In plain words: it is a nightmare scenario — your real business is accused of claiming fake ITC because a supplier turned out to be bogus. Here is how to defend yourself.
The core of your defence: genuineness
The decisive point is proving the transactions were real — that you actually received the goods/services, paid for them, and claimed ITC in good faith.
The evidence that matters
- Tax invoices and valid documents.
- Proof of payment through banking channels.
- Transport/e-way bills, delivery and weighbridge records — proof of movement.
- Stock and consumption records showing you used the inputs.
- Supplier verification you did (GSTIN status, filings).
Due diligence is your shield
Showing that you verified the supplier and had no reason to suspect fraud supports your bona fides — central to resisting both the demand and any allegation of knowledge.
The legal arguments
- You are a bona fide buyer — the department should pursue the defaulting supplier.
- There was no intent or knowledge of any fraud.
- The transactions were genuine — not paper.
- The demand/classification (e.g. Section 74) is wrong on the facts.
What to do when accused
- Assemble the genuineness evidence early.
- Respond fully to the SCN; attend the hearing.
- Appeal or seek writ relief where needed.
- Get experienced counsel.
Frequently asked questions
My supplier was fake — am I automatically guilty? No — a genuine buyer can defend with proof of real transactions and due diligence.
What evidence helps most? Payment trail, transport/delivery proof, stock records and supplier verification.
What's the key argument? Bona fide purchase, no knowledge of fraud, and genuine supply.
How Vakil Help Desk helps
Vakil Help Desk advises businesses and individuals on GST summons, searches, arrests and bail, show-cause notices, ITC disputes and fake-invoice allegations — and represents clients before the GST authorities, appellate forums and High Courts. If you have received a GST summons or notice, or are facing arrest, we can help you respond.
This article is for general legal awareness, not individual legal advice. GST law, the thresholds for arrest and prosecution, and the case law on arrest and attachment keep evolving, and the right step depends on your facts and the current position. Please consult a lawyer before responding to a GST summons, notice or arrest.