ED Conducts Searches Across UP, Haryana in Probe of Alleged Bogus Input Tax Credit Fraud

The Enforcement Directorate (ED) on Monday conducted searches at multiple premises in Uttar Pradesh and Haryana in connection with a money laundering investigation linked to an alleged fraud involving bogus Input Tax Credit (ITC), officials said. The searches were carried out under the provisions of the Prevention of Money Laundering Act (PMLA), 2002.

According to officials, the searches covered nine premises in Muzaffarnagar and Ghaziabad in Uttar Pradesh and Faridabad in Haryana. The operation was carried out by the ED's Lucknow Zonal Office.

The case involves M/s Jambudwip Exports & Imports Ltd, an entity allegedly linked to a network involved in generating and passing on fraudulent ITC through fabricated invoices and E-way bills without any actual movement of goods. Officials said the alleged network used multiple bogus or non-existent entities to create a chain of fictitious transactions. Investigators found evidence of extensive circular transactions, rapid layering of funds and subsequent cash withdrawals, indicating an organised mechanism to circulate and conceal the proceeds generated through the fraudulent ITC transactions.

GST authorities have established fraudulent availment of ITC worth ₹9.63 crore and passing on of ITC amounting to ₹10.28 crore, the officials said. The transactions resulted in wrongful loss to the government exchequer, with the corresponding proceeds being treated as proceeds of crime under the PMLA.

Investigation Details and Findings

The alleged modus operandi involved the use of fabricated documentation to create the appearance of genuine business transactions and facilitate the availment and transfer of ITC, despite there being no corresponding movement of goods. According to officials, the investigation revealed a network involving extensive circular transactions, rapid layering of funds and cash withdrawals through multiple bogus or non-existent entities.

The ED's search operation was aimed at tracing the proceeds of crime and identifying other persons and entities that may have benefited from the alleged fraudulent ITC network. The agency also sought to recover documentary and digital evidence related to the creation of bogus invoices, E-way bills, financial transactions, fund layering and movement of illicit proceeds.

Officials are examining financial records and other material recovered during the searches to establish the complete money trail and identify the beneficiaries involved in the network. The ED has not disclosed details of any arrests or seizures so far.

In a detailed statement issued after the searches, the ED said that the company misused GST provisions and fabricated invoices to cause a loss of ₹27.02 crore to the government. The ED initiated the investigation based on a FIR registered by the Uttar Pradesh Police under various sections of the Indian Penal Code, which are scheduled offences under the PMLA.

The statement, which mentioned the seizure of ₹3.8 crore in cash, said the company had fraudulently availed and passed on Input Tax Credit on the strength of fabricated invoices and forged e-way bills without actual supply or receipt of goods. Investigators found that forged consignment shipment challans were prepared in a pre-planned manner with the intention of obtaining fake Input Tax Credit.

Investigation further revealed that fake Input Tax Credit of about ₹10.28 crore was availed and passed on during financial year 2018-19 through a chain of non-existent and bogus entities. Funds received from beneficiary firms were transferred to such entities on the same day, layered through a maze of accounts and finally withdrawn in cash.

Discrepancies in Reports

While most reports placed the number of premises searched at nine, two reports by Lokmat Times cited a figure of eleven premises. The reports also differed on the total amount of financial loss attributed to the company, with one report mentioning a loss of ₹27.02 crore while others listed the amounts of fraudulent availment (₹9.63 crore) and passing on (₹10.28 crore). A court has not yet ruled on these figures, and the discrepancies may stem from the point at which the loss was measured.

The company could not be contacted immediately for a comment on the action.