of fake invoices provided by affiliated shell companies, which were utilised to carry out a layered transmission of money, without actually providing any hardware, software, courseware, other goods/services, etc,.

Money was reportedly drawn out of the bank accounts and handed over to unknown persons allegedly through hawala transactions.

Extracts from a judgement of the Special Judge, ACB cases, Vijayawada dated 10 th September 2023 in Cr.No.29/2021:

A tax investigation by the Additional Director General. GST, Intelligence, Pune in respect of claims of availing of CENVAT credit by M/s. Design Tech Systems Pvt. Ltd and M/s. Skillar Enterprises India Pvt. Ltd, led to unearthing a huge financial scam involving crores of rupees by M/s. SIEMENS Industry Software India Pvt. Ltd., and M/s. Design Tech Systems Pvt.Ltd. As per the MOA Design Tech has to provide training softwa.re development including various sub modules designed for high end software for advance manufacturing CAD/CAM. As per the investigation conducted by Addl DGGI, Pune concluded that both the services provided and service receiver had taken contradictory stands regarding the nature of services.

All these companies are shell/defunct companies, and they were issuing invoices without providing any services. It is patent that all these companies have formed into a Cartel to siphoning the public funds tuning to Crores of rupees. The Managing Director of DesignTech admitted before Asst. Director General that he does not have any evidence to show that services have been received from these companies.

On 10th September 2023, NDTV reported:

Chandrababu Naidu, Arrested In Alleged Corruption Case, Sent To Jail For 14 Days.

Former chief minister of Andhra Pradesh Nara Chandrababu Naidu has been sent to judicial custody for 14 days in connection with a Rs. 371 crore corruption scam in which he is accused of masterminding a conspiracy to divert money meant to train unemployed youth. The case involves the Andhra Pradesh State Skill Development Corporation, that was established when Mr Naidu's Telugu Desam Party was in power.

Wonder, what this is all about?

In August 2018, the DGGI, Pune booked a case where they found that under a contract, a Company called DesignTech Systems received Rs 300 crore from APSSDC (Andhra Pradesh State Skill Development Corporation) and it transferred Rs 200 crore to Skillar Enterprise, which used fake invoices raised by ACI to misappropriate public funds.

The DGGI (Directorate General of Goods and Services Tax Intelligence) found it astonishing to reveal that government contracts are sub-contracted to companies like ACI which do not exist, and they reported the matter to the APSSDC which intimated the issue to the State Crime Investigation Department (CID) which booked a case involving about forty high profile accused persons including managing directors, IAS officers and ministers. The amount involved being thirty crores attracted the attention of the Enforcement Directorate and a few arrests were also made.

Finally on 9 th September 2023, the Andhra Pradesh State CID arrested Mr. Chandrababu Naidu, the former Chief Minister of Andhra Pradesh, who was remanded to Judicial Custody till 22 nd September 2023.

What started as a DGGI case in Pune in 2018 resulted in a former Chief Minister landing up in jail.

Beware GST is no Jest

Until Next week