2024 (9) TMI 233 - HC - GST

Jurisdiction - invocation of penal provisions under Indian Penal Code by GST Authorities, without invoking the penal provisions of GST Act, when the alleged offences are covered under the provisions of GST Act and that too without obtaining Sanction under Section 132(6) of GST Act - prosecution so launched is hit by legal bar against the institution or continuance of the proceedings so as to warrant quashment or not. HELD THAT - Upon perusal of record, it is apparent that the petitioner herein had been summoned under Section 70 of GST Act vide Summon dated 11.08.2021 and he had given his statement with GST Authorities and thereafter no action under GST Act was taken against the petitioner by GST Authorities. GST authorities conducted search and seizure operations while exercising powers under Section 67(2) of GST Act, on the premises of M/s. Shreenath Soya Exim Corporate and prepared inspection report dated 04.07.2022, in which it has been alleged that Shri Vaibhav Laxmi Industries was bogus firm and has been fraudulently registered, which issued invoice/bill without supply of goods/services leading to wrongful availment or utilisation of input tax credit/refund of tax. Upon perusal of inspection report dated 04.07.2022 along with FIR, it becomes quite apparent that there is no allegation against the petitioner of forming the bogus firm and even if the allegations. In the considered opinion of this court, GST Act, 2017 is a special legislation which holistically deals with procedure, penalties and offences relating GST and at the cost of repetition this court cannot emphasise more that the GST Authorities cannot be permitted to bypass procedure for launching prosecution under GST Act, 2017 and invoke provisions of Indian Penal Code only without pressing into service penal provisions from GST Act and that too without obtaining sanction from commissioner under Section 132(6) of GST Act especially when the alleged actions squarely fall within the precincts of offence as enumerated under GST Act, 2017. This court has no hesitation in holding that GST Authorities cannot bypass procedure prescribed under GST Act for launching prosecution by simply invoking penal provisions under IPC without invoking penal provisions under GST Act especially when the allegations so revealed as a result of search and seizure conducted by GST Authorities constituted offence covered under the penal provisions of GST Act as that would amount to bypassing procedural safeguards as provided under Section 132(6) of GST Act which requires sanction of the commissioner prior to initiation of prosecution, which is to the prejudice of the petitioner herein. Letting GST Authorities to adopt such course of action would amount to abuse of process of law which cannot be permitted by this court. This petition deserves to be allowed and is hereby allowed.

Summary

Issues Involved:
1. Whether the GST Authorities can launch prosecution invoking penal provisions under the Indian Penal Code (IPC), without invoking the penal provisions of the GST Act, when the alleged offences are covered under the provisions of the GST Act and that too without obtaining sanction under Section 132(6) of the GST Act?

Detailed Analysis:

Issue 1: Invocation of IPC Provisions without GST Act Sanction

The petitioner sought reliefs including quashing the proceedings initiated under the GST Act and IPC, and clarification from the GST department and police authority regarding the petitioner's implication in Crime No. 61/2022. The petitioner argued that the GST Act, 2017 is a complete code providing procedures and penalties for offences under the Act. The petitioner contended that invoking IPC provisions without invoking the GST Act's penal provisions and without obtaining the Commissioner's sanction under Section 132(6) of the GST Act is legally untenable.

The respondents argued that offences under the GST Act and IPC are distinct, and there is no prohibition against registering offences under the IPC based on complaints by GST Authorities.

Upon hearing both parties, the court identified the main issue: whether the GST Authorities can invoke IPC provisions without invoking the GST Act's penal provisions and without obtaining the necessary sanction under Section 132(6) of the GST Act.

The court referred to relevant statutory provisions under the GST Act, including Sections 67, 69, 70, 122, and 132, which detail the powers of inspection, search, seizure, arrest, summoning persons, penalties for certain offences, and punishment for specific offences.

The court noted that the petitioner was summoned under Section 70 of the GST Act and had given statements to GST Authorities. The search and seizure operations conducted under Section 67(2) of the GST Act revealed that M/s. Shreenath Soya Exim Corporate was a bogus firm issuing invoices without supplying goods/services, leading to wrongful availment or utilization of input tax credit/refund of tax. However, there were no allegations against the petitioner of forming the bogus firm.

The court emphasized that the allegations constituted offences covered under Section 132 of the GST Act. It was undisputed that no sanction was obtained from the Commissioner before launching prosecution, as required under Section 132(6) of the GST Act. The court found no justification for invoking IPC provisions without invoking the GST Act's penal provisions and bypassing the prescribed procedure.

The court held that the GST Act is a special legislation dealing holistically with GST-related procedures, penalties, and offences. Bypassing the GST Act's procedures and invoking IPC provisions without obtaining the Commissioner's sanction would defeat the purpose of the GST Act. The court concluded that such actions by GST Authorities amount to an abuse of the process of law.

The court referenced the Supreme Court judgment in Sharat Babu Digumarti Vs. Government (NCT of Delhi), which emphasized that special provisions with overriding effects in a latter enactment should prevail over general and prior laws.

Conclusion:

The court allowed the petition, quashing the FIR in Crime No. 61/2022 under Sections 420, 467, 468, and 471 of the IPC and the consequential proceedings against the petitioner. No order as to costs was made.