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Gurugram Court Discharges Accused in ₹190-Crore Fake ITC Case as Tax Department Fails to Establish Prima Facie Evidence

By The Legal Alpha Web Desk · 29 October 2026 · 4 min read
Gurugram Court Discharges Accused in ₹190-Crore Fake ITC Case as Tax Department Fails to Establish Prima Facie Evidence

A Gurugram magisterial court discharged Mohammad Shamsad Saifi in a high-profile prosecution involving alleged Goods and Services Tax (GST) fraud exceeding ₹190 crore. Saifi was arrested in October 2020 by anti-evasion authorities on allegations of floating bogus entities to issue invoices without underlying supplies, thereby passing fraudulent Input Tax Credit (ITC).

The case collapsed at the pre-charge stage after the prosecution produced only one official witness, whose testimony lacked direct personal knowledge, while primary documentary evidence remained unproved.

Legal Topic

  • Area of Law: Indirect Tax / Criminal Procedure

  • Sub-topic: GST Fraud Prosecution, Framing of Charges, and Pre-Charge Discharge

Core Legal Issue

The core issue was whether the prosecution had produced sufficient legally admissible material to establish a prima facie case under Section 245 of the Code of Criminal Procedure, 1973 (CrPC) for framing charges under Section 132 of the Central Goods and Services Tax (CGST) Act, 2017.

The court had to determine whether allegations of large-scale financial crime can proceed to trial when the prosecuting agency relies on hearsay testimony and fails to exhibit primary transactional records, bank ledgers, and seizure memos despite repeated procedural opportunities.

What Did the Court Decide?

Additional Chief Judicial Magistrate Manish Kumar dismissed the complaint at the stage of framing charges and discharged Saifi of all alleged offences under the CGST Act.

The court held that a mere administrative complaint or the magnitude of an alleged economic loss cannot substitute for substantive evidence. It noted that despite granting over twenty procedural adjournments between May 2023 and October 2025 to lead pre-charge evidence, the Directorate General of GST Intelligence (DGGI) failed to substantiate its case or produce key witnesses. The court formally closed prosecution evidence, discharged the accused, and ordered the release of his bail bonds.

Key Legal Points

  • Hearsay Witness Incompetency: A witness with no direct personal knowledge of the search, seizure, or computation cannot sustain a criminal complaint at the pre-charge inquiry stage.

  • Evidentiary Threshold at Charge Framing: The gravity of an economic offence does not relax the baseline standard of establishing a prima facie case grounded in primary records.

  • Prosecution Laxity: Repeated non-appearance of public prosecutors and persistent failure to produce listed witnesses justifies closing the evidentiary stage and discharging the accused.

Relevant Law

  • Section 132(1), CGST Act, 2017: Prescribes statutory penalties and criminal prosecution for issuing invoices without supply of goods or services and fraudulently availing or utilizing ITC.

  • Section 69, CGST Act, 2017: Grants authorized tax officials the power to arrest persons suspected of committing cognizable and non-bailable tax offences.

  • Section 245, Code of Criminal Procedure, 1973: Provides for the discharge of the accused in warrant-cases instituted on a private/official complaint when no case is made out that would warrant a conviction if unrebutted.

  • Indian Evidence Act, 1872 (now Bharatiya Sakshya Adhiniyam): Governs the inadmissibility of hearsay testimony and mandates primary proof for documentary exhibits.

Arguments of the Parties

Tax Department / Prosecution

The department contended that the accused created and operated fictitious firms—including entities operating under names such as M/s Techno Electrical and Sales and M/s Lata Sales—solely to generate bogus tax invoices. The prosecution submitted that these paper transactions facilitated fraudulent ITC claims exceeding ₹190 crore across multiple recipient entities, depriving the public exchequer of statutory tax revenue.

Defence / Accused

Counsel for the defence argued that the prosecution's allegations remained unsubstantiated by primary records. The defence pointed out during cross-examination that the solitary witness examined by the department admitted he had not been part of the search teams, lacked personal knowledge of the seizures, and could not verify the computation of the alleged fraudulent tax credits. Consequently, the defence urged that no prima facie case existed to justify putting the accused on trial.

Why Does It Matter?

This ruling underscores a crucial procedural check on corporate and tax prosecutions in India. While investigative agencies routinely publicize massive recovery figures and provisional attachments, this case illustrates that headline tax figures alone do not survive scrutiny inside a criminal courtroom without meticulous adherence to criminal procedure.

For commercial entities and individuals entangled in complex tax investigations, the order demonstrates that complaints lacking primary documentary proof and competent investigating officer testimonies can be contested effectively at the threshold stage under Section 245 of the CrPC, preventing protracted and prejudicial trials.

Legal Takeaway

A high claim value in an economic offence does not lower the evidentiary bar required to put an accused on trial. In complaint-based tax prosecutions, failure by the revenue authorities to place primary transactional documents on record or examine witnesses with first-hand knowledge warrants a pre-charge discharge.

Sources

Primary Source:

  • Judicial Order of the Court of Additional Chief Judicial Magistrate Manish Kumar, District Courts, Gurugram (October 2026), discharging the accused under the CGST Act.

Additional Sources:

  • Proceedings and reporting reported by The Times of India (Gurugram Bureau) and Dainik Bhaskar regarding DGGI Gurugram Case Proceedings (October 2026).

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