Jharkhand High Court: No Criminal Case for Ignoring GST Summons, Petitioners Relieved

Jharkhand High Court: No Criminal Case for Ignoring GST Summons, Petitioners Relieved

Emphasising the value of due process and adherence to legal procedures, the Jharkhand High Court, in a landmark decision, set aside criminal proceedings initiated for non-compliance with a summons issued under Section 70 of the Central Goods and Services Act, 2017 (CGST Act).

Under Section 70 of the CGST Act, officials can summon individuals for testimony and document production.

The Jharkhand High Court granted two petitions aiming to set aside ongoing criminal proceedings stemming from a complaint case. This included the initial order issued under Section 174 of the Indian Penal Code taking cognisance of the case, with all proceedings pending before the Judicial Magistrate, 1st Class, of Ranchi.

The complaint case against the accused alleged that although they registered for GST in 2017, they had not been making any GST payments from January to November 2018, leading to the investigation

The complaint further alleged that the accused willfully disregarded four summonses issued by the Central Goods and Service Tax Department pursuant to Section 70 of the Central Goods and Service Tax Act, 2017, failing to appear on any of the specified dates.

The accused's alleged violation of Section 70 of the CGST Act and failure to respond to summons led to proceedings under Section 174 of the IPC.

Advocate Shilpi Sandil Gadodia, appearing for the petitioners, submitted that although the complaint alleges the issuance of four summonses against the petitioner company, the details of these summonses are not mentioned in the complaint petition.

Gadodia additionally submitted that the petitioner company, involved in the transportation of coal, obtained GST registration in the State of Jharkhand following the implementation of the Goods and Services Tax regime.

Advocate Gadodia also claimed that the petitioner's clients, recipients of its services, delayed payment of the raised invoices.

P.A.S. Pati, representing the opposing party, submitted that the petitioner, without lawful excuse, disregarded the summonses and willfully chose not to provide evidence, make statements, or produce the listed documents and materials.

Pati further submitted that the company's authorised representative's non-appearance necessitated the filing of a complaint under Section 174 of the Indian Penal Code, which penalizes disregard for directions issued by public authorities. In this instance, the GST authority, pursuant to Section 156 of the CGST Act, 2017, qualifies as the relevant public authority.

Pati argued that Section 89 of the CGST Act applies to the petitioner as a private limited company, exempting them from providing statements. Under this provision, responsibility falls on individuals managing the company's daily affairs.

Citing Section 135 of the CGST Act, Advocate Pati argued that guilt must be proven in court, not presumed. He further asserted that the summons' non-compliance justified invoking Section 174 of the IPC, and therefore, the petitions should be dismissed.

Having reviewed the facts and submissions presented by counsel, the Court observed that the GST payment was already complete. The counter-affidavit acknowledged the receipt of ₹5,21,95,792 by the relevant authority, subject to verification. However, the lack of any initiated case or recovery action indicated the absence of any outstanding dues against the petitioners.

The Court noted that no further proceedings under Section 73 of the CGST Act, 2017, were being pursued to determine any outstanding tax, thereby confirming the undisputed fact that the amount in question had already been paid.

In its explication of Section 70 of the CGST Act, 2017, the Court noted that this section empowers authorized personnel to summon individuals for the purpose of providing evidence and presenting documents. Any subsequent inquiry conducted under this section will be governed by the provisions of the Civil Procedure Code, with only Sections 193 and 228 of the Indian Penal Code being applicable as per Section 70(2) of the aforementioned Act.

The Court further elaborated on Section 125 of the CGST Act, 2017, which stipulates a general penalty capped at ₹25,000, in contrast to Section 132 of the same Act, which outlines specific punishments.

The Court, acknowledging the absence of any initiated proceedings under Sections 125 and 132 of the Act against the petitioners, as undisputed by both parties, emphasized this fact.

Examining the documents, the Court observed irrefutable evidence of responses to the summonses, further demonstrated by the authority's extension of timeframes. Consequently, a claim of non-compliance cannot be upheld.

The Bench of Justice Sanjay Kumar Dwivedi observed, “In view of the above facts and considering that the summons were replied, which were entertained by the authority concerned and it cannot be said that the petitioners have not complied with the summons, issued by the authority concerned and further there are procedures prescribed under the CGST Act, 2017 for penalty under Section 125 which restricted to a fine of ₹25,000 only and none of the failure prescribed in Section 132 of the said Act is the subject matter of the present cases and further Section 70 of the said Act speaks of procedure to be adopted for summoning, that will in accordance with the Code of Civil Procedure and further considering that the reply to the summons were entertained by the authority concerned, to allow to continue the proceeding under Section 174 of the Indian Penal Code against the petitioners will amount to an abuse of process of law.”

Considering the aforementioned facts, legal arguments, and comprehensive analysis, the Court set aside the entirety of the criminal proceedings, encompassing the pending order in the Court of the Judicial Magistrate, 1st Class, Ranchi. Accordingly, the petitions were granted and disposed of.