Ahmedabad’s Directorate General of GST Intelligence has cracked down upon two rackets.
One was a tax fraud to the tune of over Rs 250 crore.
The planning behind these scams has shocked investigators.
Bogus firms, fake invoices, and hawala channels formed a complex web, a section of the media reported. Authorities acted instantly to trace the money and the masterminds.
In the first case, the allegedly fraudulent Input Tax Credit (ITC) was to the tune of approximately Rs 252.66 crore, It involved a taxable value of about Rs 1,403.66 crore.
Over the previous two months, DGGI officers conducted coordinated search operations at multiple premises located in Ahmedabad, Jamnagar and Mumbai and recovered various incriminating records, data and digital devices.
These firms were allegedly found to be fictitious. These were mainly “Pvt Ltd” companies and the syndicate appointed dummy directors and showed bogus turnover of hundreds of crores of rupees within just a few months.
“These firms were used to issue fake invoices without supply of underlying goods or services. These bogus invoices, so generated, were further used in various sectors such as iron-steel, chemical, cement, agriculture and construction sectors. The bogus invoices were used by the recipient firms to inflate their turnovers and to defraud the government exchequer by offsetting the due GST liability by utilising this fake ITC. Forensic examination of digital devices and scrutiny of records is under progress by the DGGI …,” said the official statement published by a national newspaper.
“During the course of investigation, it was found that the syndicate ran the scam by creating multiple layers of firms, persons and financial transactions operating in many states. To give a semblance of genuine sale-purchase transactions, the recipients transferred the invoice amount through RTGS transactions in these firms’ bank accounts. However, after deducting the commission, the remaining amount was returned by the syndicate in cash through hawala channels,” the statement added.
According to the agency, investigation revealed that 17 GST-registered firms (mainly pvt ltd companies) were being controlled and operated by Rizwan Khoja, a resident of Ahmedabad, through the creation of these fictitious firms.
To escape the legal scrutiny, Khoja allegedly did not use any of his personal credentials to create these firms or operate the bank accounts, registrations, procuring SIMs, etc.
Instead, this was allegedly orchestrated using “sophisticated” modus operandi. These fake transactions were allegedly managed through his associates, other gullible persons, his staff and relatives.
To have a centralised control over the scam, he reportedly used to provide mobile phones to all of these persons and replaced these at regular intervals to escape any scrutiny.
Another person, Lalit Jain, allegedly acted as a broker/middleman in facilitating the sale of fraudulently generated invoices. He used to contact various industry persons to lure them for purchase of these fake invoices and earned commission.
The DGGI booked them under sections 132 (1)(b) & (c) which are punishable under sections 132(1)(i) and cognizable and non-bailable U/s 132(5) of CGST Act.
Both were arrested on January 22, under section 69 of CGST Act and produced before the court, which remanded them for 5 days for interrogation. So far, six persons have been arrested in the case.
In another case related to M/s Rajanji Entreprise, the key controller named Memon Mohamadafwan was arrested on January 20. This firm allegedly indulged in availing fake ITC to the tune of Rs 9.29 crore through bogus bills valued at around Rs 52 crore.
A statement read, “These fake bills were issued from 27 bogus entities. Memon Mohamadafwan was sent to judicial custody for 14 days by the court. This case is a follow up of an earlier case of Ritesh Shah, a resident of Ahmedabad, who was the mastermind of a scam of fake billing amounting to approximately Rs 800 crore involving Rs162 crore of fake ITC.”
“Apart from fake billing, Ritesh Shah had indulged in Hawala transactions and money laundering, fake political donations, creating fake firms by misusing identities of common citizens, operating dummy bank and APMC accounts, for which he was arrested by DGGI Ahmedabad in December 2024. Subsequently, he was arrested by the Enforcement Directorate (ED), Mumbai, and remains in judicial custody there.”
The DGGI stated that using fake bills to claim and pass on fraudulent ITC constitutes a serious offense under section 132(1)(b) and (c) of the CGST Act, 2017. They added that such offenses are punishable under section 132(1)(i) and are cognisable and non-bailable under section 132(5) if the tax evasion amount is Rs 5 crore or more. The agency further said that scrutiny of the recipients of these fake bills is still ongoing.
