GST Scam : Gurugram Sessions Court denies Bail to Accused in GST Scam for availing Fraudulent ITC

The Patiala House Court in the matters Central Goods and Service Tax vs. Pawan Kumar Sharma denies bail application of an accused of GST scam allegedly involved in availing and passing on fraudulent ITC to non-existing companies.

As per the prosecution, the accused was engaged in the business of dry fruits, etc through his sole proprietorship firm in the name of M/s Pawan Traders which was closed vide canceled/surrendered order dated 17.09.2021 and there were no outstanding dues on the part of the applicant/accused to be paid to the department (GST) for which the relevant documents has also been placed on record. It is submitted that the applicant/accused had already duly deposited the due GST amount of the relevant period and now the department is wrongly accusing him to have availed and passed on Input Tax Credit (ITC). It is submitted that the applicant/accused was informed by the Intelligence Officer that they were searching the records of the firm M/s Laxmi Trading company, a sole proprietorship firm of Late Smt. Laxmi Devi was the real sister of the applicant/accused. It is submitted that the applicant/accused had merely some business transactions with M/s Laxmi Trading Company and the applicant/accused had no control or relation with the business transactions of M/s Laxmi Trading Company nor he is the owner or the operator of the said firm and no CGST liability can be fastened upon the applicant/accused in respect of any operations of M/s Laxmi Trading Company. It is submitted that the applicant/accused had never had any business transaction with M/s Imperial Merchants Pvt. Ltd.

It is further submitted that while investigating the tax invoices issued by M/s Pawan Traders to M/s Babu Lal Subhash Chand, which were recovered from the office of the applicant/accused, the applicant/accused disclosed that he was signing the invoices of M/s Pawan Traders to M/s Babu Lal Subhash Chand, which were goodsless invoices issued to M/s Babu Lal Subhash Chand on the instructions of the nephew of applicant/accused. It is submitted that during investigation it was revealed that the address of M/s Pawan Traders was the same as mentioned in the PAN card of Laxmi Devi who was also a dummy proprietor of M/s Laxmi Trading Co. It is further submitted that as per the statements made by Sh. Sanjeev Goel, Controller and Anish Goel, Director of M/s Imperial Merchants Pvt. Ltd, applicant/accused used to contact them for receiving duty paid goodsless bills for M/s Laxmi Trading Company through mediator Arvind and these bills were further used for passing on fraudulent ITC to defraud government exchequer and the conduct of applicant/accused clearly establishes on record that applicant/accused used to manage M/s Laxmi Trading Co. along with his nephew Gopal Sharma and was also the proprietor of M/s Pawan Traders. It is submitted that applicant/accused is also proprietor /controller of entities like M/s Pawan Traders, M/s Jagannath, M/s Kajuwala, M/s Jatin Sharma, M/s Sai Overseas, etc which are also suspected to be involved in availing and passing on fraudulent ITC to non-existing companies.

During the investigation, it was revealed that M/s Laxmi Trading Company, prima facie, has availed fraudulent ITC for a sum of Rs.22.62 crores and passed on fraudulent ITC of Rs.26.31 crores. It is submitted that during verification of inward suppliers, it has been revealed that M/s Laxmi Trading has availed fraudulent ITC from nonexistent or nontraceable firms to the tune of more than Rs.10 crores. It is further submitted that applicant/accused is involved in more than one financial fraud and his past antecedents are tainted.

“GST has been touted as a key tax reform in the post-liberalisation period to prevent the cascading impacts of taxation,” the Court said after hearing both sides’ arguments. Unfortunately, some of the mischievous brains are busy removing the nuts and bolts from the vehicle of tax reforms to hinder the forward course of growth. The Courts of this country cannot afford to take a lenient view against such mischief.”

As of the above discussion, the Court denies the bail application.

The Judgment was made by Hon’ble Judge Dharmender Rana.

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