Relief Denied in ₹100 Cr GST Fake ITC Case: Rajasthan HC Says ‘He Who Comes Into Equity Must Come With Clean Hands' [Read Order]

The Rajasthan High Court has dismissed a writ petition filed by the petitioner in connection with an alleged ₹100 crore fake input tax credit (ITC) chain under the Goods and Services Tax regime.

Quoting the equity principle that “he who comes into equity must come with clean hands,” the Court refused relief and imposed costs of ₹5 lakh on the petitioner. The Bench held that while procedural lapses by enforcement officers were noted, the company’s fraudulent conduct barred it from seeking discretionary remedies

Korfex Industries Pvt. Ltd., a registered dealer under GST in Rajasthan, purchased remelted lead from a Haryana‑based supplier and generated e‑way bills and invoices for its transport to its Bhiwadi factory.

The petitioner contended that the vehicle carrying remelted lead had already reached its factory premises in Bhiwadi, Rajasthan, on 29 July 2025, supported by GPS logs, CCTV footage, e‑way bills, and tax invoices.

Counsel argued that issuing MOV‑02 after the goods had arrived was illegal, as Section68 only empowers inspection of goods “in movement.” The petitioner further alleged that the inspection period lapsed without extension, no detention order under MOV‑06 was issued, and the vehicle was unlawfully moved 250 km away to Jaipur.

The company claimed harassment, loss of ₹18,000 due to illegal detention, and violation of natural justice.

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The State and Union tax authorities countered that Korfex Industries was part of a larger cartel operating across Delhi, Haryana, Punjab, and Himachal Pradesh, orchestrating sham transactions to fraudulently avail ITC exceeding ₹100 crore.

They alleged that the petitioner procured bogus invoices from non‑existent or deregistered firms in Delhi, creating artificial outward supplies and exploiting systemic gaps in the GST portal.

Investigations revealed that the goods in question originated from Delhi, though documents falsely showed supply from a Haryana‑based firm. The respondents argued that detention under MOV‑02 was lawful, and proceedings under Section 130 GST Act for confiscation were justified.

The Division Bench, comprising Acting Chief Justice Sanjeev Prakash Sharma and Justice Sanjeet Purohit, examined the statutory framework under Sections 68, 129, and 130 of the GST Act and corresponding rules.

The Court acknowledged that procedural lapses occurred in the manner of detention and movement of goods. However, it emphasised that the petitioner’s conduct, colluding with fictitious suppliers and availing fraudulent ITC, struck at the root of the GST regime.

Quoting the maxim “he who comes into equity must come with clean hands,” the Court held that discretionary relief cannot be granted to a litigant engaged in fraudulent practices. It cited the Supreme Court’s precedent in Tomorrowland Ltd. v. HUDCO (2025) to reinforce that equity requires transparency and honesty. The Bench observed that what law forbids directly cannot be achieved indirectly, condemning the petitioner’s attempt to exploit loopholes in the GST system.

The writ petition was dismissed with costs of ₹5 lakh, recoverable from the petitioner company through its Director. The Court directed GST authorities to continue proceedings under Section 130 GST Act and take steps to plug systemic gaps that enabled the circulation of fake ITC.

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