The Allahabad High Court has rejected the bail applications of three accused—Hari Shankar Sharma, Deepak Jain and Sushant Goyal—allegedly involved in a large-scale Goods and Services Tax (GST) Input Tax Credit (ITC) fraud, observing that alleged fake ITC racket posed serious threat to public exchequer and economic offences constitute a distinct category requiring a stricter approach.
The bench of Justice Samit Gopal, while dismissing three connected criminal miscellaneous bail applications, held that the allegations pertain to a serious economic offence involving fraudulent availment and circulation of fake ITC through non-existent firms, resulting in substantial loss to the government exchequer.
The case arises from an undated complaint filed under Sections 132(1)(b), 132(1)(c) and 137 of the Central Goods and Services Tax (CGST) Act, 2017, punishable under Section 132(1)(i). The complaint was instituted by the Directorate General of GST Intelligence (DGGI), Meerut Zonal Unit.
According to the prosecution, credible intelligence inputs revealed that a network of interlinked entities systematically created and circulated fictitious ITC without actual supply of goods. The scheme allegedly involved issuance of invoices without underlying transactions to wrongfully avail and pass on input tax credit.
The accused are alleged to have operated through multiple firms. Scrutiny of GST returns from April 2020 to July 2025 allegedly revealed ₹45.79 crore fraudulent ITC availed by M/s Madhuban Trading Company from fake firms; ₹15.48 crore ineligible ITC availed by M/s WMCA Trade Mart Pvt. Ltd. from 12 non-existent suppliers; ₹28.16 crore fake ITC availed by M/s Hari Shankar Sharma HUF; and ₹14.17 crore fraudulent ITC availed by M/s Omtex, including credits passed on by the other accused entities.
The department alleged that a substantial portion—over 96% of ITC availed by certain entities—originated from inactive or bogus firms.
The accused argued that the applicants were falsely implicated. Investigation had concluded and a complaint had been filed. The offences are triable by a Magistrate with a maximum punishment of five years. The case is largely documentary in nature. The accused have no prior criminal history. They have been in custody since October/November 2025. The Supreme Court and coordinate benches of the High Court have granted bail in similar cases.
Reliance was placed on judgments including Vineet Jain v. Union of India, Ratnambar Kaushik v. Union of India, and other recent bail orders in GST-related prosecutions.
Hari Shankar Sharma also contended that ₹30.5 lakh seized during search was unrelated to the alleged ITC activities.
The GST Department argued that the accused were masterminds behind a structured ITC fraud racket. Fake firms were floated and controlled through brokers/builders. Invoices were issued without supply of goods to generate and pass on fake credits. Commission was earned on fraudulent transactions. The offence involved huge public revenue loss and had serious economic ramifications. There was risk of tampering with evidence or absconding.
The department relied on Supreme Court rulings including Serious Fraud Investigation Office v. Nittin Johari, Tarun Kumar v. Enforcement Directorate (2024), and Rakesh Mittal v. Ajay Pal Gupta (2026), emphasizing that economic offences must be treated with greater seriousness.
After hearing both sides and examining the record, the High Court held that the allegations disclose large-scale illegal availment of ITC involving huge sums and systematic fraud.
The Court cited the Supreme Court’s decision in Tarun Kumar v. Enforcement Directorate, wherein it was observed that economic offences involve deep-rooted conspiracies, cause huge loss of public funds, pose serious threats to the financial health of the country, and equire a different approach in matters of bail.
The High Court further referred to the Supreme Court’s recent ruling in Rakesh Mittal, which underscored that principles applicable to heinous crimes must equally apply to serious economic offences, even if triable by a Magistrate.
The Court noted that economic offences are committed with deliberate design and calculated intent for personal gain at the cost of public interest, and therefore cannot be viewed lightly.
In view of the nature of allegations, the magnitude of the alleged fraud, and the legal position laid down by the Supreme Court, the High Court held that no case for bail was made out.
All three bail applications were accordingly rejected.
However, the Court expressed an expectation that the trial court would proceed with the trial expeditiously.
Case Details
Case Title: Hari Shankar Sharma Versus UOI
Case No.: Criminal Misc. Bail Application No. – 45131 Of 2025
Date: February 27, 2026
Counsel For Petitioner: Anand Mani Tripathi, Arun Kumar Shukla
Counsel For Respondent: Dhananjay Awasthi, Parv Agarwal
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