LUDHIANA — An Additional Sessions Court in Ludhiana has dismissed the bail applications of local industrialist Kewal Krishan Garg and his son, Chetan Garg, in connection with an alleged Goods and Services Tax fraud amounting to approximately ₹436 crore. Kewal Krishan Garg serves as the president of the All India Furnace Association. The Directorate General of GST Intelligence, which is leading the investigation, has accused both individuals of being connected to an elaborate syndicate involving fictitious GST registrations and the illicit generation and utilization of input tax credit. In his ruling, Additional Sessions Judge Dr. Rajneesh observed that economic offenses of this scale adversely affect the nation’s economic framework and present a significant societal threat. The court determined that releasing the accused at this juncture could lead to interference with the ongoing probe, finding no sufficient grounds to grant relief.
Allegations of Bogus Invoicing Across Four Group Entities
The prosecution’s case centers on the alleged fraudulent receipt and utilization of input tax credit through four commercial entities tied to the KNL Group: KNL Drivelines Parts Private Limited, Ramya Balaji Alloy Private Limited, KNL Axles Private Limited, and KNL MK Gears Private Limited. Investigators stated that the firms are linked to a commercial group owned and actively managed by the two accused. The tax authorities alleged that the companies improperly claimed or utilized approximately ₹21.81 crore in tax credits relying on invoices supplied by entities that did not conduct actual business or transport any physical goods. Investigators suspect these mechanisms were arranged purely to extract fiscal benefits via paper-based billing.
The inquiry initially identified 44 suspicious GST registrations accounting for transactions valued at approximately ₹261 crore. As investigators broadened their examination, the scope widened to encompass 76 registrations, with the overall valuation of the suspected fraudulent input tax credit network expanding to around ₹436 crore. Central authorities maintained that both father and son exercised direct oversight over corporate operations and coordinated the deployment of the disputed invoices.
Investigation Cites Digital Records and Witness Testimony
Opposing the bail pleas, the Directorate General of GST Intelligence submitted witness testimonies, digital records, and WhatsApp chat transcripts that allegedly pointed toward unrecorded cash sales. The agency informed the court that the evidence collected thus far reflected the grave nature of the alleged economic offenses.
The prosecution argued that the investigation remains active and has not reached a stage where the accused could be released without risk. The agency expressed serious apprehensions that the father and son could tamper with material evidence or influence witnesses if granted freedom, emphasizing that uninterrupted custody was essential to protect the integrity of the remaining inquiries.
Defence Challenges Legality of Arrest and Cites Lack of Evidence
Counsel representing Kewal Krishan Garg denied all wrongdoing, arguing that his client had been falsely implicated and that the named firms were authentic manufacturing facilities in Ludhiana. The defense contended that the department had failed to present independent financial, digital, forensic, or banking evidence tying Garg to the alleged illicit supplier network, while also challenging the procedural legality of the arrest.
The defense further submitted that Garg is a senior citizen suffering from multiple medical ailments, has no prior criminal background, and has been detained since August 19, 2026. Counsel pointed out that the authorities had not filed a formal complaint under Section 132 of the Central Goods and Services Tax Act against Garg and noted that the inquiry and ensuing trial would take extensive time to conclude. The court determined that while defense arguments on legality and merits could be considered at the appropriate trial stage, they did not warrant bail under present circumstances.
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