Morally correct lie Cath fabricated (7)
I believe the answer is:
ethical
'morally correct' is the definition.
(I've seen this before)
'lie cath fabricated' is the wordplay.
'fabricated' is an anagram indicator.
'lie'+'cath'='liecath'
'liecath' anagrammed gives 'ETHICAL'.
(Other definitions for ethical that I've seen before include "Abiding by moral principles" , "Morally proper" , "Morally correct, in accordance with professional standards" , "Morally acceptable" , "At Chile (anag.)" .)