ED conducts searches in three states in Rs 100-crore fake ITC fraud case

New Delhi/Itanagar, Jan 22 (IANS) The Enforcement Directorate (ED) has carried out search operations at multiple locations across West Bengal, Manipur and Jharkhand in connection with a Rs 100-crore fake Input Tax Credit (ITC) fraud, sources in the central probe agency said.

The ED, Itanagar, conducted search operations on January 20 under the Prevention of Money Laundering Act (PMLA), 2002 at 10 premises across West Bengal, Manipur and Jharkhand in connection with the Rs 100-crore fake ITC fraud.

The ED initiated the investigation on the basis of an FIR registered under various sections of the Indian Penal Code, 1860, based on a complaint filed on October 3, 2024 by CGST and Central Excise, Itanagar Commissionerate against M/s Sidhi Vinayak Trade Merchant, Arunachal Pradesh, which was found to be non-existent at its declared address.

A statement of the ED said that the investigation revealed that the firm had fraudulently issued a total of 15,258 bogus/fake invoices having a taxable value of approximately Rs 658.55 crore within a span of six months, to 58 recipient entities registered across 11 different states, during the period October 2023 to March 2024.

These fraudulent invoices facilitated the wrongful availment of fake Input Tax Credit (ITC) amounting to approximately Rs 99.31 crore by the said 58 entities during financial year 2023-24.

During the searches, it was found that Dayal Commercial, Apee Enterprises, Phoenix Hydraulics, Ram Awatar Bansal & Co. and Bhima Shankar Industries, having principal business in Kolkata, were solely engaged in generating bills and passing on Input Tax Credit (ITC).

These entities generated bogus bills worth Rs 450 crore, along with corresponding fake ITC claims, fabricating records of vehicle manufacture and sales through bogus invoices, and fraudulently claiming GST refunds which were siphoned off and shared among promoters, suppliers and professional facilitators. Fake e-way bills and kickbacks to officials were also detected.

In Manipur, M/s FEMA Marketing’s principal place of business is under construction and no business activity is being carried out therefrom. However, as per the GST portal, the entity has shown the said premises as its place of business and is purportedly operating from there for the last three years.

It declared fictitious turnover of Rs 6.05 crore and passed on fraudulent ITC to leading companies, highlighting the scale of misuse of the GST mechanism.

In Jharkhand, an entity, namely M/s Mahesh Prasad Gupta, admitted that the said entity had availed fake ITC and was not able to provide the relevant invoices, e-way bills and lorry receipt.

Most of the entities involved in generating fake ITC operated for a short span of 6-8 months and generated fake ITC by issuing bogus invoices. The GSTN of these entities was cancelled by CGST later.

However, in the meanwhile, they generated and circulated the ITC onwards, which was ultimately used by some genuine entities. The entire modus resulted in a huge loss to the government and created Proceeds of Crime in the hands of proprietors or operators of these entities.

The case originated with fake ITC claims of Rs 99 crore due to bogus billing of Rs 658 crore. However, evidence uncovered during the searches reveals a significantly larger amount of fake ITC involving entities across multiple states.

Statements from key persons were recorded during the searches, in which they admitted to not conducting any business.

The searches resulted in freezing of bank balances, seizure of immovable property documents, and recovery of incriminating records exposing systematic misuse of the GST framework through bogus invoicing, fake e-way bills and layered fund transfers.

Further, Rs 21 lakh lying in the accounts of M/s S.K Construction was also frozen during the search operation.

Further investigation is underway.

–IANS

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