Prosecution under general penal law for past tax delays is unsustai

Prosecution under general penal law for past tax delays is unsustainable given special GST codes.

Issue

Whether the revenue or police authorities can legally invoke general penal provisions under Section 316(5) of the Bharatiya Nyaya Sanhita (BNS), 2023 for the delayed deposit of tax when the GST Act provides a complete, self-contained special code for tax infractions.
Whether an FIR, charge sheet, and criminal cognizance can be validly sustained under the BNS, 2023 for an omission that took place during the financial year 2017–18, long before the BNS was enacted and enforced.

Facts

The Party: The applicant served as a Gram Panchayat Secretary handling administrative works for the Gram Sabha.
The Allegation: It was alleged that the applicant delayed or failed to deposit GST or Tax Deducted at Source (TDS) components deducted from Gram Sabha structural works during the financial year 2017–18.
The Criminal Action: Following a complaint before the Lokayukta and a subsequent enquiry, an FIR was registered against the applicant under Section 316(5) of the Bharatiya Nyaya Sanhita (BNS) on October 19, 2024. A regular police investigation followed, leading to a filed charge sheet and a court summoning order.
The Mitigating Record: The official record established that the tax amounts were subsequently deposited in full, showing an absolute absence of any criminal embezzlement, financial forgery, or dishonest misappropriation.
The Legal Challenge: The applicant moved to quash the criminal proceedings, pointing out that the underlying events occurred in 2017–18, whereas the BNS penal provision used to charge them was enacted and enforced years later.

Decision

Special Law Overrides General Law: The Central/Uttar Pradesh Goods and Services Tax Act constitutes an exhaustive, complete special code that handles its own deductions, interest, penalties, prosecution, and compounding. Because the allegation involved a mere delay in deposit without dishonest intent or wrongful gain, the statutory field is occupied by the GST Act, making immediate resort to the general penal provisions of BNS 316(5) legally unsustainable.
No Retrospective Penal Application: The alleged tax omission occurred during 2017–18. Substantive penal law requires a person to be tried under the laws prevailing on the exact date of the offense. Since the BNS, 2023 was enforced long after the period of occurrence, launching a prosecution under it for past conduct constitutes a manifest legal infirmity.
Proceedings Quashed: The High Court allowed the application, completely quashing the impugned criminal charge sheet, the summoning order, and all related criminal proceedings. (In favour of assessee)

Key Takeaways

GST Act Exclusivity on Tax Infractions: Where a special tax enactment explicitly covers a specific field of non-compliance (such as delayed tax deposits) and provides its own civil and criminal remedies, the state cannot bypass it to directly launch heavy criminal prosecutions under general penal codes.
Protection Against Retrospective Prosecution: Under well-settled constitutional principles, a taxpayer or public servant cannot be prosecuted under a new substantive penal law (like the BNS, 2023) for conduct or omissions that took place under an older legal era (like the Indian Penal Code period of 2017–18).
Absence of Mens Rea in Delays: A mere administrative delay in depositing government tax or TDS, when eventually rectified without any element of forgery, cheating, or personal siphoning, amounts to a statutory tax default rather than a traditional penal crime.

HIGH COURT OF ALLAHABAD

Tanveer Asharaf

State of U.P.

Saurabh Srivastava, J.

APPLICATION U/S 528 BNSS No. 18970 of 2026

MAY 22, 2026

Pankaj Kumar Gupta for the Applicant.

ORDER

1. Heard Sri Pankaj Kumar Gupta, learned counsel for the applicant, learned A.G.A. for the State and perused the record.

2. The present application under Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023 has been filed for quashing of the impugned charge sheet dated 01.09.2025, cognizance/summoning order dated 02.04.2026 and entire proceedings of Case No.1325 of 2026 (State v. Nisar Ahmad & others), arising out of Case Crime No.215 of 2024, under Section 316(5) of the Bharatiya Nyaya Sanhita, Police Station Nagar, District Basti, pending before the Court of Chief Judicial Magistrate, Basti.

3. Brief facts of the present case are that during the period when the applicant was posted as Gram Panchayat Secretary, certain allegations were levelled regarding delayed/non-deposit of GST/TDS amount deducted from payments made in relation to execution of Gram Sabha development works. Pursuant to a complaint made before the Lokayukta, an enquiry was conducted and an enquiry report came to be submitted, on the basis whereof directions were issued by the district authorities for lodging of FIR against the applicant along with other co-accused persons. Consequently, FIR dated 19.10.2024 came to be registered as Case Crime No.215 of 2024 under Section 316(5) of the Bharatiya Nyaya Sanhita, Police Station Nagar, District Basti. Thereafter, upon completion of investigation, the Investigating Officer submitted charge sheet dated 01.09.2025 against the applicant and co-accused persons under Section 316(5) B.N.S., pursuant whereof the learned Chief Judicial Magistrate, Basti took cognizance and passed impugned summoning order dated 02.04.2026 in Case No.1325 of 2026 (State v. Nisar Ahmad & others).

4. Learned counsel for the applicant further submits that the allegation emerging from the enquiry report and FIR is confined only to the extent that an amount of Rs.8,629/- relating to GST/TDS deduction on material purchased for certain Gram Sabha works was not deposited in the Government account within time. It has further been submitted that immediately upon gaining knowledge regarding the alleged non-deposit, the applicant along with co-accused persons deposited the entire amount in the Government account and submitted receipts before the competent authority, thereby demonstrating absence of any dishonest intention or wrongful gain.

5. Learned counsel for the applicant submits that the impugned prosecution is wholly illegal and amounts to abuse of process of Court inasmuch as the entire allegation merely relates to delayed/non-deposit of GST/TDS amount and no allegation of embezzlement, criminal misappropriation or wrongful gain has been levelled against the applicant. It is further submitted that the U.P. Goods and Services Tax Act, 2017 is a complete and self-contained Special Statute providing exhaustive machinery relating to tax deduction, adjudication, penalty and prosecution. Referring to Sections 51, 122, 126 and 127 of the GST Act, it is argued that alleged delayed or non-deposit of GST amount is specifically governed by the statutory framework of the GST Act itself therefore invocation of general penal provisions under B.N.S. is impermissible when the allegations are squarely governed by the GST Act itself.

6. Learned counsel has also argued that the alleged occurrence pertains to financial year 2017-18, whereas FIR dated 19.10.2024, charge sheet dated 01.09.2025 and cognizance order dated 02.04.2026 have been passed under the provisions of the Bharatiya Nyaya Sanhita, 2023, which admittedly came into force subsequently. Learned counsel submits that retrospective application of penal provisions is constitutionally impermissible and therefore the very registration of FIR, submission of charge sheet and taking of cognizance under B.N.S. are ex facie illegal and unsustainable in law. In support of the aforesaid submissions, reliance has been placed upon Sharat Babu Digumarti v. Government of NCT of Delhi [2017] 2 SCC 18 and Deepu v. State of U.P. 2024 (8) ILRA 903.

7. Per contra, learned A.G.A. submits that the impugned charge sheet has been submitted after due investigation and sufficient material has been collected during investigation to proceed against the applicant. It is contended that the applicant admittedly failed to deposit the deducted GST/TDS amount within the prescribed time and therefore criminal liability cannot be ruled out at this stage. However, the detailed submissions advanced on behalf of the applicant that the allegations in the present case are wholly governed by the provisions of the U.P. Goods and Services Tax Act, 2017, which is a Special Statute providing a complete mechanism for adjudication, penalty and prosecution, and that invocation of general penal provisions under Section 316(5) B.N.S. without resorting to the statutory procedure prescribed under the GST Act could not be disputed by the learned A.G.A. during the course of arguments.

8. Since legal issue has been raised for challenging veracity of the implication of the applicant into unwarranted criminal litigation and as such process for inviting counter and rejoinder affidavit is hereby dispensed with.

9. After hearing the rival submissions advanced by learned counsel for the parties and upon perusal of the material brought on record, the following issues arise for consideration before this Court:-

Whether the State Authorities can legally initiate criminal prosecution by invoking the penal provisions of IPC/B.N.S. without invoking the penal provisions and mandatory statutory procedure prescribed under the U.P. Goods and Services Tax Act, 2017, which is a Special Statute providing a complete mechanism for adjudication, penalty and prosecution?

Whether the FIR, charge sheet and cognizance taken under the provisions of the Bharatiya Nyaya Sanhita, 2023 in relation to an alleged occurrence pertaining to the financial year 2017-18 are legally sustainable in the eyes of law?

10. The first issue which arises for consideration before this Court is as to whether the State Authorities could have initiated criminal prosecution against the applicant by invoking the general penal provisions under Section 316(5) B.N.S. without resorting to the statutory mechanism prescribed under the U.P. Goods and Services Tax Act, 2017.

11. The record reveals that the sole allegation against the applicant is delayed/non-deposit of GST/TDS amount deducted in relation to execution of Gram Sabha works.

12. At this stage, it would be appropriate to note that the GST Act, 2017 is a complete and self-contained Special Statute providing comprehensive machinery relating to deduction of tax, assessment, adjudication, penalty and prosecution. Therefore, it is necessary to examine the relevant provisions of the GST Act, 2017 which have direct bearing on the controversy involved in the present case. The relevant statutory provisions are reproduced hereinbelow:-

“Section 50- Interest on delayed payment of tax.-

(1) Every person who is liable to pay tax in accordance with the provisions of this Act or the rules made thereunder, but fails to pay the tax or any part thereof to the Government within the period prescribed, shall for the period for which the tax or any part thereof remains unpaid, pay, on his own, interest at such rate, not exceeding eighteen per cent., as may be notified by the Government on the recommendations of the Council:

…….

Section 51- Tax deduction at source.-

(1) Notwithstanding anything to the contrary contained in this Act, the Government may mandate,-

(a) a department or establishment of the Central Government or State Government; or

(b) local authority; or

(d) such persons or category of persons as may be notified by the Government on the recommendations of the Council, (hereafter in this section referred to as “the deductor”), to deduct tax at the rate of one per cent. from the payment made or credited to the supplier (hereafter in this section referred to as “the deductee”) of taxable goods or services or both, where the total value of such supply, under a contract, exceeds two lakh and fifty thousand rupees:

Provided that no deduction shall be made if the location of the supplier and the place of supply is in a State or Union territory which is different from the State or as the case may be, Union territory of registration of the recipient.

Explanation .-For the purpose of deduction of tax specified above, the value of supply shall be taken as the amount excluding the central tax, State tax, Union territory tax, integrated tax and cess indicated in the invoice.

(2) The amount deducted as tax under this section shall be paid to the Government by the deductor within ten days after the end of the month in which such deduction is made, in such manner as may be prescribed.

(3) A certificate of tax deduction at source shall be issued in such form and in such manner as may be prescribed.].

(4) ²[****]

(5) The deductee shall claim credit, in his electronic cash ledger, of the tax deducted and reflected in the return of the deductor furnished under sub-section (3) of section 39, in such manner as may be prescribed.

(6) If any deductor fails to pay to the Government the amount deducted as tax under sub-section (1), he shall pay interest in accordance with the provisions of sub-section (1) of section 50, in addition to the amount of tax deducted.

(7) The determination of the amount in default under this section shall be made in the manner specified in section 73 or section 74 ³ [or Section 74A].

(8) The refund to the deductor or the deductee arising on account of excess or erroneous deduction shall be dealt with in accordance with the provisions of section 54:

Provided that no refund to the deductor shall be granted, if the amount deducted has been credited to the electronic cash ledger of the deductee

Section 122-Penalty for certain offences.

Where a taxable person who—

…

(v) fails to deduct the tax in accordance with the provisions of subsection (1) of section 51, or deducts an amount which is less than the amount required to be deducted under the said sub-section, or where he fails to pay to the Government under sub-section (2) thereof, the amount deducted as tax;

…….

shall be liable to pay a penalty of ten thousand rupees or an amount equivalent to the tax evaded or the tax not deducted under section 51 or short deducted or deducted but not paid to the Government or tax not collected under section 52 or short collected or collected but not paid to the Government or input tax credit availed of or passed on or distributed irregularly, or the refund claimed fraudulently, whichever is higher……”

Section 126-: General disciplines related to penalty –

No officer under this Act shall impose any penalty for minor breaches of tax regulations or procedural requirements and in particular, any omission or mistake in documentation which is easily rectifiable and made without fraudulent intent or gross negligence.

Explanation—For the purpose of this sub-section,—

(a) a breach shall be considered a ‘minor breach’ if the amount of tax involved is less than five thousand rupees;

(b) an omission or mistake in documentation shall be considered to be easily rectifiable if the same is an error apparent on the face of record.

Section 138. Compounding of offences.-

(1) Any offence under this Act may, either before or after the institution of prosecution, be compounded by the Commissioner on payment, by the person accused of the offence, to the Central Government or the State Government, as the case be, of such compounding amount in such

(2) The amount for compounding of offences under this section shall be such as may be prescribed, subject to the minimum amount not being less than 5[twenty-five per cent. of the tax involved and the maximum amount not being more than one hundred per cent. of the tax involved].

(3) On payment of such compounding amount as may be determined by the Commissioner, no further proceedings shall be initiated under this Act against the accused person in respect of the same offence and any criminal proceedings, if already initiated in respect of the said offence, shall stand abated.”

13. A careful and conjoint reading of Sections 50, 51, 122, 125, 126 and 138 of the U.P. Goods and Services Tax Act, 2017 clearly reveals that the GST Act is a complete and self-contained Special Statute enacted to regulate all matters relating to levy, deduction, collection, deposit, adjudication, penalty and prosecution concerning GST liabilities. Section 51 specifically governs deduction of tax at source by Government departments, local authorities and Government agencies and further mandates deposit of the deducted amount within the prescribed period. Section 50 provides the consequence of delayed payment of tax by way of statutory interest. Section 122(1)(v) specifically prescribes penalty in cases where a person fails to deduct or deposit the amount deducted under Section 51. Section 125 further provides for general penalty in cases where no separate penalty is specifically prescribed. Section 126 incorporates the legislative policy that no penalty shall ordinarily be imposed for minor breaches of tax regulations or procedural requirements and further clarifies under the Explanation appended thereto that a breach involving tax amount less than Rs.5,000/-shall be treated as a “minor breach”. The said provision further protects omissions or mistakes which are easily rectifiable and committed without fraudulent intention or gross negligence. Further, Section 138 expressly makes offences under the GST Act compoundable upon satisfaction of statutory requirements.

14. The aforesaid statutory framework unmistakably demonstrates that the legislature has consciously created a complete code under the GST Act to deal with all contingencies arising out of non-deduction, short deduction, delayed deposit or non-deposit of GST amount, including determination of liability, imposition of interest, levy of penalty, prosecution and compounding of offences. Once the field is specifically occupied by a Special Statute providing an exhaustive mechanism, resort to the provisions of general penal law can be justified only where the allegations independently disclose essential ingredients of distinct criminal offences such as dishonest misappropriation, forgery, fabrication of records, cheating or wrongful gain.

15. Upon a careful perusal of the records, the FIR and the impugned charge sheet, this Court finds that even if the entire prosecution case is accepted in its entirety, the allegation against the applicant is confined only to delayed/non-deposit of GST/TDS amount deducted during execution of Gram Sabha works. Significantly, neither the FIR nor the charge sheet contains any allegation with regard to embezzlement of Government funds, dishonest misappropriation, siphoning of money for personal use, fabrication or manipulation of records, fake transactions, forged documents, dishonest withdrawal or wrongful gain attributable to the applicant. Rather, the material brought on record indicates that the amount allegedly not deposited was subsequently deposited in the Government account. Thus, the allegations levelled against the applicant squarely fall within the statutory framework of the U.P. Goods and Services Tax Act, 2017 and not within the ambit of general penal provisions under Section 316(5) B.N.S. Consequently, initiation of criminal prosecution under the general penal law, without resorting to the statutory mechanism prescribed under the GST Act, appears legally unsustainable.

16. The Hon’ble Supreme Court in Sharat Babu Digumarti (supra), has recognized the settled principle that where a Special Statute creates a complete mechanism dealing with offences, penalties and prosecution, resort to the general penal law is not permissible in absence of independent ingredients constituting separate offences under the general criminal law.

17. In view of the aforesaid discussion, this Court finds substance in the submission advanced on behalf of the applicant that the allegations levelled in the present case are squarely governed by the provisions of the U.P. Goods and Services Tax Act, 2017 and initiation of prosecution solely under Section 316(5) B.N.S., without invoking the statutory mechanism prescribed under the GST Act, appears legally unsustainable.

18. So far as Issue No.2 is concerned, this Court finds that the allegations in the present case admittedly relate to the financial year 2017-18, whereas the First Information Report dated 19.10.2024, the impugned charge sheet dated 01.09.2025 and the cognizance/summoning order dated 02.04.2026 have all been registered and proceeded with under the provisions of the Bharatiya Nyaya Sanhita, 2023.

19. This Court further finds that the aforesaid legal issue has been considered in view of the judgment rendered by this Court in Deepu (supra) , wherein this Court, while examining the applicability of the newly enacted criminal laws, categorically observed that where the alleged occurrence pertains to a period prior to enforcement of the Bharatiya Nyaya Sanhita, the substantive penal provisions applicable would continue to be those prevailing on the date of occurrence and not the subsequently enforced enactment.

20. The ratio laid down in Deepu (supra) clearly recognizes the distinction between substantive penal law and procedural law and further clarifies that although investigation after enforcement of the new criminal laws may proceed in accordance with the procedure prescribed under B.N.S.S., the substantive offence itself cannot be altered by subsequently enforced penal statutes.

21. In the present case, admittedly the alleged omission pertains to the financial year 2017-18. Therefore, registration of FIR under Section 316(5) B.N.S., submission of charge sheet under the said provision and cognizance taken thereunder suffer from manifest legal infirmity, inasmuch as the prosecution has invoked a penal provision which was not in existence on the date of the alleged occurrence.

22. This Court is, therefore, of the considered opinion that the prosecution of the applicant under Section 316(5) B.N.S. in respect of an alleged occurrence pertaining to the financial year 2017-18 cannot be legally sustained.

23. In view of the aforesaid findings, this Court is of the considered opinion that continuance of the impugned criminal proceedings against the applicant would amount to abuse of the process of law and is liable to be interfered with in exercise of inherent jurisdiction under Section 528 B.N.S.S.

24. Consequently, the impugned charge sheet dated 01.09.2025, cognizance/summoning order dated 02.04.2026 and proceedings of Case No.1325 of 2026 (State v. Nisar Ahmad & others), arising out of Case Crime No.215 of 2024, under Section 316(5) B.N.S., Police Station Nagar, District Basti, pending before the learned Chief Judicial Magistrate, Basti, so far as it relates to the present applicant, are hereby quashed.

25. Accordingly, the present application is allowed.

26. However, it is made clear that this order will not preclude authorities concerned to proceed against the applicant, if required, under the U.P.G.S.T. Act. 2017 in strict compliance of the provisions contained therein.