Print

GST - Two arrested for running 28 fake companies for facilitating bogus ITC

Published: Nov 16, 2019

By TIOL News Service

NEW DELHI, NOV 16, 2019: CGST-WEST Commissionerate has unearthed racket of issuance of fake invoices without actual supply of goods and services by M/s Royal Sales India and 27 other dummy companies. Two persons have been arrested in this matter and remanded to judicial custody for 14 days by Duty Magistrate, Patiala house Courts, New Delhi. The accused were found to be operating 28 fake companies to facilitate fraudulent Input Tax Credit (ITC), thus defrauding the exchequer. Prima facie, fraudulent ITC of about Rs 108 Crore has been passed on using invoices involving amount of Rs 900 Crore. Final duty is subject to outcome of the investigation.

On basis of search at various suppliers & recipients of goods of the said firms, it was revealed that Modus operandi of these 28 bogus firms involved obtaining GST registration of fake firms all across Delhi using KYC documents of lowly paid individuals and generating goodless invoices and e-way bills of these firms. On preliminary scrutiny, it was seen that the inward supplies of the said firm were not in correlation with outward supplies. All these firms have resorted to sale or cause effect of sale of goods, by issuing good-less invoices and on collection of the payment by cheque, pay back in cash to the party in question. This is done in order to facilitate these firms under investigation to avail Input Tax Credit for offsetting any likely tax liability and in some cases availing IGST refund etc.

Till now, 15 buyer firms have already admitted their liability vide their Voluntary Statement and further deposited voluntarily approx Rs.1.30 Crore towards ITC wrongly availed, Interest and Penalty under Section 74(5) of CGST Act, 2017 till date. Further, approx. Rs 1.58 Crore has been frozen in Bank Accounts of these fake firms.

Therefore, both accused have committed offence under the provisions of Section 132(1)(b) and (c) of CGST Act 2017, which are cognizable and non-bailable under section 132(5) being punishable under Section 132(1)(i) of the said Act and have been remanded to judicial custody for 14 days on 15.11.2019. Investigations are underway to identify key beneficiaries of this fraud and to further recover GST involved.