GST Act Prevails: Madhya Pradesh High Court Rules IPC Cannot Be Invoked for Offences Covered Under GST

The Madhya Pradesh High Court recently ruled that GST (Goods and Services Tax) authorities cannot use the Indian Penal Code (IPC) to charge someone for an offence if that offence is already covered under the GST Act.. This ruling came in the case of Deepak Singhal v. Union of India and Others.

The case involved a businessman who was accused of running a fake company that issued invoices without actually supplying goods or services.. The authorities charged him under various sections of the IPC but he argued that the charges should be handled under the GST Act because the alleged offences were related to GST matter.

The High Court, consisting of Justices SA Dharmadhikari and DV Ramana, agreed with the businessman. The judges explained that the GST Act, 2017, is a special law that fully covers all aspects related to GST including the process, penalties, and offences. Since the law already outlines how to deal with these offences, the GST authorities cannot ignore the procedures laid out in the Act and use the IPC instead.

The Court made it clear that allowing the GST authorities to bypass the GST Act’s procedures and hand over the case to the local police would go against the purpose of the GST Act itself. The GST Act is designed to handle tax-related issues specifically, and its procedures need to be followed.

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The case was brought before the court because the businessman, who had been charged under the IPC, filed a petition to quash (cancel) the criminal charges. He argued that the authorities did not follow the correct procedure under the GST Act, particularly Section 132(6), which states that before anyone can be prosecuted for a GST-related offence, the GST Commissioner must approve it.

The lawyer for the government argued that the IPC and GST Act are separate laws and that there’s no rule preventing the police from filing charges under the IPC even if the case involves a GST issue. They claimed that offences under the GST Act, and those under the IPC could be handled separately.

However the Court rejected this argument, pointing out that even if the allegations against the businessman were true they would still fall under the scope of the GST Act specifically Section 132 which deals with issuing fake invoices. The Court also took note that the GST crime branch had not approved charges before filing criminal complaints as mandated by law.

Meaning thereby, the criminal proceedings under IPC were quashed with the businessman.

In this case, Advocate Shashwat Seth represented the petitioner (the businessman), while Deputy Advocate General Sudeep Bhargava appeared on behalf of the Central government.

The ruling is significant because it clarifies that the GST Act must be followed when dealing with GST-related offences and that authorities cannot use the IPC to get around the GST Act’s specific rules. This ensures that the procedures established under the GST Act are respected and followed in all cases related to GST offences.