Patna High Court on ITC Fraud Using Nine GSTINs: Key Takeaways
The focus keyphrase ITC fraud via NIL returns has triggered legal debate once again. In a significant ruling, the Patna High Court recently refused to quash proceedings against a taxpayer accused of availing fake Input Tax Credit (ITC) across nine GSTINs while regularly filing NIL returns.
The ruling clarifies how constitutional remedies under Article 226 can’t be casually invoked when substantial evidence points to GST fraud.
What Was the Case About?
- The petitioner operated nine GST registrations.
- Regular NIL returns were filed under GSTR-3B.
- Despite this, the taxpayer availed and utilised Input Tax Credit running into crores.
- The Department initiated proceedings under Section 132 of the CGST Act, which deals with GST offences and penalties.
The taxpayer approached the High Court to quash these proceedings using Article 226 of the Constitution, claiming procedural irregularities.
Why Did the Patna High Court Refuse to Intervene?
The Hon’ble Court held:
- NIL returns and ITC mismatch across multiple GSTINs raised genuine suspicion.
- There was substantive material justifying the Department’s case.
- Article 226 jurisdiction is discretionary, and not meant to interfere at a preliminary stage of investigation unless there’s clear abuse of power.
Legal Reference:
CGST Act, 2017 – Section 132 deals with imprisonment and fines for fraudulent ITC claims, among other offences.
Constitutional Reference:
Article 226 allows High Courts to issue writs to protect legal rights, but courts avoid stepping in where facts are disputed or under active investigation.
ITC Fraud via NIL Returns: What You Must Know
If you’re running a business with multiple GSTINs, this judgment is a timely reminder that:
- Filing NIL GSTR-3B doesn’t shield you from scrutiny if ITC is claimed separately.
- Authorities track PAN-based activity across GSTINs using advanced analytics.
- Inconsistencies between outward supplies and claimed ITC trigger red flags.
- Using multiple GSTINs for fraud can lead to prosecution under Section 132, with imprisonment of up to 5 years.
Expert Tip: Reconcile Before You Claim
“Claiming ITC without outward supplies or valid tax invoices invites prosecution, not just recovery. Reconciliation and internal audit must be done GSTIN-wise to avoid cross-GSTIN ITC misuses.”
— GST Practitioner, Efiletax Expert Panel
When Can Article 226 Be Invoked in GST Cases?
| Situation | Can You Approach High Court under Art. 226? |
|---|---|
| Department issued notice only | Yes, if there’s gross violation of natural justice |
| Evidence suggests fraud | Unlikely, courts generally don’t interfere |
| No factual dispute, pure legal issue | Yes |
| Proceedings under Section 132 | Rarely – courts prefer investigation to complete |
Why This Matters for Businesses and Consultants
- GST ITC fraud cases are on the rise, with over 4,000 arrests since 2021 as per CBIC data.
- The use of multiple GSTINs with NIL returns is a known modus operandi flagged by DGGI.
- High Courts are cautious in granting relief unless there’s clear abuse of power.
- Misuse of input tax credit can result in penalties, cancellation, and criminal prosecution.
Closing Thoughts
The Patna HC’s stand on ITC fraud via NIL returns sends a clear message — judicial intervention under Article 226 isn’t a shortcut to escape GST fraud proceedings. Every taxpayer, especially those operating multiple GSTINs, must ensure strict ITC compliance and audit trail integrity.
Need help with ITC reconciliation or GST litigation support?
Contact Efiletax now — your trusted partner in tax and legal compliance.
FAQs
1. Can filing NIL returns protect me from GST scrutiny?
No. If ITC is claimed separately, NIL returns can appear suspicious and attract investigation.
2. Is availing ITC without outward supply allowed?
Not unless it’s under special provisions (e.g., ISD, reverse charge). Otherwise, it’s considered fraudulent.
3. Can I claim ITC across multiple GSTINs?
Yes, if justified. But each GSTIN must maintain its own books, returns, and tax trail.
4. What is Section 132 of the CGST Act?
It deals with offences such as issuing fake invoices, fraudulent ITC, and non-payment of collected tax.
Summary
ITC fraud via NIL returns across multiple GSTINs won’t get judicial protection, rules Patna HC. Filing NIL GSTR-3B doesn’t absolve you if ITC claims indicate GST evasion.