Case study · Investigations
Invoices Without Steel
A steel processor's purchases were invoiced through paper traders while the metal came from unbilled sources. The company was left facing tax-credit reversal and penalties.
- Fake invoicing & tax-credit rings
- Kickbacks
- Sham counterparties & fictitious transactions
- purchases through paper traders
- ₹12–18 Crpurchases through paper traders
- tax credit at risk
- ₹2–3 Crtax credit at risk
- suppliers found non-genuine
- 14suppliers found non-genuine
- checks before onboarding
- Substancechecks before onboarding
01The situation
The steel arrived. The supplier on the invoice never had any.
A steel processor received a tax notice disputing credits on purchases from suppliers later found to be non-existent. Management needed to know whether this was supplier fraud it had fallen victim to, or something its own people had arranged.
How it came to us
A tax notice questioned input tax credit claimed on purchases from several suppliers whose registrations had been cancelled.
02How it worked
- 01Raw material was bought from unbilled market sources at lower prices.
- 02Invoices were obtained from paper traders who never held stock.
- 03The company claimed tax credit on those invoices.
- 04The purchase manager arranged the invoices and shared the price difference with brokers.
- 05Payments to paper traders came back in cash through intermediaries.
Swipe sideways to see the whole diagram.
- Outside parties
- Insiders involved
- The organisation
- Where the money ended up
- Repeats / feeds back
How it was hidden
Genuine goods received, paper traders with valid registrations at the time, and payments that looked like normal supplier payments.
03The challenge
Establish whether the goods were real, who arranged the paper invoices, and the company's exposure, quickly enough to respond to the tax authority.
What made it hard
- Real goods with false paper
- Tax authority deadlines
- Several traders and brokers
- Company exposure as well as staff misconduct
Red flags that were there to see
- Suppliers with cancelled registrations
- Suppliers with no warehouse or vehicles
- Same broker behind many suppliers
- Prices below market for bulk purchases
04Our approach
- Workstream 01
Supplier verification
Substance and status of every high-value supplier.
- Workstream 02
Goods movement reconciliation
Transport and gate records against invoices.
- Workstream 03
Funds-flow analysis
Where supplier payments went next.
- Workstream 04
Tax exposure assessment
Credit at risk and remediation options with tax counsel.
The breakthrough
Goods movement records showed material arriving from sources other than the invoiced suppliers, and the funds trail showed supplier payments returning in cash through brokers linked to the purchase manager.
05What we found & did
- Purchases invoiced through paper traders while goods came from unbilled sources.
- Tax credit claimed on invoices without supply.
- The purchase manager shared the price difference with brokers.
- Senior management was cleared.
06The impact
The company reversed the disputed credit, negotiated its position with the tax authority on the basis of documented facts, removed the purchase manager and introduced supplier substance checks before onboarding.
- purchases through paper traders
- ₹12–18 Crpurchases through paper traders
- tax credit at risk
- ₹2–3 Crtax credit at risk
- suppliers found non-genuine
- 14suppliers found non-genuine
- checks before onboarding
- Substancechecks before onboarding
07Lessons for your business
The controls that would have stopped this, or caught it sooner:
- Verify supplier substance, not just registration.
- Monitor suppliers' registration status continuously.
- Reconcile invoiced suppliers with transport and gate records.
- Watch for brokers behind many suppliers.
~₹5 Crundue benefit quantified
The CEO's Three Vendors
A subsidiary CEO routed a rural retail rollout through vendors fronted by his own associates. The money trail led back to him.
- Procurement reconstruction
- Corporate and statutory records
- Ground intelligence
- Funds-flow tracing
US$4.7M+diversion traced to the founder
Zero Skin in the Game
An investor funded a road-construction contractor. Within months, the founder's own contribution had quietly gone to zero and the diversion had begun.
- Records digitisation
- Funds-flow reconstruction
- Personal wealth analysis
- Corporate and property records
~1Memails and documents reviewed
The Fortune That Wasn't There
Shareholders suspected their managing director of hiding a fortune. On the data available, the money trail did not support that suspicion, and it surfaced employee frauds instead.
- Digital forensics
- Source and application of funds
- Related-party mapping
- Market intelligence
Client names and identifying details are withheld to protect confidentiality. Specific references and client experiences can be shared on request, with the client’s consent.
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