Deepak Singhal vs. Union Of INDIA

Held

The Court held that the GST Act, 2017, is a special legislation that holistically deals with procedures, penalties, and offences related to GST. The GST authorities cannot bypass the 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, especially when the alleged actions constitute offences squarely covered by Section 132 of the GST Act. This would amount to bypassing procedural safeguards like the mandatory sanction from the Commissioner under Section 132(6) of the GST Act, which is to the prejudice of the petitioner. The Court found no justification for the GST authorities to invoke IPC penal provisions without invoking those under the GST Act, particularly when the alleged actions fall within the ambit of offences enumerated under the GST Act. Such a course of action would defeat the purpose of the special statute and amount to an abuse of the process of law. Relying on Sharat Babu Digumarti, the Court concluded that when a special law covers a criminal act, the offender gets out of the net of the IPC. Therefore, 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 11.08.2021 by Respondent No. 5 under Section 70 of the GST Act, 2017. Subsequently, on 14.02.2022, GST authorities conducted search and seizure operations at the premises of M/s. Shreenath Soya Exim Corporate, alleging it to be a bogus firm that issued invoices without supplying goods, leading to wrongful availment of input tax credit. Based on a complaint by Respondent No. 5, FIR No. 62/2022 was registered on 26.12.2022 by Respondent No. 6 under Sections 420, 467, 468, 471 of the IPC, implicating the petitioner later based on a memorandum under Section 27 of the Evidence Act. The petitioner approached the High Court seeking to quash these proceedings.

Key Issues

1. Whether 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 GST Act, and without obtaining sanction under Section 132(6) of the GST Act? 2. If not, whether the prosecution so launched is hit by a legal bar against the institution or continuance of proceedings, warranting quashment? Petitioner's Arguments: The petitioner argued that the GST Act, 2017, is a complete code and provides for offences and punishments. Since the alleged actions are covered by Section 132 of the GST Act, IPC provisions could not be invoked without first invoking the GST Act's penal provisions. Furthermore, Section 132(6) requires prior sanction from the Commissioner for prosecution, a procedural safeguard bypassed by registering an FIR under the IPC. Reliance was placed on Sharat Babu Digumarti Vs. Government (NCT of Delhi) 2017 (2) SCC 18. Respondents' Arguments: The respondents contended that offences under the GST Act and IPC are distinct, and there is no prohibition against police authorities registering offences under the IPC based on a complaint from GST authorities.