Gauhati High Court Rejects Bail Plea In ₹8.59 Crore GST Fraud Case

The Gauhati High Court has recently denied bail to a petitioner in Rs. 8.59-crore fake Input Tax Credit (ITC) scam, observing that the allegations disclose an organized and well-planned fraud involving misuse of the GST system.

A bench comprising Justice Pranjal Das noted that custodial interrogation was necessary as the investigation was at a crucial stage and that granting bail could hamper efforts to unearth the larger conspiracy.

Bahadur Islam, the petitioner, was arrested for alleged offences under Section 132 read with Section 69 of the Central Goods and Services Tax (CGST) Act. While Section 132 deals with serious GST offences such as fake invoicing, ITC fraud and substantial tax evasion, Section 69 empowers the Commissioner to order arrest for such offences. The petitioner sought bail under Section 483 of the Bharatiya Nagarik Suraksha Sanhita (BNSS), 2023.

The Revenue argued that the fraudulent activities were carried out on an organized scale, with offenders operating across a wide geographical area of the country, resulting in illegal gains to themselves and substantial losses to the exchequer.

The prosecution alleged that the petitioner, along with other accused, was involved in a GST fraud racket in which GST registrations were obtained in the names of non-existent firms. It was further alleged that fake invoices were issued without any actual supply of goods, enabling the fraudulent availment and passing on of ITC exceeding Rs.8 crore.

The High Court noted that the petitioner was not merely an innocent proprietor of a Customer Service Point and had admitted to receiving illegal remuneration. It was also observed that he had assisted co-accused persons in creating fake firms for the purpose of passing on fraudulent ITC.

The Bench further observed that the Investigating Authority had referred to the network as a “gang” operating in an organised manner to defraud the Revenue through fictitious entities without any corresponding real-time supply of goods or services.

Taking into account the nature and gravity of the allegations and the fact that the investigation was still at an active stage, the Court held that granting bail would not be in the interest of a fair and effective investigation:

"Even though the petitioner has been in detention since 14.11.2025, but - considering the nature of the alleged offences, the materials revealed by the investigation, and the continuance of investigation into various dimensions of the alleged offences - I am of the considered view that granting of bail at this stage may not be in the best interest of effective and complete investigation, as has been also rightly contended by the prosecution."

Accordingly the Court rejected the bail application.

Case Title: Bahadur Islam v. The Union of India

Citation: 2026 LLBiz HC (GAU) 1

Case Number: Bail Appln./3839/2025

Counsel for Petitioner: Advocates S C Biswas, B D Das, F A Hassan

Counsel for Respondent: Advocates S.C. Keyal