Gauhati High Court upholds ED attachment in Fama Marketing ITC case

What the Record Shows

The Gauhati High Court, by a judgment dated 26 June 2026, upheld a provisional attachment order passed by the Enforcement Directorate against Mrig Mrinal Dhawan, the proprietor of M/s Fama Marketing, in WP(C) No. 2531/2026. Justice Manish Choudhury dismissed Dhawan's writ petition challenging the attachment, holding that fake GST input tax credit availed through shell entities can prima facie constitute "proceeds of crime" under the Prevention of Money Laundering Act, 2002.

The attachment itself dates to 30 March 2026, when the Deputy Director of the Directorate of Enforcement provisionally attached three plots of land in Guwahati under Section 5(1) of the PMLA. Per the judgment, the ED alleges that Rs 99,31,36,975 constituted proceeds of crime generated through fraudulent input tax credit, and that Fama Marketing had availed Rs 52.66 lakh of that credit through invoices from two entities the agency describes as shell concerns.

It is important to be precise about what the court decided. A provisional attachment under Section 5(1) is a preventive step, not a finding of guilt, and it must still be confirmed by the Adjudicating Authority under Section 8. The High Court expressly recorded that Dhawan retains the right to place evidence before that authority to show the property should not be declared as involved in money-laundering. The court made no finding that he had laundered money; it held only that the ED's prima facie view was sustainable in law.

How It Worked

According to the judgment, the case traces to a predicate FIR registered at Itanagar Police Station on 3 October 2024 under Sections 120B, 420, 467, 468 and 471 of the Indian Penal Code. The FIR concerns M/s Siddhi Vinayak Trade Merchants, which investigators allege issued GST invoices without any actual supply of goods and passed on the resulting input tax credit to a chain of entities.

Per the ED's case as recorded by the court, Siddhi Vinayak Trade Merchants is alleged to have issued 15,258 bogus invoices amounting to Rs 658.55 crore without moving any goods, generating the input tax credit that the agency treats as proceeds of crime. The mechanism the ED describes is a paper trail: credit is created on invoices alone, then layered and circulated through further entities and, in the court's words, projected as untainted property, which the judgment observed attracts the money-laundering offence in Section 3.

Fama Marketing enters the chain lower down. The judgment records that the firm booked purchases of TMT bars in FY 2023-24 and availed input tax credit of Rs 52.66 lakh, being Rs 22.48 lakh through M/s Krishti Enterprise and Rs 30.18 lakh through M/s L.S. and Company, both of which the ED alleges were conduit entities in the same arrangement.

The attached plots were purchased on 11 February 2022 for Rs 60 lakh, before the alleged offences. Dhawan argued the property could not therefore be proceeds of crime. The court rejected that submission, holding that where actual proceeds are unavailable or have been transferred, property of equivalent value held within the country may be attached, applying the PMLA's settled attachment scheme.

Who Lost Money

The loss in a fake input-tax-credit matter falls, in the first instance, on the public exchequer rather than on individual investors. Input tax credit is a claim against tax the government would otherwise collect; per the ED's case, credit generated on invoices unsupported by any supply of goods represents revenue drained from the central and state exchequer.

The headline figure of Rs 99.31 crore held prima facie to be proceeds of crime is the aggregate the ED attributes to the wider Siddhi Vinayak chain, not to Fama Marketing alone. Dhawan's own attributed credit is Rs 52.66 lakh, and the property attached in his hands is three plots bought for Rs 60 lakh. The gap between the systemic figure and any single downstream firm is characteristic of these matters and is worth keeping in view when reading the large numbers.

No recovery to any victim arises at this stage. An attachment freezes assets pending adjudication; it does not transfer them to the exchequer, and it does not itself establish that tax was lost through Dhawan's conduct. Whether the state ultimately recovers anything depends on confirmation of the attachment and on the outcome of the predicate prosecution.

Where It Stands Now

As of today, the position is that the provisional attachment stands, having been upheld by the Gauhati High Court on 26 June 2026. The writ petition was dismissed, but the court left the merits of the attachment to be decided by the Adjudicating Authority under Section 8 of the PMLA, before whom Dhawan may contest whether the plots are proceeds of crime.

No conviction has been recorded. The predicate FIR remains at the investigation stage, the ED's attachment is provisional and awaits confirmation, and the doctrinal ruling that fake ITC can be proceeds of crime was a prima facie view for the limited purpose of testing the attachment, not a verdict on any individual. A provisional attachment under the PMLA contains allegations tested only to a prima facie standard, not findings of guilt; the persons named are presumed innocent until proven guilty, and due process continues.

The judgment also referred to a larger bench a separate question on whether the confidentiality protection in a PMLA attachment order extends to the "reasons to believe" recorded by the attaching officer. That reference does not disturb the outcome on the attachment, which remains in force.

What It Means

The significance of this judgment is doctrinal. It is one of the clearer High Court statements that fake GST input tax credit, a tax offence, can feed the PMLA machinery as proceeds of crime, bridging the gap between GST enforcement by the DGGI and money-laundering enforcement by the ED. For anyone dealing in goods where input credit is claimed, the practical lesson the record illustrates is the risk of transacting with entities later alleged to be non-existent: credit availed on their invoices can be traced downstream even to a buyer who booked ordinary purchases.

For an affected person, an attachment is not the end of the road. The PMLA builds in an adjudication stage and appellate remedies precisely because a Section 5(1) order is provisional. The concrete takeaway is procedural: the burden and the opportunity both shift to the Adjudicating Authority, where evidence of genuine supply and payment can be placed on record. The pattern of attachment and confirmation echoes other recent enforcement outcomes, from a Kolkata court's confiscation order in a fugitive-offender case to SEBI's debarment of Zee Entertainment's promoters.

None of this is advice to take or avoid any position. It is a description of how the attachment power and its checks are meant to operate, and of the standard, prima facie rather than proven, at which a court reviews an attachment. You can read more matters like it in Oquilia's enforcement archive.

FAQ

Does the ED attachment mean the people named are guilty?

No. A provisional attachment and a predicate FIR contain allegations, not findings of guilt; the accused are presumed innocent until proven guilty, and due process continues. The Gauhati High Court upheld the attachment only on a prima facie standard and made no finding that Mrig Mrinal Dhawan committed any offence. The final decision on the property rests with the Adjudicating Authority.

What exactly did the Gauhati High Court decide?

Per the judgment dated 26 June 2026, the court dismissed the writ petition and held that fake GST input tax credit availed through shell entities can prima facie constitute proceeds of crime under the PMLA, and that property of equivalent value acquired before the alleged offence may be attached. It expressly left the final decision on the attachment to the Adjudicating Authority under Section 8.

Is the attachment permanent?

No. A provisional attachment under Section 5(1) of the PMLA must be confirmed by the Adjudicating Authority under Section 8 within the statutory period. The affected person can contest it there, place evidence of genuine transactions on record, and pursue a further appeal before the Appellate Tribunal if the attachment is confirmed.

How can I check whether a GST supplier is genuine?

Registered dealers can verify a counterparty's GSTIN and filing status on the official GST portal before claiming input tax credit. Matching purchase invoices against the auto-populated returns and retaining proof of the actual movement and payment of goods are the documentary safeguards the system relies on to distinguish real supply from invoice-only credit.

Where can I read the official judgment?

The full judgment in WP(C) No. 2531/2026, decided by Justice Manish Choudhury on 26 June 2026, is published on Indian Kanoon and is linked in the source note below. It sets out the ED's allegations, the petitioner's arguments and the court's reasoning on each in full.

This report is based on the judgment of the Gauhati High Court in WP(C) No. 2531/2026 dated 26 June 2026 and the provisional attachment record it reviews, examined on 31 July 2026.