The Karnataka High Court upheld the arrest and prosecution of Shri Mohammed Kamran, proprietor of M/s M.K. Traders, by the Directorate General of GST Intelligence (DGGI), affirming the legality of the investigation process. Kamran was involved in a scrap trading business and faced allegations of participating in a fake Input Tax Credit (ITC) syndicate. The DGGI's investigation revealed that Kamran had availed and passed fake ITC through interconnected firms using invoices without actual goods supply, uncovering fictitious suppliers and suspicious transactions.
Read more: Andhra Pradesh High Court - Unsigned assessment order is legally invalid; Matter remanded for fresh adjudication [Order attached]
Kamran challenged his arrest and prosecution under Sections 69 and 132 of the CGST Act, arguing that the DGGI's actions constituted illegal parallel proceedings after the State GST authorities had begun their investigation. He also claimed violations of arrest safeguards and constitutional rights. The respondents countered that the State investigation was transferred to the DGGI, justifying the arrest due to Kamran's non-cooperation and potential evidence tampering.
The Court concluded that Section 6(2)(b) of the CGST Act does not prevent intelligence gathering by another GST authority and noted that the DGGI's independent intelligence justified their comprehensive inquiry. It found that the arrest adhered to statutory and constitutional requirements, with necessary grounds and procedures followed. Given the evidence of non-cooperation and potential evidence destruction, the Court found sufficient justification for the arrest and prosecution, dismissing Kamran's writ petition.
Order Date - 07 July 2026
Parties: Shri Mohammed Kamran Vs Senior Intelligence Officer, DGGI & Others
Facts -
- Petitioner, Shri Mohammed Kamran, proprietor of M/s M.K. Traders, was engaged in the scrap trading business. State GST authorities initially investigated discrepancies in his GST transactions before the DGGI initiated a separate intelligence-based investigation into an alleged fake Input Tax Credit (ITC) syndicate.
- Petitioner was alleged to have availed and passed fake ITC through a network of interconnected firms using invoices without actual supply of goods. DGGI claimed the investigation revealed fictitious suppliers, cancelled GST registrations, and suspicious transaction patterns involving multiple entities.
- Petitioner was summoned for interrogation, arrested on 16 September 2025, and prosecuted under Sections 69 and 132 of the CGST Act. He challenged the arrest, prosecution, remand, and cognizance order, alleging illegal parallel proceedings, violation of arrest safeguards, and infringement of constitutional rights.
- Petitioner contended that once the State GST authorities had initiated proceedings, the DGGI could not conduct another investigation on the same cause under Section 6(2)(b) of the CGST Act. The respondents maintained that the State investigation had subsequently been transferred to the DGGI and that the arrest was justified due to the petitioner's alleged non-cooperation and risk of tampering with evidence.
Issue -
- Whether the DGGI's prosecution and arrest of the petitioner were illegal due to alleged parallel GST proceedings and violation of statutory safeguards governing arrest?
Order -
- The Court held that Section 6(2)(b) of the CGST Act prohibits simultaneous adjudicatory proceedings but does not bar intelligence gathering or investigation by another GST authority. It observed that the State GST investigation had ultimately been transferred to the DGGI, eliminating any allegation of impermissible parallel proceedings.
- The Court found that the DGGI possessed independent intelligence indicating a large fake ITC network involving multiple entities and substantial revenue implications. It observed that the investigation extended beyond routine tax discrepancies and justified a comprehensive inquiry into the larger fraudulent supply chain.
- The Court observed that the arrest complied with the statutory requirements under Sections 69 and 132 of the CGST Act as well as constitutional safeguards. It noted that the grounds of arrest were communicated, the petitioner's family was informed, and the authorities had recorded reasons to believe that custodial interrogation was necessary.
- The Court further held that the material on record showed sufficient justification for arrest, including allegations of non-cooperation, attempts to evade investigation, possible destruction of evidence, and the petitioner's alleged role as the key operator in the fake ITC network. Accordingly, the Court refused to interfere with the prosecution or the arrest and dismissed the writ petition.
