Madhya Pradesh HC Denies Anticipatory Bail In GST Refund Fraud Case Involving Bogus Firms

In a recent ruling, the Madhya Pradesh High Court denied anticipatory bail to the applicant in a case involving GST refund fraud through bogus firms.

A Single Judge Bench of Justice Vivek Rusia emphasized the gravity of the offence, as the magnitude of the GST refund involved was estimated to exceed 80 crores, and considering the seriousness of the offence concluded that no grounds for anticipatory bail could be established.

Senior Advocate Ravindra Singh appeared for the Applicant, whereas Advocate Prasanna Prasad appeared for the Respondent.

In the present case, the applicant, who was the proprietor of M/s Manchan Overseas and the Director of Shankheshwar Impex Pvt. Ltd., was involved in a case related to GST refund fraud. Complaints were received regarding goods exported without being collected and the subsequent illegal obtaining of GST refunds. The applicant was added as an accused in the FIR, arrested, and placed on police remand. However, the applicant was released on bail after a compromise was reached with the complainants. The GST Investigation Wing sought formal arrest for interrogation. The applicant approached the High Court for protection, claiming that the GST Investigation Wing was attempting to arrest them without following guidelines. The applicant expressed willingness to cooperate with the investigation.

The GST Investigation Wing argued that effective interrogation required the applicant to be taken into custody, as other individuals implicated him in opening bogus firms for GST refunds.

The matter involved a potential GST refund magnitude of over 80 crores, and the GST Investigation Wing followed the guidelines and obtained approval for the investigation and arrest.

After examining the evidence collected against the applicant, the Bench noted the applicant’s failure to appear before the GST Investigation Wing despite receiving multiple summons under Section 70 of the Central Goods and Service Tax Act.

The Bench further found that the applicant played a central role in the fraudulent GST refunds through the creation of fictitious firms.

Highlighting the need for a thorough investigation into the GST-RI and GST-3B sales and purchases involving as many as 25 bogus firms, the Bench while denying the bail, placed reliance on the case of Y.S. Jagan Mohan Reddy v. Central Bureau of Investigation [(2013) 7 SCC 439], wherein the Apex Court had emphasized that economic offences should be treated differently when it comes to bail.

The Bench recognized that economic offences often involved intricate conspiracies and substantial losses of public funds, which pose a serious threat to the overall economy and financial well-being of the country.

Therefore, such offences need to be viewed seriously and considered grave offences, concluded the Bench.

Cause Title: Mohit Jain v. Union of India

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