Supreme Court’s Approach to Bogus ITC Under GST: Six Documentary Pillars That Protect Assessees

Background: Bogus ITC Allegations and Section 74

Under the GST framework, allegations of bogus, fake, or ineligible Input Tax Credit (ITC) are increasingly common. Departmental officers frequently invoke Section 74 of the CGST Act 2017, accusing assessees of fraud, deliberate suppression of material facts, or misstatements with an intent to evade tax.

However, the Supreme Court has repeatedly intervened in favour of assessees who can demonstrate, through statutory and commercial documentation, that their transactions are genuine. The Court’s rulings make it clear that once the assessee furnishes the necessary documentary evidence prescribed by law, the onus of proving fraud or collusion shifts squarely to the department.

Key Judicial Principle: Where the assessee has discharged the initial burden by producing proper documents, denial of ITC and mechanical invocation of Section 74 are unsustainable unless the department rebuts such evidence with concrete material.

This article recasts, in structured form, six core documentary bases on which the Supreme Court has granted relief in cases involving allegations of bogus ITC.

1. Valid GST Tax Invoices as the Foundation of ITC

Essential Role of a Proper Tax Invoice

The Supreme Court has consistently viewed a valid tax invoice as the primary statutory requirement for claiming ITC. When an assessee holds invoices that comply with GST law, it creates a strong presumption that the transaction is legitimate.

Where an assessee such as Mr. Sharma can produce invoices that show:

  • All mandatory particulars under the GST law
  • Correct GSTINs of both supplier and recipient
  • Accurate tax rates and taxable values
  • Proper classification and description of goods or services

the allegation that ITC is “bogus” cannot rest merely on suspicion, departmental doubts, or later non-compliance by the supplier.

Effect on Burden of Proof

Once the assessee produces GST-compliant invoices and records them in the books of account, the Supreme Court has held that:

  • The initial evidentiary burden is discharged by the assessee.
  • The burden then shifts to the department to demonstrate that the invoices are fictitious, fabricated, or do not relate to actual supplies.

Note: The existence of duly issued tax invoices means the department must bring positive evidence to disprove their genuineness; mere assertions or assumptions are not enough.

2. Documentary Evidence Establishing Receipt of Goods or Services

Proving Actual Movement or Provision

The Supreme Court has accorded decisive weight to objective records that show that goods were actually transported or services were indeed rendered.