GST Fraud: Allahabad HC Grants Bail to Accused in ₹31.18 Crore Fake ITC Scam involving 17 Shell Companies [Read Order]

The Allahabad High Court has granted bail to the accused in a ₹31.18 crore Goods and Services Tax ( GST ) fake Input Tax Credit ( ITC ) scam involving 17 shell companies, noting that the trial is yet to commence, is likely to be prolonged, and that continued detention of the accused would serve no meaningful purpose.

The bench of justice Manoj Bajaj, while granting bail observed that “Admittedly, the alleged offences are triable by Magistrate and provide for a maximum punishment of five years imprisonment, and trial is likely to consume considerable time to conclude, therefore, this Court has no hesitation in holding that the further detention of the applicant behind the bars would not serve any useful purpose, who is confined in judicial custody.”

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The Directorate General of GST Intelligence (DGGI) filed a complaint against M/s Shreeji Metals, alleging that the firm availed ineligible Input Tax Credit (ITC) amounting to ₹31.18 crore through 17 shell companies based on fake invoices without actual supply of goods.

The case began with intelligence inputs revealing suspicious transactions involving non-operational entities such as M/s MG Wire Udyog, M/s Shiv Wire Udyog, M/s Hanumant Enterprises, and M/s Durga Industries. These four firms alone facilitated wrongful ITC claims worth ₹9.25 crore.
During investigation, statements were recorded from Mr. Umakant, whose documents were misused to create Shiv Wire Udyog, and from Mr. Shivam Goyal, proprietor of Shreeji Metals, who confessed to availing ineligible ITC. Mr. Praveen Kumar Goyal, authorised signatory of the firm, also corroborated the fraudulent transactions.

Further probe revealed involvement of eight more non-existent firms, and subsequent statements identified Mayank Kumar Rajput, Ankit Rajput, and Vikrant Singhal as the masterminds behind the creation of 18 fake firms using stolen credentials. These entities were allegedly used to issue fake invoices and generate cash through layered banking transactions.

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Later, five more firms Vaibhav Industries, Shivam Wire and Cable Company, GJ Wire Industries, M/s R.P. Wires, and M/s Citrix Enterprises were found involved, bringing the total to 17 shell entities. The complaint, backed by financial and data analysis, concluded that the bail applicant had violated multiple provisions of the CGST Act, 2017. A charge sheet dated 14th November 2024, along with a supplementary affidavit dated 22nd January 2025, was filed to initiate prosecution.

The applicant's plea for bail was earlier rejected by lower courts. However, before the High Court, his counsel argued that the business operations of M/s Shreeji Metals were otherwise lawful, with tax filings made regularly since 2016.

They contended that apart from the applicant's own statement and one other, no concrete evidence linked him to the creation of the shell firms. It was also pointed out that another accused, involved in similar offences, had already been granted bail.

The Union of India opposed the bail, citing the gravity of the offence and the scale of the financial fraud. However, it was not disputed that assessment proceedings under Section 74 of the CGST Act had not yet begun, and no recovery notices had been issued.

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The High Court observed that all evidence was documentary and the trial, yet to commence, would likely take considerable time. Noting that the offence is triable by a Magistrate and carries a maximum sentence of five years, the Court concluded that applicant’s continued custody would serve no meaningful purpose.

The Court allowed the bail application without commenting on the merits of the case, directing that the bail applicant be released upon furnishing appropriate bail and surety bonds to the satisfaction of the trial court, and further ordered him to comply with all bail conditions as set by the lower court.

To Read the full text of the Order CLICK HERE

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