The Madhya Pradesh High Court recently held that Goods and Services Tax (GST) authorities cannot invoke penal provisions of the Indian Penal Code (IPC) when the alleged offence falls within the purview of the GST Act [Deepak Singhal v. Union of India and Others].

A Bench of Justices SA Dharmadhikari and DV Ramana quashed criminal proceedings initiated against a businessman under various provisions of the IPC, stating,

"...GST Act, 2017 is a special legislation which holistically deals with procedure, penalties and offences relating GST and at the cost of repetition this court cannot emphasise more that the GST Authorities cannot be permitted to bypass procedure for launching prosecution under GST Act, 2017 and invoke provisions of Indian Penal Code."

It added that if GST authorities, instead of conducting proceedings prescribed under GST Act, delegate the same to the local police, it would defeat the purpose of the Act.

The Court was dealing with a petition that sought quashing of criminal proceedings invoked under various provisions of the IPC against the petitioner. It was alleged that the petitioner had been running a bogus and fraudulently registered firm which had issued invoice/bill without having supplied goods or services.

The petitioner argued that by directly invoking IPC provisions, the GST authorities bypassed procedural requirements under the GST Act, particularly under Section 132(6), which mandates the sanction of the GST Commissioner before prosecution.

Counsel for the respondents countered that offences under the GST Act and those under the IPC are distinct, and there is no bar on registration of offences under the IPC by police authorities on a complaint made by GST authorities.

The Court found that even if the allegation against the petitioner is taken at face value, the same constitutes an offence covered by the penal provision of Section 132 of GST Act. Further, it said that no sanction was taken from Commissioner, as required under Section 132(6) of GST Act, before registration of the FIR.

Thus, its quashed the criminal proceedings against the petitioner.

Advocate Shashwat Seth appeared for the petitioner, while Deputy Advocate General Sudeep Bhargava represented the Central government.

[Read Order]