Authorities in Chhattisgarh have arrested steel trader Harish Wadhwani in connection with an alleged ₹6.93 crore fake Input Tax Credit scam involving shell companies and fraudulent invoices. Wadhwani, a partner in Om Kiran Ispat Udyog, is accused of availing wrongful tax credits by showing purchase transactions from entities that allegedly had no real business activity or whose GST registrations were later cancelled or suspended.
The alleged fraud came to light during scrutiny of tax filings and business transactions. Investigators said an examination of financial records, invoices and return filings revealed discrepancies between recorded purchases and the actual movement of goods, prompting a deeper probe into suspected fake invoicing.
FCRF’s Flagship Cyber Law Certification Returns With a New Four-Week Cohort
Fake Invoices Used to Claim ITC
According to officials, multiple transactions were allegedly routed through companies that existed only on paper. These entities are suspected of issuing invoices without genuine supply of goods, creating a false transaction chain to claim Input Tax Credit.
Investigators believe such arrangements are used to inflate business activity on paper while unlawfully obtaining tax benefits. The alleged misuse of ITC has raised concerns over revenue loss and weaknesses in documentation-based compliance systems.
GST experts note that Input Tax Credit allows businesses to adjust taxes paid on purchases against their output tax liability. However, when credits are claimed without actual supply of goods or services, it causes direct loss to the exchequer and undermines the tax framework.
Accused Evaded Arrest for Months
Officials said Wadhwani had allegedly been evading arrest for nearly five months. During this period, he reportedly approached several judicial forums seeking anticipatory bail.
Relief was denied at all levels, and the matter eventually reached the Supreme Court, where his petition was also rejected. His arrest followed after the rejection of his plea.
Authorities are now examining whether the alleged scam was limited to the arrested trader or formed part of a wider network involving other firms and intermediaries. Preliminary findings suggest that additional entities may have played a role in generating and circulating fake invoices.
Probe Expands to Wider Network
Investigators are mapping the financial trail linked to the suspected transactions to determine the scale of the alleged fraud and identify beneficiaries. Banking records, GST returns, invoices, e-way bills, transport documents and fund flow patterns are expected to form part of the scrutiny.
Financial crime experts say fake ITC rackets often depend on shell companies and circular trading arrangements, where firms issue invoices to each other without actual movement of goods. Such networks can make fraudulent transactions appear legitimate on paper.
Authorities have indicated that further arrests cannot be ruled out as the investigation progresses. The probe remains focused on reconstructing the transaction network, verifying counterparties involved and assessing the total financial impact on government revenue.
