Bail Denied in GST Fake ITC Fraud Case

Case Details: Hari Shankar Sharma vs. Union of India - [2026] 184 taxmann.com 86 (Allahabad)

Judiciary and Counsel Details

Samit Gopal, J.
Anand Mani Tripathi, Arun Kumar Shukla, Mohit Singh, Shad Azam, Anil Kumar Bajpai & Ankit Kumar Pal for the Applicant.
Dhananjay Awasthi, Anurag Sharma, Parv Agarwal & Krishna Agarawal for the Respondent.

Facts of the Case

The applicants sought bail in criminal proceedings initiated under GST law alleging fraudulent availment and circulation of Input Tax Credit (ITC). The prosecution alleged that the applicants, acting as directors, proprietors, and karta of entities, created inter-linked dummy firms and generated fictitious invoices without actual supply of goods to fraudulently avail and pass on large amounts of ITC. The allegations were stated to involve offences punishable, relating to fraudulent ITC claims and arrest powers of the tax authorities. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that offences involving fraudulent availment and circulation of ITC through fictitious entities constitute serious economic offences attracting stringent standards for grant of bail. It was observed that Section 132 of the CGST Act treats fraudulent availment of ITC without actual supply of goods as a punishable offence, while Section 69 of the CGST Act empowers the jurisdictional officer under GST to authorise arrest where such offences are committed. It was held that such conduct amounted to a grave economic offence affecting public revenue. It was concluded that no grounds were made out for grant of bail and accordingly rejected the bail applications.

List of Cases Referred to

Vineet Jain v. UOI [2025] 174 taxmann.com 139 (SC) (para 7)
Arvind Dham v. Directorate of Enforcement [2026] 182 taxmann.com 86 (SC) (para 8)
Manoj Kumar Garg v. UOI [2025] 179 taxmann.com 396 (Allahabad) (para 8)
Vinay Kumar v. UOI [2026] 182 taxmann.com 892 (Allahabad) (para 8)
Mukul Sharma v. Commissioner [2025] 180 taxmann.com 780 (Allahabad) (para 8)
Azharuddin v. UOI [Bail Application No. 29377 of 2025, dated 7-10-2025] (para 8)
Dhiraj Nath Gupta v. UOI [Bail Application No.32145 of 2025, dated 16-10-2025] (para 8)
Ratnambar Kaushik v. UOI [2022] 145 taxmann.com 296/[2023] 95 GST 548/68 GSTL 233 (SC) (para 9)
Serious Fraud Investigation Office v. Nittin Johari [2019] 109 taxmann.com 224 (SC) (para 10)
Ayodhya Prasad Mishra v. State of Uttar Pradesh MANU/SCOR/27988/2020 (para 10)
Rakesh Mittal v. Ajay Pal Gupta alias Sonu Chaudhary [SLP (Crl.) No. 19708/2025, dated 2-2-2026] (para 10)
Tarun Kumar v. Asstt. Director, Directorate of Enforcement [2023] 156 taxmann.com 480 (SC) (para 12).