High Court Refuses Bail in Rs. 2 Crore GST Fraud Matter

Ankit and Shiva Johri are accused of orchestrating a Rs. 2.01 crore GST scam by creating “paper companies” to fraudulently claim Input Tax Credit (ITC). While the brothers claimed to be providing simple freelance clerical services, the prosecution alleges they were the architects of a circular trading loop, using ghost entities like M/s Bharat Building Materials and M/s Lam Enterprises to generate bogus invoices for goods that were never actually moved.

The state’s case rests on a significant digital trail, as investigators discovered that several of these fictitious firms were operated using Johris’ personal devices and private internet connections. By linking these “ghost firms” to the same IP addresses, authorities have moved to prove that the operation was a deliberate, coordinated fraud rather than accidental administrative assistance. This case underscores the increasing effectiveness of tax departments in using digital forensics to dismantle high-tech tax evasion schemes.

Issue Raised: Whether offences arising from GST fraud can be prosecuted under general criminal law (BNS/IPC) in addition to the CGST Act, and whether the accused were entitled to bail.

HC’s Decision: The Allahabad High Court denied bail to Ankit and Shiva Johri, ruling that GST fraud involving forged identities and deliberate conspiracy constitutes a serious economic offence punishable under both the GST Act and the Bharatiya Nyaya Sanhita (BNS). The Court rejected the defence’s claim that the GST Act is an exclusive legal code, asserting that the use of forged documents to create “ghost” entities demonstrates a level of criminal intent that transcends simple tax non-compliance.

Characterising the brothers as the “architects” of the scam rather than mere clerical workers, the judges highlighted their use of personal digital infrastructure to manage the fraud and the resulting significant loss to the public exchequer. This judgment clarifies that third-party service providers cannot avoid criminal liability if they are found to be active participants in high-tech tax evasion schemes.

To Read Full Judgment, Download PDF Given Below.