In a significant GST enforcement development, the Rajasthan High Court has dismissed a writ petition filed by a GST-registered assessee accused of involvement in a fake Input Tax Credit (ITC) scam amounting to nearly ₹100 crore. The court not only denied relief but also imposed a cost of ₹5 lakh on the petitioner, reinforcing the principle that equitable remedies are unavailable to parties indulging in fraudulent conduct. The ruling highlights the judiciary’s firm approach towards misuse of the GST framework and bogus ITC claims.
Background of the Case and Assessee’s Claims
The petitioner, Korfex Industries Pvt. Ltd., a registered GST dealer in Rajasthan, was engaged in the business of purchasing remelted lead. The company claimed to have procured the goods from a Haryana-based supplier and transported them to its factory in Bhiwadi, Rajasthan. According to the assessee, the consignment had already reached the factory premises on 29 July 2025. To support this claim, the petitioner relied on GPS tracking data, CCTV footage, e-way bills, and tax invoices, asserting that the movement of goods was complete before any enforcement action was initiated.
The company challenged the action of the GST authorities, arguing that issuance of GST MOV-02 after the goods had reached the destination was unlawful. It was contended that Section 68 of the GST Act authorises inspection only when goods are in transit. The petitioner further stated that the statutory inspection period expired without any extension, no detention order under MOV-06 was passed, and the vehicle was allegedly shifted illegally to Jaipur, around 250 km away. On these grounds, the assessee alleged harassment, violation of natural justice, and claimed a financial loss of ₹18,000 due to illegal detention of goods.
Stand of GST Authorities and Allegations of a Larger Cartel
The State and Union GST authorities strongly opposed the writ petition, submitting that Korfex Industries was part of a larger organised cartel operating across Delhi, Haryana, Punjab, and Himachal Pradesh. As per the investigation, the cartel was allegedly involved in generating fake invoices and creating sham transactions to fraudulently avail ITC exceeding ₹100 crore.
The authorities alleged that the petitioner procured invoices from non-existent or deregistered firms based in Delhi, while the documents falsely showed supply from a Haryana-based entity. The investigation revealed that the actual origin of the goods was Delhi, not Haryana as claimed. According to the respondents, the procedural issues raised by the assessee could not overshadow the serious nature of tax fraud involved. They maintained that proceedings under Section 130 of the GST Act for confiscation were legally justified in the given circumstances.
Court’s Analysis on Law and Equity
The Division Bench comprising Acting Chief Justice Sanjeev Prakash Sharma and Justice Sanjeet Purohit examined the legal framework under Sections 68, 129, and 130 of the GST Act along with the relevant rules. The court acknowledged that certain procedural lapses were evident in the manner of detention and movement of the goods. However, it emphasised that discretionary relief under writ jurisdiction cannot be granted to a litigant whose conduct is tainted with fraud.
The bench observed that collusion with fictitious suppliers and availing fake GST ITC strikes at the very foundation of the GST regime. Relying on the equitable maxim “he who comes into equity must come with clean hands,” the court held that a party involved in bogus practices cannot seek protection on technical or procedural grounds. The court also referred to the Supreme Court ruling in Tomorrowland Ltd. v. HUDCO (2025), reiterating that equity demands transparency, honesty, and fairness, and what the law directly prohibits cannot be achieved indirectly by exploiting systemic loopholes.
Final Verdict and Directions to Authorities
In its final order, the Rajasthan High Court dismissed the writ petition and imposed a cost of ₹5 lakh, directing that the amount be recoverable from the petitioner company through its Director. The court permitted GST authorities to continue proceedings under Section 130 of the GST Act and also urged them to take effective steps to plug systemic gaps that enable circulation of bogus ITC within the GST ecosystem. The judgment sends a strong message that courts will not shield entities involved in tax evasion, even if procedural irregularities are demonstrated.
Case Details
| Particulars | Details |
|---|---|
| Case Title | Korfex Industries Pvt. Ltd. vs. State of Rajasthan |
| Case No. | D.B. Civil Writ Petition No. 12230/2025 |
| For Petitioner | Ms Urvashi Dugga, Mr H.V. Nandwana |
| For Respondent Nos. 1 to 3 | Mr Bharat Vyas, Mr Jaivardhan Joshi |
| For Respondent No. 4 | Mr Rakesh Choudhary, Mr Siddhant Jain |
| Court | Rajasthan High Court |