2024 (9) TMI 828 - HC - GST

Jurisdiction of GST Authorities - Whether the GST Authorities can launch prosecution invoking penal provisions under Indian Penal Code, 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? - If not, then whether the prosecution so launched is hit by legal bar against the institution or continuance of the proceedings so as to warrant quashment? 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 therein are taken at their face value, the same constitutes offence which are squarely covered by the penal provision of Section 132 of GST Act, 2017. The 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 Indian Penal Code, 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?
2. Whether the prosecution so launched is hit by legal bar against the institution or continuance of the proceedings so as to warrant quashment?

Detailed Analysis:

Issue 1: Invocation of IPC Provisions by GST Authorities

The petitioner sought reliefs including the quashing of proceedings and summons issued under the GST Act and IPC. The petitioner argued that the GST Act, 2017 is a complete code providing procedures, penalties, and punishments for offences under the GST Act. The petitioner contended that the invocation of IPC provisions without invoking the penal provisions of the GST Act and without obtaining the required sanction under Section 132(6) of the GST Act is unlawful. The petitioner relied on the Supreme Court judgment in Sharat Babu Digumarti Vs. Government (NCT of Delhi) to support the argument that a special statute like the GST Act should prevail over general laws like the IPC.

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

Upon hearing both parties, the court noted that the petitioner was summoned under Section 70 of the GST Act and had given statements to GST Authorities. However, no action under the GST Act was taken against the petitioner. The GST Authorities conducted search and seizure operations under Section 67(2) of the GST Act on the premises of M/s. Shreenath Soya Exim Corporate, which was alleged to be a bogus firm issuing invoices without supplying goods/services, leading to wrongful availment of input tax credit.

The court observed that the allegations against the petitioner, even if taken at face value, constituted offences covered by Section 132 of the GST Act. No sanction from the Commissioner was obtained before launching the prosecution, as required under Section 132(6) of the GST Act. The court emphasized that the GST Authorities cannot bypass the procedural safeguards of the GST Act by invoking IPC provisions without pressing the penal provisions of the GST Act.

Issue 2: Legal Bar Against Prosecution and Quashment of Proceedings

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

The court referred to the Supreme Court judgment in Sharat Babu Digumarti Vs. Government (NCT of Delhi), which held that a special law shall prevail over general laws. The court concluded that the GST Authorities cannot bypass the GST Act's procedural safeguards and invoke IPC provisions without the required sanction.

Conclusion:

The petition was allowed, and the FIR in Crime No. 62/2022 under Sections 420, 467, 468, and 471 of IPC and consequential proceedings were quashed as against the petitioner. No order as to costs was made.