BENGALURU: State tax sleuths who had arrested Mohammed Siddiq, a main supplier of steel rerollers in a tax evasion racket of Rs 1,000 crore, arrested his accomplice Imtiaz, from Bantwal in Dakshina Kannada.
Sources said that during investigation, tax sleuths noticed a money trail leading to several states, and revealing that the mastermind had set up a maze of fraudulent suppliers of iron and steel scrap. The sleuths realised that while on paper there were transactions which appeared genuine, closer examination found the entries fake. So on record, while scrap steel appeared to have been sourced from a network of retail and wholesale kabadiwalas across Karnataka, Kerala and Tamil Nadu, they realised the entries were fake, sources said. The racket ensured they don’t pay 18 per cent GST on steel scrap.
The taxmen also realised that these entities exist because steel rerollers deal with them. Steel rerollers routinely cut off transactions with suppliers like Siddiq (after his arrest) and look for alternate cartels who could also be fraudulent. When asked what risk they run, sources said, “Some in the network who are uneducated and live in small houses, yet have on paper large transactions, are unaware that their bank accounts are being misused. If convicted, they could end up serving a prison sentence of up to 5 years, besides hefty fines.”
Siddiq had virtually set up a maze of fake suppliers and issued fake tax invoices through fake registrations, misappropriating Input Tax Credit without remitting the taxes to governments in the initial transaction. He and the other culprits could face serious charges under GST, IT and other penal sections related to economic offences, they said.
These details became evident when sleuths followed the money trail and noticed that voluminous sums of cash were exchanged through business correspondents of payment banks, who collect cash from various sources to remit to the nodal bank accounts of their respective banks, and in return, equivalent sums of money are transferred from benami accounts to the business correspondent’s accounts by the kingpin. This leads to flooding of cash in the market, which since it is untraced, is used for various transactions as black money. Their strategy was to escape tax liability, evading GST cash responsibility on outward supplies and this had caused losses to the government to the tune of about Rs 179.99 crore.
When they raided Siddiq’s place, they realised he had dozens of bank passwords and authorizations of many ‘benami’ persons who are his accomplices spread over Bengaluru, Dakshina Kannada, Kerala and Tamil Nadu. It was painful to note that persons whose bank accounts Siddiq operated lived in poverty, while lakhs of rupees were being transacted through their bank accounts. Sources said he had managed to issue counterfeit invoices, seeking to benefit those who purchased from him.