High Court Rejects Bail Plea in GST Input Tax Credit Fraud

The applicants, Rohan Tanna and Chandrasekhar Chandrakar, approached the Chhattisgarh High Court seeking anticipatory bail in connection with an investigation conducted by the Directorate General of Goods and Services Tax Intelligence (DGGI).  The investigation alleged that M/s Shristi Construction, a proprietorship concern, was a non-existent “paper entity” used to fraudulently generate and pass on Input Tax Credit (ITC) without any actual supply of goods. Analysis of e-way bill data reportedly confirmed that no vehicles were used for the claimed transactions, indicating that no physical movement of goods had taken place. It was further alleged that the applicants were part of a larger syndicate operating a chain of shell entities, issuing fake invoices worth approximately Rs. 54.40 crores, leading to wrongful ITC claims of about Rs. 9.79 crores and causing substantial loss to the public exchequer.

Central Issue: Whether the applicants are entitled to anticipatory bail under Section 438 CrPC (now Section 482 BNSS) in a case involving alleged large-scale GST fraud and ongoing investigation into a structured ITC evasion racket.

HC’s Ruling: The Chhattisgarh High Court rejected the anticipatory bail applications. The Court observed that economic offences of this nature have a deep-rooted impact on the financial system and are to be treated as a distinct category of crime due to their effect on public revenue and national interest. It noted that the material placed on record prima facie indicated the existence of shell entities and the involvement of the applicants in managing such firms.

The Court further held that custodial interrogation was necessary to trace the full extent of the alleged ITC fraud and the network of entities involved in the “downward chain” of transactions. Emphasising that anticipatory bail is an exceptional remedy, the Court found no extraordinary circumstances justifying its grant in a case involving deliberate and organised fraud against the tax system. Accordingly, the applications were dismissed.

To Read Full Judgment, Download PDF Given Below