The Madhya Pradesh High Court stated that GST authorities cannot bypass the procedural safeguards under the GST Act by directly invoking IPC provisions without first applying the penal provisions of the GST Act.
The assessee/petitioner, Deepak Singhal was summoned by the department/respondent No. 5 under Section 70 of the GST Act, 2017. A search and seizure operation was conducted under Section 67(2) of the GST Act at the premises of M/s. Shreenath Soya Exim Corporate. The inspection report alleged that Shreenath Soya was a bogus firm involved in issuing fraudulent invoices, leading to wrongful tax credit utilization.
An FIR was filed under IPC Sections 420, 467, 468, and 471 was filed against the proprietor of Shreenath Soya, in which the assessee was later implicated on the basis of a memorandum under Section 27 of the Evidence Act. The assessee has filed a petition before the Madhya Pradesh High Court for quashing the entire proceedings registered against him.
The assessee submitted that the search and seizure operations conducted by the GST authorities under Section 67(2) of the GST Act revealed the commission of an offense punishable under Section 132 of the GST Act. Since the GST Act is a special statute, any offense covered by it should not invoke the provisions of the Indian Penal Code (IPC) without first applying the relevant provisions of the GST Act. Therefore, registration of FIR at the instance of GST Authorities under provisions of IPC without invoking penal provisions under GST Act is bad in law.
The department submitted that offence under GST Act and IPC are distinct and there is no prohibition registration of offences under IPC by Police authorities on complaint being made by GST Authorities.
The bench observed that no justification exists on part GST authorities to invoke penal provisions of IPC without invoking penal provisions under GST bypassing the procedure as prescribed under GST Act and such justification is mandatory especially when uncontroverted allegations in the inspection report and FIR, constituted offence squarely covered under the provisions of GST Act, 2017, specifically Section 132 of GST Act.
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The bench further opined that 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 would defeat the very purpose of enacting a special statute such as GST Act, 2017, as the GST Authorities instead of conducting search and seizure and conducting proceedings as prescribed under GST Act, 2017 themselves would be delegating the same to local police authorities which cannot be said to be the intent of the legislature while enacting GST Act, 2017.
The Division Bench of Justices Sushrut Arvind Dharmadhikari and Duppala Venkata Ramana observed that 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.
In view of the above, the bench allowed the petition.
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