HC stays order for CBI probe into Rs 500-cr fraud | chandigarh | Hindustan Times
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HC stays order for CBI probe into Rs 500-cr fraud

chandigarh Updated: Dec 12, 2013 23:00 IST
Sanjeev Verma
Sanjeev Verma
Hindustan Times
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A division bench of the Punjab and Haryana high court has stayed its single-judge order of handing over the probe to the Central Bureau of Investigation (CBI) into the "unholy nexus" between traders and Punjab officials which led to Rs 500-crore refund of value-added tax (VAT) to various firms for interstate trade and export of goods on the basis of "paper transactions".

Taking up a petition filed by three traders' associations of Ludhiana, the division bench comprising chief justice Sanjay Kishan Kaul and justice Augustine George Masih, on Thursday also issued notices of motion to the Punjab government and the CBI for filing their replies before January 29.

The petition filed by the Knitwear and Apparel Exporters' Organisation, Fastener Manufacturers Association of India and Federation of Punjab Small Industries Association has challenged justice Jitendra Chauhan's judgment of November 15 in a case titled "Raman Kumar Garg vs State of Punjab."

Garg, proprietor of Jaldhara Exports, Ludhiana, had approached the high court seeking anticipatory bail since there were allegations against him that he had claimed VAT refund on goods exported to Bangladesh to the tune of Rs 1.64 crore on the basis of forged and fabricated documents and was issued refund of Rs 1.56 crore by the Punjab excise and taxation department.

Judgment under challenge

Justice Chauhan had ordered a CBI probe in the case after observing, "As per the status report… VAT refund of almost Rs 500 crore has been given to various firms on the basis of interstate trade and export of goods… This initial probe by the economic intelligence unit indicates that these facts could just be the tip of the iceberg."

The court said, "Facts of the present case starkly bring out the connivance of state officials without which it could not have been possible for the petitioner (Garg) to seek the refund in question… under a well-executed conspiracy… where signatures of customs officers at the international border were also forged."

The court was surprised to know that goods were despatched from Ludhiana on January 5 and the receipt of goods had been shown to be at the Bangladesh border on the same day, whereas the distance between the two stations was about 1,800 km.

Grounds of challenge

The traders' associations have now challenged the single-judge order on the ground that the judge had without jurisdiction directed the CBI to examine all claims of VAT refund in Punjab. It has been submitted that sweeping directions were so wide that it was likely to affect various entities in Punjab, including members of petitioner associations, who may even had legitimately claimed VAT refunds.

It has been submitted that the petitioner associations, who were going to be affected by the CBI probe, should have been heard as per settled law.