The Anti-Evasion Branch of the Central Goods and Services Tax (CGST), Delhi South Commissionerate, has arrested the proprietor of an iron and steel trading firm in connection with an alleged fraudulent availment, utilisation and passing on of inadmissible Input Tax Credit (ITC) exceeding Rs. 25.22 crore.
According to the Ministry of Finance, the alleged fraudulent transactions were carried out through bogus invoices having an aggregate value of approximately Rs. 140.14 crore. The action forms part of the ongoing enforcement drive by the CGST authorities against entities allegedly involved in wrongful availment and circulation of ITC without genuine underlying supplies.
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Investigation Uncovers Alleged Bogus ITC Network
The investigation conducted by the Anti-Evasion Branch revealed that the firm had allegedly availed ITC on the strength of invoices issued by multiple entities.
According to the department, several of these supplier entities were found to be non-existent, non-functional, suspended or cancelled. Field verification conducted by the officers further indicated that certain suppliers were not carrying out genuine business activities from their declared places of business.
The findings raised concerns regarding the genuineness of the transactions underlying the ITC claimed by the iron and steel trading firm.
ITC Allegedly Availed Without Actual Receipt of Goods
A significant aspect of the investigation was the alleged absence of actual movement or receipt of goods corresponding to the invoices on which ITC was claimed.
The department stated that the firm had allegedly availed ITC without actually receiving the underlying goods. Thus, according to the investigation, the credit claimed in the firm’s GST records was not supported by corresponding physical supplies.
The investigation further alleged that the firm did not merely avail the disputed ITC but also passed on such ITC to various recipients by issuing invoices without corresponding supply of goods.
The alleged transactions therefore involved both the availment of ITC on invoices unsupported by actual supplies and the subsequent passing on of credit through invoices without corresponding movement of goods.
Statements Recorded Under Section 70 of CGST Act
The case was investigated through documentary evidence, field verification and statements recorded by the department.
The statements were recorded under Section 70 of the Central Goods and Services Tax Act, 2017, which empowers the proper officer to summon a person whose attendance is considered necessary to give evidence or produce documents during an inquiry.
The department stated that the evidence gathered during the investigation, along with the statements recorded under Section 70, formed part of the basis for the arrest.
Proprietor Arrested Under Section 69
Based on the evidence collected during the investigation, the proprietor was arrested on 17 September 2026 under Section 69 of the CGST Act, 2017.
Section 69 provides the statutory framework for arrest in specified cases where the Commissioner has reasons to believe that a person has committed an offence punishable under the relevant provisions of the CGST Act.
Following his arrest, the proprietor was produced before the Patiala House Court in Delhi.
Court Remands Accused to Judicial Custody
The Patiala House Court remanded the arrested proprietor to judicial custody for 14 days.
The arrest and subsequent judicial remand follow the department’s investigation into the alleged fraudulent ITC transactions involving the iron and steel trading business.
The allegations made by the department are subject to the further course of investigation and judicial proceedings.
Investigation Remains Underway
The Ministry of Finance stated that further investigation in the matter is under progress.
The ongoing investigation is expected to examine the complete chain of transactions, including the entities that allegedly issued the invoices, the recipients to whom ITC was allegedly passed on, and the financial and documentary trail associated with the transactions.
The case highlights the continued scrutiny by GST authorities of ITC claims involving suppliers that are subsequently found to be non-existent, inactive, suspended or cancelled, particularly where there is an alleged mismatch between tax invoices and actual receipt or movement of goods.
The department’s action also underscores the significance of establishing the genuineness of underlying supplies while claiming and utilising ITC under the GST framework.
