ED to share information with GSTN for launching prosecution - The same person be convicted under various laws simultaneously - IPC and GST

[Vivek Jalan]

Aiming to plug tax evasion through fake billing, Centre has brought the GST Network (GSTN) under the purview of Prevention of Money Laundering Act (PMLA). This will give more power to the Enforcement Directorate (ED), the anti-money laundering agency, to act against tax evasion within GSTN. This notification issued on 7th July 2023 under the powers bestowed under PMLA Act 2002, allows the Enforcement Directorate (ED) to share relevant information or material with GSTN if they have reasons to believe that there has been a violation of the Goods and Services Tax (GST) provisions. The move to include GSTN under the money laundering law comes amid rising cases of GST fraud and fake registrations. Experts said under the money laundering provisions, tax authorities will get more power to trace the original beneficiary in case of fraud.

The modus operandi will be that ED will share relevant information about evasion of GST with the GSTN who will intimate the Commissioner and prosecution launched if the Commissioner is satisfied with the information, then an FIR may be filed to launch prosecution. The question asked many times is that whether so many agencies under so many Acts can move in the same matter at the same time. We will try to answer this question.

Section 26 of the General Clauses Act, 1897 states that "Provisions as to offences punishable under two or more enactments - Where an act or omission constitutes an offence under two or more enactments, then the offender shall be liable to be prosecuted and punished under either or any of those enactments, but shall not be liable to be punished twice for the same offence." The same was also held by the Hon'ble Supreme Court in THE STATE OF MAHARASHTRA VERSUS SAYYED HASSAN SAYYED SUBHAN & ORS. - 2018 (9) TMI 1803 - SUPREME COURT.

Hence in case FIR is registered under The Indian Penal Code and under Section 132 of the CGST Act, 2017, it can lead to Criminal proceedings. Also, if compounding is done under CGST Act, 2017, it shall not affect any proceedings for the offences under IPC, such as, Sections 379 and 414 IPC and the same shall be proceeded with further which comes out of the judgement of The Hon'ble Supreme Court in JAYANT AND ORS. VERSUS THE STATE OF MADHYA PRADESH AND ORS. - 2020 (12) TMI 1237 - SUPREME COURT with one analogous case; The same was also held by THE HIGH COURT OF ANUPAM KUMAR PATHAK VERSUS THE STATE OF JHARKHAND, NIRAJ KUMAR, STATE TAX OFFICER, RAMGARH - 2023 (7) TMI 251 - JHARKHAND HIGH COURT

So, the Ministry of Finance has made its intention very clear. Every case of Economic irregularity will be dealt with by any and all agencies in close coordination with each other. The agencies will not be compartmentalised while dealing with financial irregularities.