LUCKNOW: The Directorate General of GST Intelligence (DGGI) has dismantled a large organised network accused of generating fake invoices worth more than ₹300 crore under the guise of copper scrap trading.
Simultaneous searches were carried out at 19 locations across Lucknow, Delhi and Sonauli near the India–Nepal border. Over 100 officers participated in the operation, leading to the arrest of three individuals who have been remanded to 14 days’ judicial custody. Officials said the syndicate fraudulently availed more than ₹50 crore in input tax credit (ITC), resulting in substantial revenue loss to the exchequer.
Shell Firms and Circular Billing Chains
Investigators identified Deepanshu Garg as the key accused who allegedly floated multiple shell firms in the names of domestic staff and associates. These entities reportedly showed fictitious procurement and supply of copper scrap, issuing invoices without any actual movement of goods.
According to officials, the network created a layered structure of circular billing, routing transactions across multiple states to give the appearance of legitimate trade. Work-contract supplier names were used to add credibility, while funds were transferred through various bank accounts to obscure the trail. In such operations, shell companies typically exist solely to generate invoice chains. Funds are rotated briefly to simulate business activity before being siphoned off.
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Data Analytics Flags Suspicious Patterns
The probe was initiated following specific intelligence inputs received by DGGI. Authorities conducted data analytics on e-way bills, GST returns, bank statements and registration profiles.
Discrepancies and repetitive transaction patterns triggered a coordinated multi-location search plan. Officials recovered fake GSTINs, fabricated purchase-sale ledgers, digital devices, rubber stamps and other documentary evidence. Electronic records have been sent for forensic analysis to identify additional beneficiaries and possible masterminds. The alleged fraudulent ITC was used to suppress tax liabilities, creating artificial credits in the system without underlying supply of goods.
Sonauli Link and Wider Interstate Footprint
Investigators are examining the Sonauli angle to determine whether cross-border trade documentation or bogus import-export entries were used to legitimise the billing chain. Authorities suspect that the network may extend beyond the currently identified entities, with a broader interstate footprint. Further arrests have not been ruled out.
Tax experts note that despite the introduction of e-invoicing and real-time reporting, fake ITC fraud remains a persistent challenge. Establishing the absence of physical supply through banking trails, e-way bill reconciliation and digital forensic analysis is central to proving circular transactions.
DGGI officials said interrogation of the arrested individuals is underway to map the full chain of shell firms, identify controlled bank accounts and trace end-beneficiaries. Joint enforcement action against invoice-only firms and organised tax evasion networks is expected to continue as part of intensified monitoring in high-risk sectors.
