DGGI Ahmedabad Cracks Down on Rs 262 Crore Fake Billing Scams, Three Arrested
The Directorate General of GST Intelligence (DGGI) in Ahmedabad has made significant strides in combating tax fraud, unearthing two elaborate rackets involved in fake billing worth a staggering Rs 262 crore. In a coordinated effort, authorities have arrested three individuals linked to these schemes, which exploited the Goods and Services Tax (GST) system through sophisticated fraudulent activities.
Massive ITC Fraud Uncovered in First Case
In one of the cases, the allegedly fraudulent Input Tax Credit (ITC) amounted to approximately Rs 252.66 crore, with a taxable value of about Rs 1,403.66 crore. Over the past two months, DGGI officers conducted extensive search operations across multiple premises in Ahmedabad, Jamnagar, and Mumbai. During these raids, they seized various incriminating records, data, and digital devices, providing crucial evidence for the investigation.
According to official statements, the firms involved were found to be fictitious and non-operational. These entities, primarily registered as private limited companies, were used by a syndicate to issue fake invoices without any actual supply of goods or services. The syndicate appointed dummy directors and fabricated turnovers of hundreds of crores within just a few months, creating a facade of legitimate business operations.
Complex Network and Hawala Transactions
The investigation revealed that the bogus invoices were utilized across various sectors, including iron-steel, chemical, cement, agriculture, and construction. Recipient firms used these invoices to inflate their turnovers and defraud the government by offsetting their GST liabilities with fake ITC. To maintain an appearance of genuine transactions, the recipients transferred invoice amounts via RTGS into the firms' bank accounts. However, after deducting commissions, the remaining funds were returned in cash through hawala channels, adding a layer of complexity to the scam.
Forensic examination of digital devices and scrutiny of records are currently underway as DGGI continues to unravel the full extent of the fraud. The agency emphasized that using fake bills to avail and pass on fraudulent ITC is a serious offense under the CGST Act, 2017, with stringent penalties for tax evasion exceeding Rs 5 crore.
Key Arrests and Modus Operandi
In this case, investigation uncovered that 17 GST-registered firms were controlled by Rizwan Khoja, a resident of Ahmedabad. Khoja allegedly orchestrated the scam using a sophisticated modus operandi, avoiding personal credentials by involving associates, gullible persons, staff, and relatives. He provided mobile phones to these individuals, replacing them regularly to evade scrutiny. Another individual, Lalit Jain, acted as a broker, facilitating the sale of fraudulent invoices and earning commissions by luring industry persons.
Both Khoja and Jain were arrested on January 22 under Section 69 of the CGST Act and remanded to five days of interrogation. They face charges under Sections 132(1)(b) and (c), which are punishable and non-bailable under the act. So far, six persons have been arrested in connection with this case, highlighting the scale of the operation.
Second Case Involving Rs 9.29 Crore ITC Fraud
In a separate but related case, DGGI arrested Memon Mohamadafwan, the key controller of M/s Rajanji Entreprise, on January 20. This firm allegedly availed fake ITC worth Rs 9.29 crore through bogus bills valued at around Rs 52 crore. The fake bills were issued from 27 bogus entities, and Mohamadafwan has been sent to judicial custody for 14 days.
This case is a follow-up to an earlier scam masterminded by Ritesh Shah, an Ahmedabad resident, involving fake billing of approximately Rs 800 crore with Rs 162 crore in fraudulent ITC. Shah was arrested by DGGI Ahmedabad in December 2024 for additional offenses, including hawala transactions, money laundering, fake political donations, and creating fake firms by misusing citizens' identities. He is currently in judicial custody after being arrested by the Enforcement Directorate in Mumbai.
Ongoing Investigations and Legal Actions
The DGGI has stated that further scrutiny of the recipients of these fake bills is in progress, as authorities aim to clamp down on such fraudulent activities that undermine the GST system. The arrests and ongoing investigations underscore the agency's commitment to tackling tax evasion and ensuring compliance with GST regulations.
This crackdown serves as a stark reminder of the severe consequences of engaging in fake billing and ITC fraud, with legal provisions in place to prosecute offenders rigorously. As DGGI continues its efforts, more details are expected to emerge, potentially leading to further arrests and recoveries in the fight against financial crimes.
