‘Abuse of Process of Law Cannot be Permitted’: MP HC Bars GST Authorities invoking IPC Provisions without applying GST Penal Provisions [Read Order]

The Madhya Pradesh High Court has ruled that the GST authorities cannot invoke penal provisions under the Indian Penal Code ( IPC ) without applying the corresponding penal provisions under the GST Act, 2017. The court added that such abuse of process of law cannot be permitted.

Justice Sushrut Arvind Dharmadhikari and Justice Duppala Venkata Ramana observed that “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…”

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The petitioner, Deepak Singhal, a proprietor of M/s. Agrawal Soya Extracts Pvt Ltd, sought the quashing of the FIR registered against him under various sections of the IPC, including Sections 420 ( cheating ), 467 ( forgery of valuable security ), 468 ( forgery for the purpose of cheating ), and 471 ( using forged documents as genuine ).

The FIR was based on allegations of fraudulent transactions discovered during a search and seizure operation by GST authorities, who accused a third-party firm, M/s. Shreenath Soya Exim Corporate, of issuing fake invoices to avail input tax credit ( ITC ) fraudulently.

The petitioner's counsel argued that the GST Act is a complete code in itself, providing a detailed framework for penalties and prosecution for offences related to GST violations. The counsel contended that the allegations made during the search and seizure operation fell squarely within the scope of Section 132 of the GST Act, which deals with offences such as issuing fake invoices. Therefore, the GST authorities should have invoked the penal provisions of the GST Act, rather than bypassing it by filing charges under the IPC.

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Furthermore, Section 132(6) of the GST Act explicitly requires the prior sanction of the Commissioner before any prosecution can be launched. In the present case, no such sanction was obtained before the GST authorities registered the FIR.

The petitioner argued that this procedural safeguard is essential to ensure that prosecution is not initiated arbitrarily and that GST-related offences are dealt with under the framework established by the GST Act, not the IPC.

In support of this argument, the petitioner's counsel relied on the Supreme Court’s ruling in Sharat Babu Digumarti vs. Government ( NCT of Delhi ), 2017 (2) SCC 18, which stated that when a special statute provides specific provisions for certain offences, they should prevail over general provisions under the IPC. The apex court observed that allowing GST authorities to sidestep the procedural requirements of the GST Act would defeat the legislative intent behind enacting a specialised statute for GST-related matters.

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The bench concurred with the petitioner's position. It ruled that the GST authorities cannot launch prosecution solely under the IPC without first invoking the relevant penal provisions under the GST Act, especially when the allegations fall under the scope of the GST Act.

The high court held that such an approach amounts to bypassing the procedural safeguards laid down in the GST Act, including the requirement for the Commissioner’s sanction under Section 132(6).

“Letting GST Authorities to adopt such course of action would amount to abuse of process of law which cannot be permitted by this court” stated the court in its ruling.

The Madhya Pradesh High Court quashed the FIR and the consequential proceedings against the petitioner, affirming that the GST authorities must adhere to the procedural requirements of the GST Act before initiating prosecution.

To Read the full text of the Order CLICK HERE

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