Judgment of Hon’ble Allahabad High Court in the matter of M/s Govind Enterprises Vs. State of U.P. and other has analyzed sustainability of FIR lodged for prosecution under Indian Penal Code for an offence committed under Central goods and Service Tax Act. Hon’ble high court has held that Section 131 of GST law impliedly save provisions of Indian Penal Code.
Further, an offender can be prosecuted for same offence under two enactments; however, he can’t be punished twice for same offence. Therefore, impugned FIR and proceedings are maintainable. Hon’ble High Court further held that granting of stay from arrest will become a hurdle in thorough investigation of matter. Therefore, stay from arrest is not a fit case for any relief.
1. Brief facts of the case
- M/s Govind Enterprises (“Petitioner”) was registered under GST in the state of Uttar Pradesh w.e.f. 9th March, 2018. Petitioner has disclosed his registered office at Mathura.
- On investigation, it was found that petitioner was carrying out business and maintaining records at various other locations also.
- Petitioner disclosed inward supplies of INR 35 Crores against sales of INR 17 lacs without having any physical stock lying at place of business at the time of investigation.
- He was maintaining an unreported bank account wherein major transactions were carried out.
- Respondent lodged a FIR against petitioner alleging that he took inward supplies and passed on the goods to end users without generation outward invoices, received money in cash and deposited the same to unreported bank account.
- Therefore, petitioner was having a dishonest intention of tax evasion by submitting false documents.
2. Dispute in the matter involved
- Petitioner has filed writ petition alleging that till the date no case is registered against him under Central Goods and Service Tax Act, 2017 and no recovery proceedings have been initiated against him.
- GST Act is a complete code in itself as it contemplates and deals with all kind of situations and offences related to registration, tax evasion etc.
- It has a special procedure of arrest and prosecution also for various non-compliances.
- Petitioner has argued that if GST law itself defines all prosecution provisions then lodging a First Information Report (FIR) under Indian Penal Code (IPC) and taking recourse to Code of Criminal Procedure (CPC) is not legally justified.
3. Argument by Petitioner
Petitioner has filed the petition contending:
- In case of any offence committed u/s 132 of GST Act, first proceedings must be initiated against person in default and thereafter only arrest can be made. Lodging of direct FIR is not sustainable.
- No demand for recovery has been issued against petitioner. Accordingly, there is no justification to effect arrest when investigation is pending.
4. Argument by Respondent
In response to the writ filed by petitioner, respondent contended:
- Section 131 clearly states that no confiscation made or penalty imposed under the provisions of GST law prevents infliction of any other punishment to which person may be liable under any other law for the time being in force.
- In matter pertaining to economic fraud, it would not be appropriate to grant stay of arrest especially when FIR discloses commission of cognizable offence.
- Granting of stay may thwart investigation and discovery of further information as to who all are involved in such case.
- Provisions of UPGST Act don’t override provisions of IPC or prohibits applicability of Penal code in respect of offences punishable under penal code.
5. Interpretation by Hon’ble High Court
High Court has interpreted as follows:
- Provisions of Section 131 of GST law impliedly saves provisions of Indian Penal Code. Further, there is no bar given in UP GST law on lodging of FIR under Indian Penal Code for offences punishable under GST.
- Cheating is a necessary ingredient of an offence which is prima facie appearing in the case under discussion as petitioner has furnished false documents to obtain registration under GST.
- Emphasis has also placed on various judgments of apex court holding that there is no bar to a trial or conviction of an offender under two different enactments. However, bar is only to the punishment of an offender twice for same offence.
- To ensure that person’s liberty is not jeopardized, on account of false implication, protection from arrest, pending investigation may be granted by superior courts. However, such power is not ordinarily to be exercised in matter of economic fraud.
- Impugned FIR discloses commission of cognizable offences punishable under Indian Penal Code. Therefore, such FIR is not liable to be quashed.
- In given case, stay on arrest may become a hurdle in thorough investigation of the matter, particularly in tracing out the money trail.
- Given writ petition is not a case fit for any relief.