GST authorities cannot bypass GST Act procedures by invoking IPC provisions without utilizing GST penal provisions first

The HC held that GST authorities cannot bypass GST Act procedures by invoking IPC provisions without first utilizing GST Act penal provisions and obtaining mandatory sanction under Section 132(6). The petitioner was summoned under Section 70 of GST Act and gave statement, but no action was taken under GST Act. Instead, authorities filed FIR under IPC for alleged bogus firm operations discovered during search and seizure. The court ruled that GST Act 2017 is special legislation covering procedures, penalties and offences relating to GST. Allowing authorities to bypass procedural safeguards amounts to abuse of process. The petition was allowed and prosecution quashed.

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Issues Involved:
1. Whether the GST Authorities can launch prosecution invoking penal provisions under the Indian Penal Code (IPC), without invoking the penal provisions of the GST Act, when the alleged offences are covered under the provisions of the GST Act and that too without obtaining sanction under Section 132(6) of the GST ActRs.

Detailed Analysis:

Issue 1: Invocation of IPC Provisions without GST Act Sanction

The petitioner sought reliefs including quashing the proceedings initiated under the GST Act and IPC, and clarification from the GST department and police authority regarding the petitioner's implication in Crime No. 61/2022. The petitioner argued that the GST Act, 2017 is a complete code providing procedures and penalties for offences under the Act. The petitioner contended that invoking IPC provisions without invoking the GST Act's penal provisions and without obtaining the Commissioner's sanction under Section 132(6) of the GST Act is legally untenable.

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

Upon hearing both parties, the court identified the main issue: whether the GST Authorities can invoke IPC provisions without invoking the GST Act's penal provisions and without obtaining the necessary sanction under Section 132(6) of the GST Act.

The court referred to relevant statutory provisions under the GST Act, including Sections 67, 69, 70, 122, and 132, which detail the powers of inspection, search, seizure, arrest, summoning persons, penalties for certain offences, and punishment for specific offences.

The court noted that the petitioner was summoned under Section 70 of the GST Act and had given statements to GST Authorities. The search and seizure operations conducted under Section 67(2) of the GST Act revealed that M/s. Shreenath Soya Exim Corporate was a bogus firm issuing invoices without supplying goods/services, leading to wrongful availment or utilization of input tax credit/refund of tax. However, there were no allegations against the petitioner of forming the bogus firm.

The court emphasized that the allegations constituted offences covered under Section 132 of the GST Act. It was undisputed that no sanction was obtained from the Commissioner before launching prosecution, as required under Section 132(6) of the GST Act. The court found no justification for invoking IPC provisions without invoking the GST Act's penal provisions and bypassing the prescribed procedure.

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

The court referenced the Supreme Court judgment in Sharat Babu Digumarti Vs. Government (NCT of Delhi), which emphasized that special provisions with overriding effects in a latter enactment should prevail over general and prior laws.

Conclusion:

The court allowed the petition, quashing the FIR in Crime No. 61/2022 under Sections 420, 467, 468, and 471 of the IPC and the consequential proceedings against the petitioner. No order as to costs was made.

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