Fake Biodiesel Racket SGST Uncovers Major Tax Fraud in Kerala
In a significant enforcement move, the State GST department has launched massive raids across Kerala, exposing a fake biodiesel racket operating under the guise of “biorefineries.” This illegal network recycled industrial waste oils, added chemicals, and sold the concoction as biodiesel — causing revenue losses and environmental hazards.
What Was the Racket About?
The operation, codenamed “Fuego Marino,” uncovered widespread malpractice in the manufacturing and sale of spurious diesel. Here’s what the SGST department found:
- Core Method: Recycling industrial waste oil and mixing it with chemicals.
- Product Labelled As: Biodiesel.
- End-Users: Fishing boats, crushers, quarry operations — sectors with high fuel demand.
- Primary Locations:
- Kanjikode (Palakkad) – 13 illegal units.
- North Kalamassery (Ernakulam) – 16 sites.
- Thrissur, Malappuram, TVM, Kollam, Kottayam, Kozhikode – Other active spots.
Why It Matters – Legal & Financial Impact
| Concern | Impact |
|---|---|
| Tax Evasion | Estimated crores in revenue lost for Kerala SGST |
| Environment Damage | Unregulated fuel causes emissions and machinery wear |
| Money Laundering Angle | Profits likely funneled into untraceable channels |
| Public Safety | Use in boats/quarry machines risks fire, breakdowns |
Expert View:
“Such illegal fuel operations are not just tax crimes. They destabilise regulated fuel markets and pose serious risks to human health and machinery,” says a tax enforcement analyst tracking energy-related GST fraud.
Legal Background: How GST Law Treats Fake Fuel Sales
Under the CGST and SGST Acts, any sale of goods without proper registration, invoicing, or adherence to HSN classification can lead to:
- Penalties under Section 122 & 132 for suppression and tax evasion
- Possible arrest and prosecution for fraudulent input tax credit (ITC) claims
- Investigation under PMLA, 2002 for suspected money laundering links
Case Reference:
Several High Courts have previously upheld the GST department’s power to raid and seal premises involved in clandestine manufacturing and tax fraud.
SGST Operation: Key Highlights
- Codename: Operation Fuego Marino
- Team Size: 500+ officers from Intelligence & Enforcement wings
- Raids: Conducted in over 40+ locations across 8 districts
- Duration: Based on surveillance of 3–4 months
- Status: Ongoing (as of latest update)
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FAQ Section
Q1: Is biodiesel taxable under GST?
Yes, biodiesel attracts GST at 12%, as per Notification No. 1/2017-Central Tax (Rate).
Q2: What happens if GST is evaded by mislabeling goods?
The department can impose heavy penalties, seize goods, and prosecute under anti-evasion provisions.
Q3: Can fuel traders claim ITC?
Only if the product is legally purchased and invoiced with proper GST documentation.
Summary
Kerala SGST uncovers a fake biodiesel racket selling spurious fuel to boats and quarry units. Raids across 8 districts expose tax evasion, environmental harm, and potential money laundering. Operation Fuego Marino is one of the biggest anti-evasion actions by the state GST department in 2025.