Deepak Singhal vs. Union Of INDIA

Held

The Court held that the GST Act, 2017, is a special legislation that comprehensively deals with procedures, penalties, and offenses related to GST. The GST authorities cannot bypass the prescribed procedure for launching prosecution under the GST Act by simply invoking penal provisions under the IPC without invoking the penal provisions of the GST Act itself. This is particularly true when the alleged actions, as revealed by search and seizure operations, squarely fall within the ambit of offenses enumerated under Section 132 of the GST Act. The Court emphasized that bypassing the procedural safeguards provided under Section 132(6) of the GST Act, which requires the sanction of the Commissioner prior to the initiation of prosecution, is prejudicial to the assessee. Allowing GST authorities to adopt such a course of action would amount to an abuse of the process of law. The Court cited the Supreme Court's decision in Sharat Babu Digumarti Vs. Government (NCT of Delhi) to support the principle that a special law prevails over a general law. Consequently, the FIR and consequential proceedings were quashed as against the petitioner.

Facts

The petitioner, proprietor of M/s. Agrawal Soya Extracts Pvt Ltd, was issued a summons on August 11, 2021, by Respondent No. 5 under Section 70 of the GST Act, 2017. Subsequently, on February 14, 2022, Respondent No. 5 conducted search and seizure operations under Section 67(2) of the GST Act on the premises of M/s. Shreenath Soya Exim Corporate. An inspection report dated July 4, 2022, alleged M/s. Shreenath Soya Exim Corporate to be a bogus firm that issued fraudulent invoices without supplying goods, leading to wrongful availment of input tax credit. Based on a complaint by Respondent No. 5, FIR No. 61/2022 was registered on December 26, 2022, by Respondent No. 6 under Sections 420, 467, 468, and 471 of the Indian Penal Code against the proprietor of M/s. Shreenath Soya Exim Corporate, later implicating the petitioner. The petitioner filed this writ petition seeking to quash the proceedings.

Key Issues

1. Whether GST authorities can initiate prosecution by invoking penal provisions under the Indian Penal Code without first invoking the penal provisions of the GST Act, especially when the alleged offenses are covered by the GST Act, and without obtaining the requisite sanction under Section 132(6) of the GST Act? 2. If not, whether the prosecution initiated is barred by law, warranting its quashment? The petitioner argued that the GST Act, 2017, is a complete code and provides for offenses and punishments. They contended that since the alleged offenses are covered under Section 132 of the GST Act, the invocation of IPC provisions without invoking GST penal provisions is illegal. Furthermore, Section 132(6) mandates previous sanction from the Commissioner for prosecution, which was not obtained. The petitioner relied on the Supreme Court judgment in Sharat Babu Digumarti Vs. Government (NCT of Delhi) 2017 (2) SCC 18. The respondents argued that offenses under the GST Act and IPC are distinct, and there is no prohibition against police authorities registering offenses under the IPC based on a complaint from GST authorities.