Telangana High Court orders release on bail in Rs.30 crore alleged GST ITC fraud: Legal reasoning explained

Background of the case

The criminal petition in Faisal Malik Vs Senior Intelligence Officer came before the Telangana High Court as a request for regular bail under Sections 480 and 483 of the Bharatiya Nagarik Nagarik Surakhsha Sanhita, 2023 (BNSS).

The Directorate General of GST Intelligence, Hyderabad Zonal Unit, had initiated proceedings against the petitioner, who was shown as an accused in F.No.DGGI/INV/GST.363/2026-Gr-L. The proceedings stemmed from allegations of large-scale fraud in the availment and passing of Input Tax Credit (ITC) under the CGST Act, 2017.

According to the complaint received by the Senior Intelligence Officer, the petitioner, acting as managing partner of M/s.F.K.Metals Traders, was purportedly involved in:

  • Creating or using entities for purported procurement of metal scrap, and
  • Using those entities for fraudulent ITC transactions approximating Rs.30 crore.

A case was registered alleging offences punishable under:

  • Section 132(1)(b) of the CGST Act, 2017
  • Section 132(1)(c)(i) of the CGST Act, 2017
  • Section 132(5) of the CGST Act, 2017

These provisions relate to wrongful availment or utilisation of ITC, issuance of invoices without actual supply of goods or services, and associated penal consequences where the amount involved crosses specified thresholds.

Petitioner’s stand before the Court

Core defence contentions

The learned counsel representing the petitioner advanced the following primary points:

  1. False implication
    It was argued that the petitioner was wrongly arrayed as an accused and had no role in any alleged fraudulent activities involving ITC. Counsel emphasised that the petitioner was conducting legitimate business activities and that the statements on record, when read fairly, did not support the theory of intentional fraud or conspiracy.

  2. No involvement in fake ITC scheme
    The defence categorically denied that the petitioner had engaged in:

    • Obtaining fake ITC, or
    • Passing on ITC without underlying supply of goods.

    According to the petitioner, there was no participation in any “fake invoice” racket or sham transactions with the so‑called end-beneficiary entities.

  3. Prolonged judicial custody
    The petitioner had been in judicial custody since 10.04.2026. It was urged that:

    • The continued detention was not justified in light of the nature of allegations,
    • A substantial period had already elapsed, and
    • No complaint had been filed within the critical statutory timeframe.

  4. Request for regular bail
    On these grounds, the petitioner’s counsel requested the High Court to enlarge the petitioner on regular bail under Sections 480 and 483 of the Bharatiya Nagarik Surakhsha Sanhita, 2023, subject to appropriate conditions as the Court deemed fit.

Prosecution’s opposition to bail

Arguments presented by the Additional Public Prosecutor

The learned Additional Public Prosecutor, appearing for the respondent authorities, strongly resisted the bail plea.