Bharat Sanchar Nigam Ltd’s (BSNL) handling of IGST fraud by MText Digital Media Pvt Ltd raises several red flags not just for the state telco but also law enforcement. Forgery-based tax fraud is not legally amenable to private settlement, because it is treated as an offence against the State, not merely a private contractual dispute.

The facts at the heart of the matter are: MText claimed and received over Rs 1.22 crore in Integrated GST by submitting allegedly forged documents to the tax authorities. This strikes at the integrity of the tax system and qualifies as an offence against the State, engaging multiple and stringent legal consequences under both the GST framework and the Indian Penal Code - particularly forgery and conspiracy, which are non-compoundable and non-bailable.

BSNL’s own complaint to the police in September 2022 was unequivocal. It detailed not just the unpaid dues but also the mechanics of the alleged fraud, naming individuals and even identifying the specific tax ward where the deception was executed. Acting on this, the police registered an FIR under multiple sections, including those dealing with forgery. At that point, the matter had clearly crossed the threshold from civil liability into criminal prosecution. Yet what followed was bizarre.

Despite initiating criminal proceedings, BSNL entered into a financial settlement with the accused party sometime in mid-2023. The structure - EMIs backed by post-dated cheques reveals a negotiated recovery of the principal amount only. The issue of interest recovery was allowed to slide. Internal communications indicate that interest liabilities ranged from Rs 3.96 crore to Rs 4.91 crore as early as 2022. The settlement covered only the principal. Was the interest waived? If so, on what authority and rationale? There is an absence of clear answers.

Equally concerning is BSNL’s conduct on the administrative front. Prior to the FIR, it had issued legal notices threatening recovery proceedings and service disconnection - standard contractual remedies that were never pursued. Recommendations for blacklisting the entity were made, but the trail goes cold, with even internal offices lacking clarity on whether such action was formally executed. A subsequent revocation order surfaced, but the original decision remains opaque.

BSNL indulged in a lot of RTI resistance that was required for the filing of the story. Despite directions from the Central Information Commission, it withheld key document and only made partial disclosures after repetitive intervention.

Read this edition’s cover story to know the complete sequence of how BSNL effectively neutralized a non-compoundable offence and allowed fraud upon the exchequer to prevail.