Rs 213.87 Cr fraud perpetrated by non-existent entities
Geetanjali Minhas | July 6, 2021 | Mumbai
In a first of its kind case, the Nagpur zonal unit of the director general of GST intelligence DGGI) has busted a massive racket of fraudulent refunds of input tax credit (ITC) amounting to Rs 213.87 crore by three non-existent entities based at the Maharashtra city.
The searches were on since July 1 at different places based on specific information received on the operation of fake invoices racket taking place in the city by some non-existent entities posing as exporters, making dubious ‘exports’ of tobacco products from the ICD, Mihan, Nagpur and obtaining fraudulent refunds of accumulated ITC amounting to hundreds of crores from CGST division, Hingna, Nagpur I.
Declared principal place of business (PPOBs) of all the three entities were found to be non-existent and found to be existing only on paper. All three entities, within three months of obtaining registration, filed shipping bills and showed export of a common product – smoking mixtures for pipes and cigarettes (24031910) attracting inter-alia GST @ 28 % and compensation cess @290 % on which they had filed refunds of accumulated ITC amounting to Rs 213.87 crore.
Out of the above refunds, Rs 123.97 crore had already been sanctioned by the CGST division, Hingna, Nagpur I by the first week of June.
“However, timely intervention by DGGI Nagpur Zonal unit has resulted in damage control by stopping the balance refunds of Rs 89.90 Cr filed by these entities just prior to their sanction. During the extensive investigations it has been found that there is a mastermind behind the creation of these three non-existent entities which have been floated to first carry out dubious exports and then to claim fraudulent refunds. Some leads regarding the identity and location of the mastermind behind the racket have been obtained and are being explored,” notes a statement issued by the ministry of finance on Tuesday.
“An important fact which has emerged during the investigations is that this racket may not be confined to just these three non-existent entities. It appears that more such entities have been floated in a particular jurisdiction to first carry out dubious ‘exports’ and then to claim fraudulent refunds. This investigation is being carried out simultaneously,” the statement adds.
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