Fraudulent ITC through fake invoices may attract CGST prosecution, and serious economic offence allegations can justify refusal of bail.

Fraudulent availing or passing on of input tax credit through fake invoices and non-existent firms can attract prosecution under Section 132 of the CGST Act, 2017. On the facts noted, the investigation materials, statements and account records prima facie showed creation of bogus supplier entities, issuance of invoices without supply of goods, wrongful ITC availment, and onward passing of credit to beneficiary firms. The court treated this as a serious economic offence and applied a stricter approach at the bail stage. Bail was declined because the allegations disclosed a prima facie offence under the penal provision and did not justify release.

---

---

Issues: Whether bail should be granted to an accused of availing and passing on fraudulent input tax credit through fake firms and invoices, and whether such allegations fall within Section 132 of the Central Goods and Services Tax Act, 2017.

Analysis: The material collected in investigation, the statements of the accused, and the account records were found to prima facie show that the accused created or used non-existent supplier firms, issued fake invoices without supply of goods, availed ineligible input tax credit, and further passed it on to beneficiary firms. The Court held that the CBIC clarification of 06.07.2022 did not exclude the applicability of Section 132 in cases of wrongful or fraudulent availment or utilisation of input tax credit, and that the facts of the case disclosed an offence under the penal provision. The Court also treated the alleged conduct as an economic offence of substantial magnitude, relying on the settled approach that such offences require a stricter view at the bail stage.

Conclusion: Bail was declined, as the Court found a prima facie case of serious economic wrongdoing under the CGST regime and held that the case did not justify release on bail.

Final Conclusion: The judgment affirms that fraudulent ITC routed through fake invoices and non-existent firms may attract Section 132 of the CGST Act, and that, where the allegations disclose a grave economic offence, bail may be refused on that basis.

Ratio Decidendi: Fraudulent availing or passing on of input tax credit through fake invoices and non-existent firms can attract prosecution under Section 132 of the Central Goods and Services Tax Act, 2017, and economic offences of this nature are to be considered on a stricter bail standard.

---