GST authorities cannot bypass Section 132(6) sanction requirement and directly file IPC cases without utilizing GST Act provisions

The MP HC quashed a criminal prosecution launched by GST authorities under IPC provisions without invoking GST Act penal provisions or obtaining mandatory sanction under Section 132(6) of GST Act. The petitioner was summoned under Section 70 of GST Act and gave statement to authorities, but no action was taken under GST Act. Following search and seizure operations, authorities filed FIR under IPC alleging fraudulent registration and bogus invoicing. The court held that GST Act being special legislation with comprehensive penal provisions, authorities cannot bypass prescribed procedures by directly invoking IPC without first utilizing GST Act provisions and obtaining commissioner's sanction. Such bypass amounts to abuse of process and prejudices the accused by circumventing procedural safeguards.

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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 ActRs.
2. Whether the prosecution so launched is hit by legal bar against the institution or continuance of the proceedings so as to warrant quashmentRs.

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.

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