First GST fraud case hits India

Representational Picture

The Anti Evasion Wing of Mumbai Central Commissionerate of the Central Tax Authority CBIC received intelligence regarding a conspiracy to monetize fraudulently obtained Input Tax Credit by the route of claiming cash refunds of zero-rated supplies exported out of the country.

As a follow-up, a case has been unearthed where two companies, namely, M/s. Elenya India Trading Pvt. Ltd. and Faxon India Trading Pvt. Ltd. have used the same modus operandi to fraudulently avail Input Tax credit to the tune of Rs 12.5 crore. This was utilised to meet the GST tax liability on exported goods and in turn, claim a huge IGST cash refund. They would purchase goods of low value from the local market in cash without any bill and exported the same. In order to claim and utilise ITC (Input Tax Credit), they purchased GST invoices from companies which were found to be non-existent and the transactions were only on paper.

The action taken by the department resulted in freezing of the IGST refund amount to the tune of Rs 6.50 crore in the bank account of the said companies.

The process of unearthing and unravelling this mischievously devised scheme of operations involved detailed data analysis by scrutinizing different returns and documents filed by the masterminds and their suppliers.

Detailed verification and comparisons of documents reveal that the operators had allegedly procured goods from the market in cash without bills and documents from another person showing receipt of goods on an interstate basis (IGST).

One of the Directors of M/s. Elenya India Trading Pvt. Ltd. and Faxon India Trading Pvt. Ltd., namely, Shoeb Suleman Dayater, was tracked down and arrested on May 28, 2019, and has been remanded to fourteen days of judicial custody.

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