Gurbax Lax @ Happy Nagpal VS State of Punjab

In these petitions, anticipatory bail is sought for the petitioner, Gurbax Lal @ Happy Nagpal, in two cases filed by the Inspector (Prevention) of the CGST Commissionerate, Ludhiana. The cases involve Sandeep Kumar Puri and Rajinder Singh, accused under Clauses (b), (c), and (1) of Subsection 1 of Section 132 of the CGST Act, 2017, related to GST fraud.

The petitioner’s counsel argues that on February 4, 2021, the Superintendent (Preventive) of the Central Goods and Services Tax (CGST) Commissionerate, Ludhiana, conducted a search of the petitioner’s house. This search was authorized by the Joint Commissioner of the CGST Commissionerate, Ludhiana. However, the petitioner was not present during the search, and only his wife and son were at home. The counsel contends that conducting the search in the absence of the petitioner was unlawful.

Furthermore, the counsel states that a Panchnama (a formal document prepared during the search) was created following the completion of the investigation, but neither the petitioner’s wife nor his son received a copy of this document. The investigation that led to the search was based on allegations against Rajinder Singh and Sandeep Kumar Puri, who are involved in a GST fraud case under the same provisions of the CGST Act.

The petitioner’s counsel seeks anticipatory bail, arguing that the search and subsequent actions were not legally proper, especially considering the absence of the petitioner and the failure to provide essential documents to his family members.

In this case, petitions have been filed for the grant of anticipatory bail to Gurbax Lal @ Happy Nagpal in two complaints related to GST fraud, titled as Inspector (Prevention) of CGST Commissionerate, Ludhiana vs. Sandeep Kumar Puri and Inspector (Prevention) of CGST Commissionerate, Ludhiana vs. Rajinder Singh Both cases have been filed under Clauses (b), (c), and (1) of Sub-Section 1 of Section 132 of the Central Goods and Services Tax (CGST) Act, 2017.

The learned counsel for the petitioner argues that a search was conducted on 04.02.2021 by the Superintendent (Preventive) of CGST, Ludhiana, at the petitioner’s house based on an authorization from the Joint Commissioner. The search took place in the absence of the petitioner, with only his wife and son present. The counsel contends that this raid was not legally valid due to the petitioner’s absence. Furthermore, a Panchnama was prepared post-investigation, but no copy of it was provided to the petitioner’s family.

The petitioner’s counsel explains that the investigation was linked to Rajinder Singh and Sandeep Kumar Puri, who are accused of GST fraud under the aforementioned clauses of the CGST Act. During the investigation, the petitioner’s name surfaced as an alleged participant in the fraud, though he claims no connection with the firms involved. It is further asserted that the petitioner neither owns nor operates any of these firms and is being wrongfully implicated due to the influence of one Yashpal Mehta.

The counsel explains that Yashpal Mehta is involved in export-import business and conducts a substantial portion of business with Rajinder Singh and Sandeep Kumar Puri. A personal enmity is claimed to have arisen between Mehta and the petitioner after an engagement between Mehta’s son and the petitioner’s daughter was called off in 2018. According to the counsel, Mehta is now attempting to damage the petitioner’s reputation by shifting blame for the GST fraud onto him.

The petitioner’s legal representative emphasizes that a custodial investigation is unnecessary, as the petitioner is willing to cooperate fully and provide all necessary documents to the investigating authorities.

The reply from the respondent, Inspector (Prevention) of CGST Commissionerate, Ludhiana, highlights that credible information was received by the CGST Headquarters about the involvement of certain individuals in fraudulent GST activities, but details of these claims remain unclear in the document.

In this case, Gurbax Lal @ Happy Nagpal filed petitions seeking anticipatory bail in connection with two complaints under the CGST Act, 2017. These complaints relate to GST fraud accusations in cases involving two individuals, Rajinder Singh and Sandeep Kumar Puri, who are alleged to have committed offenses under Section 132(1)(b), (c), and (l) of the CGST Act. The fraud primarily revolves around issuing fake invoices and availing or passing on fraudulent Input Tax Credit (ITC) without any actual movement of goods.

The petitioner’s counsel argued that a search was conducted at his house on February 4, 2021, by the Superintendent of Central Goods and Service Tax, Ludhiana, without his presence. His wife and son were present, but they were not given a copy of the panchnama prepared after the search. The counsel maintained that the petitioner was unfairly implicated in the GST fraud cases of Rajinder Singh and Sandeep Kumar Puri, with whom he had no business association. It was also alleged that one Yashpal Mehta, due to a personal grudge stemming from a broken engagement between their families, had manipulated the case to implicate the petitioner.

The petitioner contended that he is neither the proprietor nor the owner of any of the firms involved in the fraudulent activities and has been wrongly framed. He expressed willingness to cooperate with the investigation and argued that custodial interrogation was unnecessary.

On the other hand, the respondent’s counsel presented a detailed case against the petitioner. The authorities received credible information that Gurbax Lal was operating bogus firms and availing fraudulent ITC on fake invoices. Investigations revealed that the petitioner had been withdrawing large sums of money, which were the proceeds of the fake billing transactions. Additionally, 14 firms linked to him were discovered, along with a number of blank cheques and credit/debit cards associated with various banks. One entity, M/s Nagpal Enterprises, was also found to have been operated under his name.

The respondents highlighted that another accused, Sandeep Kumar Puri, had already been arrested and that the petitioner’s involvement in fraudulent activities was established through various documents and transactions. Based on these findings, the respondents opposed the grant of anticipatory bail to the petitioner.

The investigation revealed that three entities—M/s Sai Enterprises, M/s Sai Traders, and M/s Balaji International—were registered under the mobile number of Sandeep Kumar Puri. These entities were linked to the petitioner, who allegedly controlled and operated multiple firms involved in fraudulent GST activities. According to information provided by the Khanna Police, 31 firms were identified from blank cheques, and the same number of firms were found to have declared significant outward supply amounts. These firms had utilized Input Tax Credit (ITC) for tax payments as per their GSTR-3B filings. Among these firms, 13 had already had their registrations canceled by the Business Intelligence & Fraud Analytics (BIFA) system due to the absence of inward supplies, and their suppliers’ registrations had also been terminated.

Specific details of some firms illustrate the scale of fraud. M/s Balaji Enterprises received Rs. 257.84 lakh in ITC despite the cancellation of its eight suppliers’ licenses in 2018-19. Similarly, M/s Sai Enterprises received Rs. 79.10 lakh in ITC from five suppliers whose licenses had been canceled earlier. M/s Balak Enterprises received ITC of Rs. 117.05 lakh from six suppliers who were deregistered, and M/s Nath Enterprises fraudulently claimed Rs. 188.73 lakh in ITC from seven suppliers whose licenses had been revoked. M/s Yuvraj Enterprises, too, availed ITC from suppliers with invalid licenses, showcasing a pattern of false invoicing and fraudulent ITC claims across multiple entities.

The case details reveal a large-scale GST fraud allegedly involving the petitioner, Gurbax Lal @ Happy Nagpal, linked to multiple fictitious entities. Investigation by the CGST Commissionerate in Ludhiana identified three companies—M/s Sai Enterprises, M/s Sai Traders, and M/s Balaji International—registered under the mobile number of one of the co-accused, Sandeep Kumar Puri. Further inquiry exposed that the petitioner operated numerous fraudulent firms, with 31 entities being flagged for irregularities based on blank cheques recovered during the investigation. Out of these, 13 firms had already had their registrations canceled due to the absence of any actual inward supply of goods, while others were registered under closed or non-traceable firms.

Detailed financial transactions were uncovered showing large sums of Input Tax Credit (ITC) fraudulently availed. For example, M/s Balaji Enterprises received ITC worth ₹257.84 lakh despite its suppliers’ licenses being canceled in 2018-19. Similarly, M/s Sai Enterprises received ₹79.10 lakh, and other firms like M/s Balak Enterprises and M/s Nath Enterprises were also found to have availed crores of ITC despite being linked to defunct suppliers. This fraudulent activity led to fake bills amounting to ₹425 crore, with ITC passed on to the tune of ₹478 crore.

The prosecution emphasized that the petitioner and his associates had defrauded the government of approximately ₹127 crore using these fake entities and invoices. The magnitude of the fraud, being over ₹5 crore, granted the authorities the legal grounds to arrest the petitioner under Section 69 read with Section 132 of the GST Act, 2017. The court, after hearing both parties, indicated the seriousness of the allegations and considered the need for the petitioner’s custodial interrogation.

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