Deepak Singhal Vs Union of India And Others (Madhya Pradesh High Court)
Conclusion: GST authorities could not invoke penal provisions under the Indian Penal Code ( IPC ) without applying the corresponding penal provisions under the GST Act, 2017 especially when the allegations of issuing fake invoices to avail input tax credit ( ITC ) fraudulently fall under the scope of the GST Act.
Held: Assessee was a proprietor of M/s. Agrawal Soya Extracts Pvt Ltd, sought the quashing of the FIR registered against him under various sections of the IPC. The FIR was based on allegations of fraudulent transactions discovered during a search and seizure operation by GST authorities, who accused a third-party firm, M/s. S, of issuing fake invoices to avail input tax credit ( ITC ) fraudulently. Assessee contended that the GST Act was a complete code in itself, therefore, the GST authorities should have invoked the penal provisions of the GST Act, rather than bypassing it by filing charges under the IPC. Furthermore, Section 132(6) of the GST Act explicitly requires the prior sanction of the Commissioner before any prosecution can be launched. In the present case, no such sanction was obtained before the GST authorities registered the FIR. Assessee argued that this procedural safeguard was essential to ensure that prosecution was not initiated arbitrarily and that GST-related offences were dealt with under the framework established by the GST Act, not the IPC. It was held that GST authorities could not launch prosecution solely under the IPC without first invoking the relevant penal provisions under the GST Act, especially when the allegations fall under the scope of the GST Act. The high court held that such an approach amounted to bypassing the procedural safeguards laid down in the GST Act, including the requirement for the Commissioner’s sanction under Section 132(6). “Letting GST Authorities to adopt such course of action would amount to abuse of process of law which could not be permitted by this court” stated the court in its ruling.
