Fraudulent Availment and Passing of Fake ITC Undermines Sanctity of GST: Jharkhand HC Denies Bail to Accused in ₹750 Crore GST Scam [Read Order]

The Jharkhand High Court has refused to grant bail to, accused of being part of a massive ₹750 crore fake Input Tax Credit (ITC) racket, holding that such fraudulent activities erode the integrity of the GST ( Goods and Services Tax )Act and constitute a grave economic offence under the Prevention of Money Laundering Act, 2002 (PMLA).

The Directorate of Enforcement (ED) opposed the bail plea, contending that the petitioner was a key member of a syndicate operating across Jharkhand, West Bengal, Delhi, and other States, engaged in creation and operation of shell companies to generate and pass on bogus GST invoices without actual supply of goods or services. The racket allegedly caused a significant loss to the government exchequer through the illegal claiming of ITC.

According to the ED, the network, led by Shiva Kumar Deora floated over 135 shell firms using identity documents of innocent persons, hired under the pretext of employment. These entities fraudulently availed and transferred fake ITC to multiple end beneficiaries in exchange for commission.

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Amit Agarwal, one of the directors of Greentech Steel Pvt. Ltd. and the petitioner of this case was alleged to have managed financial layering of the proceeds of crime through bank accounts linked to TE Udhyog Pvt. Ltd., Greentech Minerals Pvt. Ltd., and Bizzare Commercial Pvt. Ltd.

The probe revealed transactions amounting to ₹16.64 crore in Agarwal’s personal accounts, with substantial credits and debits linked to entities under investigation for GST fraud. The ED asserted that the petitioner knowingly indulged in laundering proceeds of crime causing a direct loss of ₹15.95 crore to the exchequer through fictitious ITC claims.

Rejecting the bail plea, the court noted that economic offences strike at the financial fabric of the nation and cannot be treated at par with ordinary crimes.

The Court observed that money laundering is a continuing offence, persisting as long as the accused enjoys the proceeds of crime through concealment, possession, or projection as untainted property.

The Court noted the Supreme Court’s decisions in Vijay Madanlal Choudhary v. Union of India (2022) and Tarun Kumar v. Directorate of Enforcement (2023), reiterating that the twin conditions under Section 45 of the PMLA are mandatory the accused must prove he is not guilty and not likely to commit further offences while on bail.

Justice Sujit Narayan Prasad further held that the ED’s arrest and procedures complied with Section 19 of PMLA, including recording of “reasons to believe” and communication of grounds of arrest.

The Court found sufficient material evidence linking the petitioner to laundering activities through shell firms, and thus refused to dilute the rigours of the statute.

The fraudulent availment and passing of fake ITC undermines the sanctity of the GST regime and causes irreparable damage to the nation’s economic structure, the Court observed, terming the offence a deliberate act to subvert the law for personal gain.

The court also said that “Thus, the magnitude of the fraud, its organized nature, and the systematic siphoning of funds, the present case strikes at the core of the country's economic and financial fabric. The fraudulent availment and passing of fake ITC not only caused direct financial loss to the Government but also undermined the sanctity of the GST regime, which is based on self-declaration and trust.”

Accordingly, the High Court dismissed the bail petition.

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