The Goods and Services Tax (GST) Department arrested Lakshmi Prasad Yerneni (56), the Managing Director of Ecoren Energy India Pvt. Ltd., on 12th November, for fraud on ITC of ₹64.5 crore. The company had provided false tax invoices to the government and had fraudulently taken ITC and sold it as real goods or services to the government.
GST officials said the alleged fraud involved a network of connected companies that created fake transactions to make them look like legitimate business transactions. These entities were allegedly generating bogus invoices and falsely claiming input tax credit under the GST framework, they said.
Arrest and Judicial Custody
Lakshmi Prasad Yerneni was arrested in the early hours of Friday after an investigation by GST authorities. He was later taken before the Economic Offences Court in Hyderabad and remanded to judicial custody till August 7. He was shifted to Chanchalguda Central Prison, where he will be held for 14 days pending further proceedings.
The case has been registered under Sections 132(1)(c) and 132(1)(i) of the CGST Act, as well as the corresponding provisions of the State GST law. Since the alleged tax evasion exceeds ₹5 crore, the offence is cognisable and non-bailable (e.g. without a warrant), allowing authorities to arrest without a warrant.
Allegations Against the Managing Director
Investigators said Yerneni told them he had the final authority over key operational decisions, including vendor onboarding, purchase orders and work orders, and approval of advance payments.
The government says this authority has been misused to approve transactions based on fake invoices, allowing the company to claim fraudulent input tax credit without an actual supply of goods or services.
Network of Shell Companies Under Scanner
GST officials believe the alleged fraud extended beyond a single company. It is believed that a network of associated firms was created to generate fake invoices and route money through multiple bank accounts to make the transactions look legitimate, the report says.
Financial records examined during the investigation reportedly show the movement of money across several accounts. Now investigators are tracing the entire financial trail to find out who the beneficiaries are and how the money was circulated.
Along with bank transactions, the investigators are also conducting forensic analysis of digital records, GST returns, invoices, and financial documents to uncover the full extent of the alleged fraud.
Broader Investigation Underway
Other suspects, suppliers, facilitators, and other entities linked with the alleged fake ITC network could be investigated. More legal action is also possible if there is evidence of other people or companies involved.
Tax experts note that fraudulent Input Tax Credit (ITC) claims remain one of the biggest enforcement challenges under the GST regime. Such frauds are typically linked to shell companies, fake invoices, paper transactions, and layered fund transfers to avoid taxes while presenting a picture of legitimate commercial activity.
With an increase in data analytics, e-invoicing systems, digital audits, and banking trail analysis, enforcement agencies have fortified their ability to identify and dismantle organized tax fraud networks.
The GST Department has said that the investigation is ongoing. The full financial trail will then be investigated and further steps taken if any other evidence is unearthed in order to investigate the whole scope of the alleged ₹64.5 crore fake ITC fraud and prosecute those responsible.
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