A man has been arrested for allegedly setting up a shell company to evade ₹7 crore in goods and services tax (GST) using documents of a Howrah resident.

The documents were also used to open a bank account at Shaktinagar in New Delhi, where the fraudulent money would be deposited.

Sharvan Singh was arrested in Jahangirpuri, New Delhi, on June 30. Singh has been brought to Howrah on transit remand and produced before a court, which remanded him to police custody till July 9.

"The arrest was made following a complaint lodged by Kartick Ruidas in June, alleging that his name and his details, including his electricity bill, Aadhaar and PAN number, were used to set up a shell company," a senior officer of Howrah City Police said.

Investigators reached the branch of the private bank in New Delhi to get the details of KD Enterprise, the shell company.

In his complaint, Ruidas had pointed out that the mobile number provided on the GST portal against the company did not belong to him, and the email address was unknown to him.

Investigators stumbled upon Sharvan's name during the probe and found the 28-year-old had opened the bank account almost a year ago and that the company's turnover was close to ₹36 crore.

The team from Howrah City Police camped for a few days and arrested Sharvan after tracking him to Jahangirpuri.

Ruidas said he never knew Sharvan and that he works in a small laboratory products manufacturing unit for a monthly salary of close to ₹10,000.

The fraud was discovered after a revenue department team arrived at his house in mid-June for a search and seizure operation, believing he owned a company called KD Enterprise and had evaded crores in GST payments.

"We realised that Ruidas was not involved and sent a report to our bosses," a senior official of the finance ministry said.