Mumbai, 15th July 2022
Mumbai Central GST Commissionerate of Mumbai Zone has unearthed a fake supply and fraudulent availment of Input Tax Credit network which has availed Fake ITC of more than Rs 100 Crore.
More than 20 fake entities have been used to evade GST through issuance of fake invoices of Rs 585 Crore. Two persons involved in running the fake ITC racket of availment and utilization have been arrested today, 15th July 2022.
M/s Citichem India Ltd. and three other firms namely M/s HM Megabrand Pvt. Ltd, H. M enterprises and M/s General chemical industries, operated by the owner which deals in various commodities namely garments, trunks, petroleum oil, etc. were indulging in GST evasion by way of availment and utilization of Fake ITC on the strength of bogus Invoices.
Based on Intelligence developed using the intensive data mining and analysis by the Central Intelligence unit of the Principal Chief Commissioner Mumbai Zone, an investigation was initiated by the Anti Evasion officer of the Mumbai Central Commissionerate. The investigation revealed that the aforesaid mentioned firms were being managed by the owner of about five firms and was found involved in fraudulent availment and utilization of inadmissible ITC of Rs. 34.38 Crores without movements of goods and services. This is in gross violation of the provisions of CGST Act, 2017 by issuing bogus bills of around Rs. 216 crores on the name of non-existing firms to commit this tax fraud.
Another person, who had been operating 14 fake firms was involved in fraudulent availment and utilization and passing of inadmissible Input Tax Credit (ITC) of Rs. 40.46 Crores without movements of goods and services which is in gross violation of the provisions of CGST Act, 2017. Bogus bills of around Rs. 369 crores were generated to commit this tax fraud. The key managing person has admitted that that he had availed fraudulent ITC to the tune of Rs 40.46 Crores on the strength of invoices issued by the above mentioned four fake entities and passed on the ITC of Rs. 25.92 Crores to various entities.
The analysis of a WhatsApp chat group among three persons indicated to a particular modus operandi where they seem to be agreed that another kingpin will generate bogus invoice and pass on fake ITC without supply of any goods to the owner of fake entities who will then transfer the amount equal to invoice value. But later he will get the money back circulated either through cash or through layers of other accounts. The deal between these two was to share the profit fraudulently availed on basis of 50:50. However, one of the arrested persons was acting as a manager, operator and facilitator and was receiving hefty commissioner from both.
The investigation also revealed that one key person of the fake ITC network had already been investigated by DRI, CBI and finally arrested by Enforcement Directorate in hawala case involving amount to the tune of Rs. 2300 Crore in year 2018. However, he is operating business of availing and passing on fake ITC thereby defrauding Government exchequer.
Both the accused were arrested and produced before Additional Chief Metropolitan Magistrate today, 15th July 2022. The court has remanded him to 14 days judicial custody. Further investigations in the case are under process.
The operation is a part of efforts by CGST Mumbai Zone to stamp out fake ITC networks and tax evaders, which have been causing unhealthy competition with honest taxpayers and defrauding the Government Exchequer. As part of these efforts, since the last financial year, CGST Mumbai Central Commissionerate has unearthed fake ITC amounting to Rs. 321 Crores and has arrested 16 such tax evaders. The CGST officers are using data and network analysis tools to identify potential fraudsters. Department is going to intensify the drive against tax evaders in this financial year.
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