Bail Rejected in Alleged Multi-Crore Fake ITC Scam Under CGST and IGST

Background of the Bail Petition

The Punjab and Haryana High Court dealt with a petition seeking regular bail filed by Amit Mehra Vs Union of India in connection with Case No. 442 of 2025 and File No. DGGI/INT/INTL/442/2025-RU-DGGI-SML dated 01.05.2025. The prosecution had registered the case for offences under Section 132(1)(b) of the Central Goods and Services Tax Act, 2017, punishable under Section 132(1)(i) of the same Act, read with Section 20(xv) of the Integrated Goods and Services Tax Act, 2017.

The primary allegation was that a large network of non-existent or bogus firms was created to generate goods-less invoices, enabling wrongful availment and passing on of fake Input Tax Credit (ITC), causing substantial loss to the public exchequer.

Since this is the full text of a judicial order, the following is a structured summary of the key findings, arguments, and reasoning adopted by the High Court.

Prosecution’s Allegations and Investigation Findings

The investigation originated from secret intelligence that M/s Mefro Organic Limited was availing ITC on the strength of invoices that did not correspond to actual supplies of goods. These invoices were allegedly issued by four supplier firms.

  1. Based on this information, search operations were conducted:

    • At the premises of M/s Mefro Organic Limited, and
    • At the premises of the four alleged supplier firms.

  2. During investigation, these four supplier entities were found to be non-existent.

  3. Statements of the Directors and employees of M/s Mefro Organic Limited were recorded, wherein they disclosed that:

    • The so-called goods-less invoices were arranged with the assistance of Sh. Amit Mehra, the present petitioner.
    • The petitioner was stated to be the proprietor of one of the said bogus firms, namely M/s Kavish Overseas, which was providing bogus invoices to M/s Mefro Organic Limited.

Search at Petitioner’s Premises and Seizure

Following these disclosures, the investigating agency conducted further searches at:

  • The residence of Sh. Amit Mehra, and
  • The residence of his accountant, Mr. Bunty Malhotra.

The search led to recovery of:

  • From accountant’s premises:
    • 1 mobile phone and 1 laptop, said to have been provided by the petitioner;
  • From petitioner’s residence:
    • 1 mobile phone,
    • 1 laptop,
    • Cheque books connected to several bank accounts with different banks, and
    • Various stamps.

Petitioner’s Statement Before DGGI

The petitioner, in response to summons, appeared before the Directorate General of GST Intelligence (DGGI) on 01.05.2025. His statement was recorded over 01–02.05.2025, during which, according to the prosecution:

  • He admitted that he was operating four bogus firms.
  • He acknowledged that he was issuing fake e-way bills.
  • He stated that he charged 1–2% commission for each transaction.
  • He also named nine additional bogus firms involved in similar issuance of fake invoices.

At this stage of the investigation, the alleged fraud was quantified at Rs. 32 crore of ITC connected to the four bogus firms. Consequently, the petitioner was arrested on 02.05.2025 under Section 69(1) of the CGST Act, 2017.

Expansion of Investigation and Scale of Alleged Fraud

As the investigation progressed, the authorities asserted that the fraud was of a much larger magnitude than initially detected. According to the investigation:

  • The petitioner was allegedly operating 44 bogus firms.
  • These firms were used to generate goods-less invoices amounting to Rs. 2,106 crore.
  • Through these invoices, fake ITC of Rs. 315.13 crore was allegedly passed on or availed.