High Court Sanctions Bail in Rs. 23.12 Crore Fake ITC Matter Citing Documentary Evidence and Judicial Precedents
The intersection of business operations and indirect tax compliance often leads to complex legal battles, particularly concerning the availment of Input Tax Credit (ITC). In recent times, the Directorate General of Goods and Services Tax Intelligence (DGGI) has intensified its crackdown on alleged fake invoicing syndicates. However, the judiciary continues to balance the rigorous enforcement of tax laws with the fundamental rights of the assessee.
A prominent illustration of this judicial equilibrium is the recent decision by the Punjab and Haryana High Court in the matter of Mohit Singla vs Directorate General of Goods and Services Tax Intelligence. The Court granted regular bail to the accused individuals, emphasizing that when the primary evidence is documentary in nature and the investigation is substantially complete, prolonged pre-trial incarceration is unwarranted.
Overview of the GST Evasion Allegations
The legal proceedings were initiated following an extensive investigation by the DGGI, Ludhiana. The core of the dispute revolved around the alleged orchestration of a massive tax evasion scheme through the fraudulent utilization of ITC.
Background of the Investigation
The prosecution's narrative centered on M/s Kanha Concast, a partnership firm engaged in the trading and processing of scrap and finished goods. According to the investigative authorities, the partners of this firm were the principal architects of a scheme designed to wrongfully claim ineligible ITC. The department alleged that the assessee utilized fake invoices to claim credit without the actual physical receipt of any underlying goods or services.
The financial magnitude of the alleged fraud was quantified at Rs. 23.12 crores. The DGGI claimed that the assessee had procured these fabricated invoices from a network of 58 non-existent or fictitious entities. Based on these severe allegations, the authorities conducted sweeping search and seizure operations at both the commercial premises of M/s Kanha Concast and the private residences of its partners. These inspections commenced on 06.11.2025 and concluded on 07.11.2025, culminating in the immediate arrest of the key personnel.
Legal Provisions Invoked by the DGGI
The enforcement actions were grounded in specific penal provisions of the indirect tax regime, alongside the newly enacted procedural codes.
The Core Allegations Under the CGST Act
The authorities charged the arrested individuals under the stringent provisions of the Central Goods and Services Tax Act 2017. Specifically, the charges were framed under:
Section 132(1)(b): This provision targets individuals who issue any invoice or bill without the actual supply of goods or services, leading to the wrongful availment or utilization of ITC or the refund of tax.Section 132(1)(c): This clause penalizes the act of availing ITC using invoices or bills referred to in clause (b), or fraudulently availing ITC without any invoice or bill.
Furthermore, the bail petitions were moved before the High Court invoking Section 483 of the Bharatiya Nagarik Suraksha Sanhita 2023, which governs the High Court's concurrent jurisdiction to grant regular bail to an accused person in custody.