JUNE 12, 2019

By Vijay Kumar

THE Government through a PIB Press release announced a new scheme of return to be filed under the Good and Simple Tax. The new Return would be applicable from October for large taxpayers and from January 2020 for small taxpayers. From July to September, the new return is available for trial - with absolutely no risk. The new return system is meant to facilitate taxpayers. Even if it is a big burden on the taxpayers and consultants to understand the legal maze that the GST is in, a change for facilitation is always welcome. The problem is by the time you understand something, it is changed and you start all over again. This time around, it has to be appreciated that the Government is allowing a three month trial period for familiarisation of the facilitation. We have to pray that they don't change it immediately after the facilitated taxpayer has become familiar with the facility. Most often the facilitation process is an agonising one for the taxpayers, which in the previous regime used to be fondly called 'tax terrorism'. If the new Return System succeeds, there is every likelihood of GST becoming a good and simple tax. Let us hope the new return will not cause more misery for the harried taxpayer. It is meant to be a facility and God and Board willing, it will be.

GST is a Complete Code, but IPC also applicable!

See the facts of this case reported as - 2019-TIOL-1170-HC-ALL-GST :

A First Information Report (FIR) was lodged by the Assistant Commissioner, Commercial Tax at police station Kosi Kalan, District Mathura, under Sections 420, 467, 468, 471, 34, 120-B of the IPC against a GST taxpayer, let us call him GE, alleging that he fraudulently, with a dishonest intention, by submitting false documents, with an intention to evade taxes, obtained registration, thereafter, took inward supply and passed on the goods to end users, without generating outward supply bills, received money in cash and deposited the same in bank account which was not declared at the time of seeking registration.

But aren't these offences covered under the GST Act? If they are, why did the Assistant Commissioner go to the Police? Is the FIR valid? The assessee (taxable person) filed a writ in the Allahabad High Court seeking quashing of the FIR on the grounds that:

1. No case has been registered under the provisions of the U.P. GST Act or under the Central Goods and Services Tax Act, 2017 (Central Act) and no recovery demand has been raised and, therefore, lodging of the first information report under the provisions of the Indian Penal Code is not legally sustainable.

2. Goods and Services Tax Act is a complete code in itself as it contemplates and deals with all kinds of situations and offences relating to registration of firms, tax evasion etc and it prescribes a specific procedure for arrest and prosecution. Therefore lodging of the first information for offences punishable under the Indian Penal Code by taking recourse to the provisions of the Code of Criminal Procedure, 1973 is not legally justified.

3. First a proceeding has to be drawn under the provisions of the U.P. GST Act and, only thereafter there could be arrest, that too, after recording satisfaction. Hence, lodging of the first information report straightaway is not legally permissible.

4. Even assuming that a first information report can be registered, as no demand for recovery has yet been issued, there is no justification to effect arrest of the petitioner pending investigation.

Revenue argued:

1. The provisions of the Act are without prejudice to the provisions of the Code and, therefore, in respect of any offence punishable under the provisions of the Penal Code, the provisions of the Code can be invoked and a first information report can be registered.

2. The allegations made in the impugned first information report clearly disclose that a bogus firm, which had no significant business, was got registered, by submitting false documents and information, for making purchase and sale, without proper documentation, to evade taxes, and, thereafter, goods worth Rs.35 odd crores were purchased/transported through self generated 295 inward e-way bills and, against them, sale of only few lacs was shown by generating just two outward e-way bills; and, upon inspection neither proper place of business nor godown with goods were found, rather cash deposits were discovered in undisclosed bank account, the dishonest intention of the petitioner is writ large. Hence, a case for registration of FIR in respect of commission of offences punishable under the Penal Code is made out.

The High Court observed,

1. There is no provision in the U.P. GST Act, (at least shown to us), which may suggest that the provisions of the U.P. Act overrides or expressly or impliedly repeals the provisions of the Penal Code.

2. There is also no bar in the U.P. GST Act on lodging an FIR under the Code for offences punishable under the Penal Code even though, for the same act/conduct, prosecution can be launched under the U.P. Act.

3. Rather, section 131 of the U.P. Act impliedly saves the provisions of the Penal Code by providing that no confiscation made or penalty imposed under the provisions of the Act or the rules made thereunder shall prevent the infliction of any other punishment to which the person affected thereby is liable under the provisions of the U.P. Act or under any other law for the time being in force.

4. The contention of the learned counsel for the petitioner that no first information report can be lodged against the petitioner under the provisions of the Code of Criminal Procedure for offences punishable under the Indian Penal Code, as proceeding could only be drawn against him under the U.P. Goods and Services Tax Act, 2017, is liable to be rejected and is, accordingly, rejected.

5. Upon perusal of the impugned FIR, prima facie, necessary ingredients of an offence of cheating, by submitting false information and documents, are clearly spelt out. According to the allegations, a bogus firm was got registered by showing false and bogus addresses of business; and, by taking advantage of such registration, inward e-way bills were generated to make purchase of goods worth Rs.35 odd crores and, thereafter, without generating outward supply bills, huge amount of money was deposited in cash in undisclosed bank account, suggesting that goods were sold without proper documentation, with a view to evade taxes. It cannot, therefore, be said that a bare reading of the impugned FIR does not disclose commission of cognizable offences punishable under the Penal Code. Hence, the impugned FIR is not liable to be quashed.

6. In suitable cases, to ensure that a person's liberty is not jeopardized, on account of false implication, protection from arrest, pending investigation, may be granted by superior courts but that power is not ordinarily to be exercised in matters relating to economic fraud. As, in such matters, stay on arrest may become a hurdle in thorough investigation of the matter, particularly in tracing out the money trail.

But can somebody be punished under both GST and IPC?

Section 26 of General Clauses Act stipulates:

Provision as to offences punishable under two or more enactments. -
Where an act or omission constitutes an offence under two or more enactments, then the offender shall be liable to be prosecuted and punished under either or any of those enactments, but shall not be liable to be punished twice for the same offence.

Does it mean that one can be prosecuted both under GST and IPC? Does it mean that every GST assessee is under threat from his nearest Police Station apart from his CGST and SGST officials? It is possible that immediately after a case is booked by the CGST or SGST officer, the local Police inspector can barge in and arrest the assessee and prosecute him under the IPC. GST has really opened up unlimited opportunities for overzealous enforcement officers.

It is surprising that an Assistant Commissioner should go to a Police Station and file an FIR against his assessee.

"There is ammunition available in the arsenal of the department that can well be utilised to protect its interests", observed the Madras High Court in a recent case reported as - 2019-TIOL-1021-HC-MAD-GST.

Until next week