Archive for the ‘fake invoice’ Category

Rs 1,200 Crore Fake GST Invoice Scam Busted: GST Dept unearths Rs. 200 Cr Fraud in Bengaluru, 3 Arrested: How is it possible in Digital world?

November 19, 2018

Rs 1,200Crore Fake GST Invoice Scam Busted: GST Dept unearths Rs. 200 CrFraud in Bengaluru, 3 Arrested: How is it possible in Digital world?

Iron and steel – evasion prone commodities: As for as Iron and Steel manufacture and the products thereof, there has been evasion since early 1940s. Even during the 2000, when, they were brought under Componded levy scheme as “evasion prone commodities,” manufacturers and traders could collude with each other and evaded thousands of crores of duty. About“deferred payment,” initially, no time limit was mentioned and thus, many manufactured, cleared without payment of duty under the guise of “deferred payment,” and disappeared! Ironically, at that time, there were loopholes created by the higher officers at the Board level, they could evade technically with the Rules created for the furnace and rolling mills. The builders also colluded with them, as they received goods, used up in the buildings and the cash paid converted into other transactions.  Scrap imports, high sea sales, substitution with local scrap, fake invoices, dealer invoices and such other modus operandi were used where the departments and allied organizations could do little,as most of the evaders escaped with the lack of evidences and loopholes in the Act and Rules.

MNCs, money flow and corruption: As the MNCshave concentrated in and around Bangalore and they have not been worried aboutfinances, skyscrapers, five-star hotels and infrastructure have been developedquickly from 2005 and they have been changed considerably. Thus, the governmentofficials, builders, contractors, building material manufacturers-suppliers,and all other connected persons and agencies played a crucial role in theinfrastructure developments, but also in all sorts of tax evasions. As the MNCsalways claim that they do not give bribes or commissions in any form to anyofficial or facilitator, the connected persons adapted and adopted variousmethods to pump the money, reaching them, so that the work has been going onsmoothly.

Cheap labour coming from North-Eastern India, etc: Bangalore,Hosur, Mysore and other places have been hubs for the MNCs involved in IT industries, electronics, automobiles, chemicals and pharmaceuticals etc., themobility of men and materials have been considerable and huge profits earned. Cheap labour has been / is being brought from north-Eastern India and from Bangladesh. The illegal infiltrators and the so-called migrants, even coming from Myanmar pose great challenge to locals in many aspects. They create new identities, voter cards, Adhar cards, PAN cards etc. Thus, the connected other businesses – Hotels, resorts, pubs etc., also thrived. As goods and services of all sorts are required, where, money is not an issue, every thing has been going on smoothly, as all have been taken care of. However, unfortunately,certain anti-national, terrorist and economic offences criminals joined and spoiled the commercial activities.

34 fake GST registrations – proves the inefficient programming: A scam involving fake GST bills worth Rs 1,200crore has come to light in Bengaluru[1]. The preventive wing of the south commissionerate of the GST busted the racket after two month long investigations[2].The fraudulent companies were engaged in trading of fake tax invoices for availing input tax credit[3]. This has been there, even before the introduction of GST. The accused were engaged in trading of iron and steel scrap through various companies[4].The kingpins of the scam have been identified as Suhail, Basha and Hafeezur. Significantly, in this industry, most of them  have been belonging to one particular group. Suhailand Basha floated 20 fake companies and registered them under the GST by giving fake names and addresses. While Basha had obtained 14 GST registrations in the names of his relatives and others, Suhail had obtained six[5]. They floated fake companies by giving made-up addresses, which made the investigation difficult[6]. Much relaxed provisions of the GST Act and rules, resulted in such manipulations. However, it has to be noted that each must have had 20 plus 14 fake PAN and Aadhar cards also. That implies either they [PAN and Aadhar] and the figuring persons in the cards have been either fake, fictitious or dead. Therefore, the government documents, in this regard have not been fool-proof and the criminals can exploit.

One computer producing fake GST invoices for thefake companies: All companies, however, in reality operated out of a single office and the bill were generated from a single computer[7]. This has been going on even in the case of Service tax, where just to enjoy the Rs20 lakhs limit, they used to float dozens of companies. The modus operandi involved floating fake companies, issuing fake GST invoices and generating e-way bills with fake vehicle registration details without actually supplying goods[8].The companies were created with an intent to fraudulently pass on input tax credit through these fake invoices. “A search was conducted on 12th of November, 2019. We recovered some incriminating documents from 25 locations and have nabbed three persons who we believe to be the key persons involved in generating these fake invoices,” said G Narayanswamy, IRS Commissioner of Central Tax, Bengaluru South. The accused have reportedly generated and issued tax invoices having turnover of about Rs 1,200 crore having a GST liability of Rs 200 crore. Their confessions have revealed that at least 18 iron and steel producers have availed these bills to claim input credit. Further investigations are underway. 

Proceedings initiated: Meanwhile the three accused have been produced in front of the Economic Offenses Magistrate, Koramangala, arrested under the provisions of the GST law and have been remanded under 14-day judicial custody[9].The GST officials have, till now, detected an evasion of Rs 200 crore of GST in the city, and recovered Rs 140 crore so far[10].The team of GST officials included Tej Kumar, deputy commissioner, Akshatha Shrinivas, assistant commissioner and led by G Narayanaswamy, commissioner, Bangalore South detected the fraud. Incidentally, when the officers work hard and book cases like this, when the cases go to court, most of the revenue cases are lost due to many inherent reasons. Non-cooperation of the evaders in furnishing documents, request interference of vested interests, collusion of some officers, consultants and others, delaying adjudication processes at different levels, improper presentation or lack of evidences and so on. Thus, in spite of the works of honest officers, cases are lost. Therefore, the involved should have some ethics, conscience and patriotism, so that the Indian society could be saved.

© Vedaprakash

16-11-2018.

UPDATED: NOVEMBER 14, 2018 23:35 IST


[1] CNN-News18, Rs 1,200 Crore Fake GST InvoiceScam Busted in Karnataka,Stacy Pereira | , Updated:November 15, 2018, 6:39 PM IST

[2] https://www.news18.com/news/india/rs-1200-crore-fake-gst-invoice-scam-busted-in-karnataka-1940385.html

[3] TaxScan, GST Dept unearths Rs. 200 Cr Fraud in Bengaluru, 3 Arrested, November 15, 2018 7:48 am| By : Tax Scan Team.

[4] http://www.taxscan.in/gst-rs-200-fraud-bengaluru-arrested/30672/

[5] The Hindu, GST fraud: Of 20 fake companies and one computer that generated fake bills, BENGALURU , NOVEMBER 14, 2018 23:35 IST, UPDATED: NOVEMBER 14, 2018 23:35 IST.

[6] https://www.thehindu.com/news/national/karnataka/gst-fraud-of-20-fake-companies-and-one-computer/article25499392.ece

[7] Financial Express, GST Bengaluru division busts fake invoice racket, By: FE Bureau | Published: November 16, 2018 2:45 AM

[8] https://www.financialexpress.com/economy/gst-bengaluru-division-busts-fake-invoice-racket/1383319/

[9] Deccan Herald, Rs 1,200 Crore GST frsud Busted in Benhaluru, Furquan Moharkan, DH News Service, Bengaluru, NOV 14 2018, 21:29PM IST, UPDATED: NOV 15 2018, 07:25AM IST

[10] https://www.deccanherald.com/business/multi-crore-gst-fraud-busted-702991.html

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