GST authorities can't invoke provisions of the Indian Penal Code (IPC) directly, bypassing the penal provisions under the GST Act itself

Facts of the Case: The assessee argued that the search and seizure operations conducted under Section 67(2) of the GST Act revealed offenses punishable under Section 132 of the GST Act. Given that the GST Act is a special statute, the invocation of IPC provisions without first applying the penal provisions of the GST Act is legally flawed. They contended that the FIR registered by the GST authorities under IPC provisions was invalid without invoking the appropriate sections of the GST Act.

Department's Contention:  The department countered that the offenses under the GST Act and IPC are distinct, and there is no legal bar preventing the police from registering an FIR under IPC provisions based on a complaint from the GST authorities. The department justified their actions, arguing that invoking IPC provisions did not require adherence to the procedural framework of the GST Act.

Held that: The court observed that no prior sanction was obtained from the Commissioner as mandated under Section 132(6) of the GST Act before initiating prosecution. The absence of such approval rendered the FIR defective. The GST authorities were required to follow the procedure prescribed by the GST Act and invoke its penal provisions before resorting to the IPC.

It was emphasized that the GST Act, 2017 is a special statute that comprehensively covers all offenses, penalties, and procedures related to GST violations. The authorities, by bypassing this framework, undermined the legislative intent of the Act. The court stated that invoking IPC provisions without first exhausting the GST Act’s penal provisions and obtaining the required sanction was inappropriate and legally unsound.

The court further noted that allowing the GST authorities to sidestep the Act and delegate the investigation to local police would defeat the very purpose of enacting a specialized statute like the GST Act. The High Court clarified that such actions amounted to “abuse of process of law” and could not be permitted.

The Court ruled in favor of the petitioner, allowing the petition and quashing the FIR. The court reaffirmed the necessity of adhering to the procedural safeguards and penal provisions prescribed by the GST Act, ensuring that the special statute is applied in its intended manner before resorting to general criminal provisions under the IPC. Therefore, the authorities were found to have improperly initiated the criminal proceedings under the IPC, bypassing the requisite GST provisions. This principle safeguards individuals from undue criminal prosecution where the matter is better suited for resolution under the specialized tax regime of the GST law.

To read the complete judgment 2024 Taxo.online 2029