Kanpur. The State Goods and Services Tax (SGST) Department has uncovered an alleged fraudulent input tax credit (ITC) claim worth ₹1.53 crore during an investigation into Saddle Haven, a firm involved in leather processing and chemical trading in the Jajmau area of Kanpur. According to the department, the firm allegedly used ITC obtained from 11 firms whose registrations had been cancelled to adjust its tax liability. The investigation also revealed a significant discrepancy between the firm’s business turnover and its tax payments. The firm’s turnover reportedly increased from approximately ₹40 lakh two years ago to nearly ₹7 crore, while its cash tax liability remained zero. Following the investigation, ₹20.96 lakh was deposited by the firm’s proprietor.
The action was conducted under the directions of Additional Commissioner Kumar Anand and Joint Commissioner Sushil Kumar Gautam. Officials said the department had been analysing data relating to the business activities, tax payments and ITC claims of various firms for several months. During this exercise, transactions and tax records associated with Saddle Haven came under scrutiny. The team subsequently examined the firm’s declared business premises and available documents.
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Residential Property Declared as Principal Place of Business
During the investigation, the firm’s declared principal place of business at Naseem Residency, Tilak Nagar, Kanpur, was found to be a residential property. According to the department, the firm’s proprietor, Fahad Salim, had used the premises for residential purposes from February 2024 to March 2025. No commercial activity was found operating at the location during the inspection.
The firm had also declared an additional place of business at Sanjay Nagar, Wajidpur Lane. However, officials did not find documents relating to business activities at that location either. These findings prompted the department to intensify its examination of the firm’s actual business operations, declared premises and tax records.
Alleged Use of ITC from 11 Cancelled Firms
A detailed investigation into business activities linked to Jajmau, Sanjay Nagar and Wajidpur reportedly revealed that the firm had used fraudulent ITC associated with 11 firms whose registrations had been cancelled.
Input tax credit allows eligible businesses to adjust the GST paid on qualifying purchases against the tax payable on their sales, subject to applicable legal requirements. Businesses must meet the prescribed conditions, including those relating to genuine transactions and valid supporting documentation.
According to the department’s allegations, Saddle Haven used ITC associated with firms whose registrations had been cancelled to reduce its tax liability. The investigation identified alleged fraudulent ITC amounting to ₹1.53 crore.
Officials are also examining the nature of transactions between the firms concerned and the possible roles of other businesses in the alleged arrangement. The department is seeking to establish how the ITC was claimed, whether the underlying transactions were genuine and whether other entities facilitated the alleged irregularities.
Turnover Increased Sharply Despite Zero Cash Tax Liability
The sharp increase in the firm’s turnover has emerged as another important aspect of the investigation. According to the department, the firm’s turnover stood at approximately ₹40 lakh in the financial year 2024-25. It subsequently rose to nearly ₹7 crore in the financial year 2026-27 so far.
Despite this increase, the firm’s cash tax liability remained zero, according to officials. The department examined the relationship between the rising turnover and the absence of cash tax payments, focusing on how the firm had adjusted its tax liability through ITC claims.
After the alleged irregularities were detected, a challan was completed on the spot for the deposit of ₹20.96 lakh. However, this amount is significantly lower than the alleged fraudulent ITC of ₹1.53 crore. The department’s further assessment of the case will help determine the outstanding liability, if any, and the additional action required under the applicable tax laws.
Other Firms and Suspected Individuals Identified
The SGST Department has also identified several other firms and suspected individuals allegedly connected with the irregularities. According to officials, further legal action will be initiated against the entities concerned after examining their records and transactions.
The investigation aims to establish the roles played by different businesses in the alleged misuse of ITC and determine whether multiple firms operated through a coordinated arrangement to facilitate the claims.
The inspection team included Deputy Commissioner Santosh Singh, Assistant Commissioner Subhash Chandra, and State Tax Officers Ramesh Kumar Tiwari and Shuchi Rai.
The department is continuing to examine the firm’s documents, declared business premises, ITC claims and records of related businesses. The findings are expected to guide further proceedings and help establish the extent of the alleged tax irregularities and the involvement of other entities.
About the author — Suvedita Nath is a science student with a growing interest in cybercrime and digital safety. She writes on online activity, cyber threats, and technology-driven risks. Her work focuses on clarity, accuracy, and public awareness.
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