Misuse of Third Party’s GST ID and Password: Gauhati HC Denies Bail in GST ITC Fraud [Read Order]

The Gauhati High Court has refused to grant bail to accused of fraudulently misusing another person’s GST ( Goods and Services Tax ) ID and password to generate fake transactions and avail wrongful Input Tax Credit ( ITC ) worth ₹1.09 crore.

The bail application was filed by Smti Renu Sunar, Wife of Shri Harka Bahadur Sonar. The background facts is that an FIR filed on a written complaint by Tajo Parang, proprietor of M/s JZ Enterprise, who alleged that the accused and a co-conspirator, Ravi Rai, induced him to share his GST login credentials on the pretext of carrying out legitimate sub-contract work in supplies.

Later, it was discovered that multiple fake tax invoices were issued in the name of his firm by M/s SK Enterprises and M/s Nagar Trades, showing massive transactions of cement bags across Assam and Arunachal Pradesh.

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The complainant’s GST account had received ITC from these unknown firms, which was subsequently passed on to other entities such as M/s Ananth Enterprises and M/s Jerang Enterprises. The GST authorities later blocked the suspicious ITC amount of ₹1,09,11,404 to prevent further misuse.

During the hearing, counsel for the accused argued that the GST credentials, including OTP verification, were solely under the complainant’s control, and hence, the alleged misuse was impossible without his cooperation.

It was also contended that the arrest was illegal as it was conducted outside jurisdiction without proper transit remand, violating Supreme Court guidelines in Lalita Kumari v. State of U.P. (2014) 2 SCC 1.

Rejecting the plea, Justice Kardak Ete observed that prima facie materials indicated that the accused had indeed used the complainant’s GST ID and password to execute fraudulent transactions in connivance with others.

The Court noted that the procedural requirements relating to arrest and remand were duly complied with and that custodial interrogation was necessary, given the multi-layered nature of the fraud involving multiple entities across states.

Holding that the allegations disclosed a cognizable economic offence under Sections 316(4)/3(5) of the Bharatiya Nyaya Sanhita, 2023, the Court ruled that the accused was not entitled to bail at this stage and directed that investigation continue to trace the wider network of beneficiaries and money flow.

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