Nagpur: The Directorate General of GST Intelligence (DGGI) Nagpur Zonal Unit has busted a massive racket of fraudulent refunds of Input Tax Credit (ITC) of Rs 213.87 crore by three non-existent entities in Nagpur, with multiple searches at Nagpur commencing from July 1.
It is the ‘first-of-its-kind case’. Searches were conducted at various places in Nagpur on the basis of specific information regarding operation of a fake invoices racket. Some non-existent entities acting as exporters were making dubious ‘exports’ of tobacco products from the Inland Container Depot (ICD) in Multimodal International Hub and Airport at Nagpur (MIHAN) area. On the strength of these ‘exports’, these entities were allegedly obtaining fraudulent refunds of accumulated ITC amounting to hundreds of crores of rupees from CGST Division, Hingna, Nagpur-I.
During the course of searches at the declared ‘principal places of business’ of these entities, it was revealed that all the three entities were non-existent. They existed only on paper and had no physical existence. In a short span of three months after obtaining registration, these three non-existent entities had filed shipping bills and showed export of a common product — Smoking Mixtures for Pipes and Cigarettes (24031910) — attracting interalia Goods and Services Tax at the rate of 28 per cent and Compensation Cess at 290 per cent on which they had filed refunds of accumulated ITC amounting to Rs 213.87 crore.
A press release issued by DGGI Nagpur Zonal Unit said that it was found that there was ‘a mastermind’ behind the creation of these three non-existent entities 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, added DGGI Nagpur Zonal Unit. Out of the above refunds, refunds of Rs 123.97 crore had already been sanctioned by CGST Division, Hingna, Nagpur-I by the first week of June 2021. However, timely intervention by DGGI Nagpur Zonal Unit resulted in ‘damage control’, by stopping the balance refunds of Rs 89.90 crore filed by these entities just prior to their sanction.
During the investigations, it emerged that this racket might not be confined to just these three non-existent entities. “It appears that some more similar entities have been floated, all in a particular jurisdiction, to first carry out dubious ‘exports’ and then to claim fraudulent refunds. This investigation is being carried out simultaneously,” DGGI Nagpur Zonal Unit stated.