Bail in Fake ITC Prosecutions: Supreme Court Prioritizes Liberty Over Indefinite Pre-Trial Custody

Introduction

The decision of the Hon’ble Supreme Court in Amit Mehra v. Union of India reaffirms a key constitutional principle: even in serious economic offences such as fake input tax credit (ITC) fraud under the GST regime, prolonged pre-trial incarceration and systemic delay in trial cannot justify indefinite denial of bail. The Court underscored that while fiscal frauds are grave and must be dealt with sternly, the right to personal liberty under the Constitution cannot be subordinated indefinitely to the mere seriousness of the accusation, especially where the trial is yet to begin.

This ruling is particularly significant for ongoing and future prosecutions under the Central Goods and Services Tax Act, 2017 and the Integrated Goods and Services Tax Act, 2017, where investigative agencies frequently oppose bail on the ground of alleged large-scale ITC fraud and the accused’s purported central role in such schemes.

Background of the Case

Allegations and Statutory Provisions

The case arose out of Case No. 442 of 2025, where Amit Mehra (“the Petitioner”) was alleged to be involved in a major fake ITC racket. The accusations included:

  • Creation and operation of multiple bogus entities
  • Issuance of invoices without any actual supply of goods or services
  • Facilitation of wrongful availment and utilisation of ITC and tax refunds

The alleged offences were stated to be punishable under:

  • Section 132(1)(b) of the Central Goods and Services Tax Act, 2017
  • Section 132(1)(i) of the Central Goods and Services Tax Act, 2017
  • Section 20(xv) of the Integrated Goods and Services Tax Act, 2017

The Union of India (“the Respondent”), acting through the Directorate General of GST Intelligence (DGGI), contended that the Petitioner was the supposed mastermind of a large-scale fake ITC operation involving multiple shell firms.

Custody and Procedural Status

At the time the matter reached the Supreme Court, the Petitioner:

  • Had been in judicial custody for more than eight months as an under-trial
  • Faced a situation where:
    • The trial had not begun
    • Charges had not yet been framed
    • The offences were triable by a Magistrate
    • The maximum sentence on conviction could extend up to five years

The Petitioner argued that, even assuming the trial commenced promptly, its completion within a reasonable timeframe was unlikely, resulting in continued custody as an under-trial for an unduly long period.

Litigation History

Order of the Punjab & Haryana High Court

The Petitioner had earlier moved the Punjab & Haryana High Court for regular bail by filing CRMM No. 43074/2025. By order dated November 07, 2025, the High Court declined to grant regular bail, accepting the Respondent’s arguments regarding:

  • The gravity and seriousness of the alleged economic offence
  • The Petitioner’s alleged central role as the orchestrator of the fake ITC network

Dissatisfied with the High Court’s refusal to enlarge him on bail, the Petitioner approached the Supreme Court.

Proceedings Before the Supreme Court

The matter came before the Supreme Court by way of Petition for Special Leave to Appeal (Crl.) No. 20996 of 2025.