Special GST statute excludes general penal prosecution for tax deposit defaults, and later penal law cannot apply retrospectively.

Where alleged default is limited to delayed or non-deposit of GST/TDS, the GST enactment operates as a complete code for default, penalty, prosecution and compounding, and recourse to the general penal law is not permissible absent distinct ingredients of embezzlement, misappropriation, cheating or wrongful gain. The prosecution was therefore unsustainable without proceeding under the GST framework. Proceedings under the Bharatiya Nyaya Sanhita, 2023 were also legally infirm because the alleged conduct related to 2017-18, and substantive penal liability is governed by the law in force on the date of occurrence. The impugned criminal proceedings were quashed.

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Issues: (i) Whether criminal prosecution could be initiated under the general penal law for alleged delayed or non-deposit of GST/TDS amounts without first invoking the statutory mechanism under the U.P. Goods and Services Tax Act, 2017; (ii) Whether FIR, charge sheet and cognizance under the Bharatiya Nyaya Sanhita, 2023 were sustainable when the alleged occurrence related to the financial year 2017-18.

Issue (i): Whether criminal prosecution could be initiated under the general penal law for alleged delayed or non-deposit of GST/TDS amounts without first invoking the statutory mechanism under the U.P. Goods and Services Tax Act, 2017.

Analysis: The statutory scheme of the GST enactment was treated as a complete code governing deduction, deposit, interest, penalty, prosecution and compounding in relation to GST liabilities. The Court noted that the allegation was confined to delayed or non-deposit of GST/TDS and the record did not disclose independent ingredients of embezzlement, dishonest misappropriation, fabrication, cheating or wrongful gain. In such a situation, resort to the general penal law was held impermissible where the special statute specifically occupied the field and prescribed the consequence of the alleged default.

Conclusion: The prosecution based only on the general penal law, without proceeding under the GST framework, was held unsustainable and the issue was decided in favour of the applicant.

Issue (ii): Whether FIR, charge sheet and cognizance under the Bharatiya Nyaya Sanhita, 2023 were sustainable when the alleged occurrence related to the financial year 2017-18.

Analysis: The alleged omission related to a period preceding the enforcement of the Bharatiya Nyaya Sanhita, 2023. The Court applied the principle that substantive penal liability is governed by the law in force on the date of occurrence, while subsequent enactments cannot retrospectively create or alter the offence. Since the prosecution had invoked a penal provision not in force on the date of the alleged occurrence, the proceedings were found to suffer from a legal infirmity.

Conclusion: The FIR, charge sheet and cognizance under the Bharatiya Nyaya Sanhita, 2023 were held not legally sustainable and the issue was decided in favour of the applicant.

Final Conclusion: The impugned criminal proceedings were quashed in exercise of inherent jurisdiction, and the application succeeded, leaving the authorities at liberty to act, if so advised, strictly under the GST statute.

Ratio Decidendi: Where a special fiscal statute provides a complete mechanism for default, penalty, prosecution and compounding, recourse to the general penal law is not permissible in the absence of distinct criminal ingredients; moreover, a subsequently enacted penal statute cannot be applied retrospectively to alleged conduct occurring before its commencement.

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