Economic Offenses are a Class Apart: Allahabad HC Denies Bail in ₹100 Cr Fake ITC Scam Involving Network of Dummy Firms [Read Order]

The Allahabad High Court has refused to grant bail to three accused in a huge fakeInput Tax Credit (ITC) fraud under Goods and Services Tax ( GST ) allegedly exceeding ₹100 crore. The court noted that economic offences stand on a different footing and must be treated with greater seriousness.

A single bench of Samit Gopal noted that such crimes are often committed with calculated design and involve complex financial transactions that are difficult for investigative agencies to detect and unravel.

As per the facts, 3 bail applications were filed by Hari Shankar Sharma, Deepak Jain and Sushant Goyal in connection with a prosecution initiated by the Directorate General of GST Intelligence (DGGI), Ghaziabad, under Sections 132(1)(b), 132(1)(c) and 132(1)(i) of the CGST Act, 2017.

The prosecution alleged that the accused were part of a coordinated network engaged in generating and circulating fraudulent ITC through invoices issued without any actual supply of goods.

According to the complaint, the accused used a web of interconnected firms and non-existent entities to avail and pass on ineligible ITC in violation of GST Act.

The investigations showed that M/s Madhuban Trading Company had allegedly availed fraudulent ITC amounting to approximately ₹45.79 crore from multiple fake firms and subsequently passed on such credit to other entities including M/s WMCA Trade Mart Pvt. Ltd.

Further scrutiny indicated that WMCA Trade Mart Pvt. Ltd. had itself availed ineligible ITC of ₹15.48 crore from twelve non-existent supplier firms, while Hari Shankar Sharma HUF allegedly availed fake ITC worth ₹28.16 crore.

In addition, M/s Omtex, operated by Sushant Goyal, was alleged to have availed fraudulent ITC of over ₹14.17 crore, which was further circulated through the network.

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According to the department, the accused deliberately created and operated dummy firms to issue fake invoices and generate ITC without any supply of goods.

The applicants argued that they had been falsely implicated and said that the investigation had already been completed and a complaint had been filed before the court.

They contended that the alleged offences were triable by a magistrate and carried a maximum punishment of five years, and therefore bail should be granted, particularly since they had no prior criminal history and had been in custody since October - November 2025.

On the other hand, the GST authorities argued against the bail pleas, contending that the accused were the masterminds of a large-scale fraud scheme that involved making fake companies, sending out fake invoices, and giving out fake ITC to multiple people.

The prosecution said that the fraud was extremely extensive and cost the government a lot of money. It was also said that the accused had actively managed the operations of the fake companies, made money from the fake deals, and could alter evidence if they were permitted out on bail.

After examining the intensity of the economic offence, it said that no grounds for bail were made out.

The Court noted the Supreme Court’s ruling in Tarun Kumar v. Enforcement Directorate, which said that economic offences constitute a “class apart” and require a different approach in bail matters due to their deep-rooted conspiracies and huge impact on the financial health of the nation.

Accordingly, the Allahabad High Court rejected all three bail applications, holding that the seriousness of the allegations and the scale of the alleged ITC fraud required continued custody of the accused during the pendency of trial.

At the same time, the Court directed the trial court to proceed with the case expeditiously.

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