2019 (6) TMI 55 - HC - GST

Offences punishable under two or more enactments - mutual exclusion of Indian Penal Code and CGST Act/ UPGST Act (UP Act) - an offence of cheating - as per FIR dealer 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 - quashing of FIR - bail/ stay on arrest HELD THAT - The relevant provisions of the U.P. Act as also the Penal Code and the Code we find that Sections 69 134 and 135 of the U.P. Act are applicable in respect of offences punishable under the U.P. Act. - They have no application on offences punishable under the Penal Code. Further there is no provision in the U.P. 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. There is also no bar in the U.P. 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. 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. The argument of the learned counsel for the petitioner that except for offences specified in sub-section (5) of section 132 sub-section (4) of section 132 of the U.P. Act renders all offences under the U.P. Act non cognizable therefore no FIR can be lodged is not acceptable because sub-section (4) speaks of offences under the U.P. Act and not in respect of offences under the Penal Code. It is noteworthy that section 135 of the U.P. Act makes a significant departure from general law by providing that in any prosecution for an offence under the U.P. Act which requires a cuplable mental state on the part of the accused the court shall presume the existence of such mental state. The same does not hold true for offences punishable under the Penal Code. Hence to prove mensrea which is one of the necessary ingredients of an offence punishable under the Penal Code the standard of proof would have to be higher to prove commission of an offence punishable under the Penal Code than what would be required to prove an offence punishable under the U.P. Act. As such the offences punishable under the Penal Code are qualitatively different from an offence punishable under the U.P. Act. 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. We find that prima facie necessary ingredients of an offence of cheating by submitting false information and documents are clearly spelt out. Because 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. In a few decisions of the apex court it has been held that 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. - petition dismissed

Summary

Issues Involved:
1. Legality of lodging an FIR under the Indian Penal Code (IPC) for offenses related to tax evasion under the U.P. Goods and Services Tax Act, 2017 (U.P. Act).
2. Applicability of the U.P. Act's provisions on arrest and prosecution to offenses under the IPC.
3. Whether the FIR discloses cognizable offenses under the IPC.
4. The impact of economic fraud allegations on the decision to grant relief from arrest.

Detailed Analysis:

Issue 1: Legality of Lodging an FIR under IPC
The petitioner argued that no case had been registered under the U.P. Act or the Central Goods and Services Tax Act, 2017 (Central Act), and no recovery demand had been raised. Therefore, lodging an FIR under the IPC was not legally sustainable. The petitioner contended that the Goods and Services Tax Act is a complete code dealing with all situations and offenses related to tax evasion and registration of firms, and it prescribes a specific procedure for arrest and prosecution. Hence, it was argued that lodging an FIR under the IPC by invoking the Code of Criminal Procedure, 1973 (the Code) was not justified.

Issue 2: Applicability of U.P. Act's Provisions on Arrest and Prosecution
The petitioner cited Sections 69, 122, 132, and 134 of the U.P. Act, arguing that the act of the petitioner was covered by various clauses of Section 122, which prescribes penalties. The petitioner further argued that by virtue of Section 132(4), except for offenses specified in Section 132(5), all offenses under the U.P. Act are non-cognizable, and thus, no FIR could be lodged.

In contrast, the respondent argued that Section 131 of the U.P. Act, which is pari materia to Section 131 of the Central Act, allows for the imposition of penalties under the Act without prejudice to any other punishment under any other law. Therefore, the provisions of the Code could be invoked for offenses punishable under the IPC.

The court noted that Sections 69, 134, and 135 of the U.P. Act apply to offenses punishable under the U.P. Act and do not override the provisions of the IPC. It was emphasized that Section 131 of the U.P. Act impliedly saves the provisions of the IPC by stating that no penalty or confiscation under the U.P. Act prevents the infliction of any other punishment under any other law.

Issue 3: Whether the FIR Discloses Cognizable Offenses under IPC
The FIR alleged that the petitioner fraudulently obtained registration by submitting false documents and evaded taxes by not generating outward supply bills, thereby committing economic fraud. The court found that the FIR clearly disclosed the commission of cognizable offenses under the IPC, including cheating and forgery.

The court referred to Section 26 of the General Clauses Act, 1897, which allows for prosecution under either or any of the enactments when an act constitutes an offense under two or more enactments. The court also cited various Supreme Court decisions, including State of Rajasthan v. Hat Singh and State (NCT of Delhi) v. Sanjay, which held that there is no bar to prosecuting persons under the IPC even if the same act constitutes an offense under another statute.

Issue 4: Impact of Economic Fraud Allegations on Relief from Arrest
The court noted that in matters of economic fraud, granting relief from arrest could hinder a thorough investigation, particularly in tracing the money trail. The court referred to a Full Bench decision in Ajit Singh @ Muraha v. State of U.P., which held that ordinarily, there should not be a stay on arrest when the FIR discloses cognizable offenses.

Conclusion
The court dismissed the petition, holding that the FIR disclosed cognizable offenses under the IPC and that there was no bar to lodging an FIR under the IPC for acts that also constitute offenses under the U.P. Act. The court emphasized that in cases of economic fraud, it is not appropriate to grant relief from arrest as it may thwart the investigation. The petition was dismissed with no order as to costs.