TaxTMI 
TaxTMI 
TaxTMI 
A recurring defense in GST enforcement is the attempt to recast serious fiscal offences as “civil disputes” involving interpretation, classification, valuation, or eligibility of input tax credit. This plea is commonly invoked to stall investigation, defeat sanction, and secure premature quashing of prosecutions under Section 482 CrPC. The Supreme Court’s reportable judgment dated 08-01-2026 in C.S. Prasad Versus C. Satyakumar And Others - 2026 (1) TMI 1280 - Supreme Court decisively rejects this approach and lays down principles that apply with full force to GST prosecutions under Section 132 of the CGST Act .
Though the case arose from a non-tax dispute, the ratio is one of general criminal jurisprudence. The Court has reaffirmed that civil adjudication and criminal prosecution operate in distinct and independent fields. The existence, pendency, or even culmination of civil proceedings does not dilute criminal liability where the ingredients of an offence are prima facie disclosed.
Under the GST framework, adjudication determines tax liability, interest, penalty, and recovery. It does not adjudicate criminal intent. Section 132 criminalises conduct marked by mens rea—fraudulent availment or utilisation of input tax credit, issuance or use of fake invoices, suppression with intent to evade tax, falsification of records, obstruction of officers, and deliberate contraventions designed to defraud revenue. These are not neutralised merely because a demand is confirmed, dropped, paid, or settled.
The Supreme Court has categorically disapproved High Courts weighing delay, conduct of the complainant, or perceived suppression of facts while exercising inherent jurisdiction. This has direct relevance to GST prosecutions where accused persons routinely argue departmental delay, prior audits, or alleged revenue neutrality to seek quashing. The Court clarifies that delay by itself is never a ground to quash criminal proceedings at the threshold. Such considerations pertain to appreciation of evidence and are matters for trial.
Equally significant is the Court’s warning against converting Section 482 proceedings into a surrogate trial. In GST matters, quash petitions often invite courts to examine invoices, e-way bills, agreements, returns, reconciliations, or circulars—effectively asking the court to decide the case without evidence. The Supreme Court reiterates that at the quash stage, allegations must be taken at face value; the court must not test reliability, sufficiency, or probability.
This doctrine fortifies prosecutions under Section 132CGST Act, even where adjudication is pending, concluded, or challenged in appeal. Where allegations disclose fake invoicing, circular trading, shell entities, forged documentation, or deliberate misuse of statutory schemes, criminal law cannot be neutralised by labelling the dispute as “tax interpretation” or “commercial arrangement”.
The judgment also carries a systemic warning of particular importance to GST. If criminal proceedings were quashed merely because adjudication has examined the transaction, offenders could routinely defeat prosecution by prolonging adjudication or appellate remedies. The Supreme Court cautions that such an approach would convert civil proceedings into a shield against criminal accountability, undermining the rule of law.
For GST officers, the ruling provides authoritative judicial backing for parallel adjudication and prosecution, subject to statutory safeguards and disclosure of a prima facie offence. For adjudicating authorities, it underscores the importance of clear factual findings, which often form the substratum of criminal complaints even though they do not conclude criminal guilt. For defence practitioners, the message is unambiguous: the plea that a GST offence is “purely civil in nature” is no longer a universal escape route.
In conclusion, the January 2026 Supreme Court judgment restores doctrinal clarity at a time when fake ITC rackets, circular trading, and document fraud threaten the integrity of the GST system. Adjudication may determine tax and penalty; criminal law determines culpability. One cannot extinguish the other.
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By Adv. G. Jayaprakash (Former Central Excise Officer)