Fake firms involved in tax fraud worth crores busted, 2 planners held

Tax officials have busted a fraud running into hundreds of crores involving "large number of firms" registered in Gautam Buddh Nagar and other places of Delhi NCR and arrested two masterminds involved in it, officials said on Tuesday.

These firms were apparently connected and had claimed huge amount of refunds against accumulated Input Tax Credit (ITC) on account of inverted tax structure and zero-rated supply of goods were identified, the Union Finance Ministry said in a statement.

Searches were conducted on March 13 by officers of CGST Gautam Buddh Nagar along with other counterparts at various locations declared as principal places of business and residential premises in Delhi, Faridabad, Gurgaon, Noida and Greater Noida, it said.

"During the search, none of the firms were found to be existing/operational at their declared premises. Further investigations revealed that two persons, apparently masterminds behind the racket had obtained KYC documents from proprietors/partners of these firms for a consideration," the ministry said.

"All the business activities were found to be only on paper without actual movement/supply of goods which included manufactured or unmanufactured tobacco, yarn, woven fabric and cotton yarn, other made up clothing, etc," it added.

These firms had generated invoices for passing on Input Tax Credit ascertained to be Rs 1,892 crore so far and refund claims amounting to Rs 264 crore have been paid to these firms, out of which Rs 60 crore have been recovered so far, the statement said.

In addition, pending refund claims of approximately Rs 131 crore have been withheld, it added. "Residential premises of suspected masterminds were also searched on March 15 and their statements recorded. Based on their confessional statements, they have been arrested on March 16 under Section 69 of CGST Act," the ministry said.