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Permutation codes have been shown to be useful in power line communications, block ciphers, and multilevel flash memory models. Construction of such codes is extremely difficult. In fact, the only general lower bound known is the Gilbert-Varshamov type bound. In this paper, we establish a connection between permutation codes and independent sets in certain graphs. Using the connection, we improve the Gilbert-Varshamov bound asymptotically by a factor log(n), when the code length n goes to infinity.