Authority: High Court of Karnataka at Bengaluru

Order Date: 07‑07‑2026 (pronounced)

Case Overview

  • Petitioner: Shri Mohammed Kamran, S/O Shri Akram Pasha, proprietor of M.K. Traders (GSTIN 29IRZPK8080E1ZT), aged 24, presently in judicial custody, Central Prison, Bangalore.
  • Respondents: 1) Senior Intelligence Officer, Directorate General of GST Intelligence (DGGI), Bengaluru Zonal Unit; 2) Additional Director, DGGI; 3) Commercial Tax Officer, Commercial Tax Office (Enforcement)‑10, Mysuru; 4) Joint Commissioner of Commercial Taxes (Enforcement), Mysuru.
  • Nature of Proceeding: Writ Petition under Article 226 of the Constitution and Section 528 of the BNSS, seeking (i) quash of the private complaint filed on 12‑11‑2025 (Crime No. 34/2025, File DGGI/INV/125/2025‑GR‑C‑01), (ii) quash of the arrest dated 16‑09‑2025 and subsequent remand order, and (iii) quash of the Order of Cognizance dated 25‑11‑2025 (PCR 280/2025).
  • Background: Kamran operated M.K. Traders dealing in iron and steel waste scrap. GST registration obtained; business involved purchase of scrap from various suppliers and sale to registered manufacturers.
  • Investigations:
  • State GST: On 14‑05‑2025 the Commercial Tax Officer and Joint Commissioner issued a notice (17‑06‑2025) alleging discrepancies in GST payment and demanded documents. Kamran replied on 09‑09‑2025 providing limited invoices, E‑Way bills and bank statements.
  • Central GST (DGGI): Based on intelligence indicating receipt of fake invoices from fictitious suppliers, DGGI generated an early‑warning report and conducted searches under Section 67 of the CGST Act on 10‑09‑2025 at the premises of M.K. Traders, A.R. Steel (prop. Akram Pasha), U.K. Steel Traders (prop. Saddam), and N.M.G. Traders (prop. Nasir Ahmed). Seizures included 6 mobile phones, a Dell laptop, a MacBook, a pendrive and assorted documents.
  • Quantified ITC: Table‑2 in the investigation shows total ITC availed by the four entities as ₹14,164.21 lakh, of which ₹13,702 lakh was passed on. Specifically, M.K. Traders availed ₹2,178.73 lakh, of which ₹1,886 lakh was passed on; N.M.G. Traders availed ₹4,976.23 lakh, passing ₹4,652 lakh; U.K. Steel Traders availed ₹3,785.64 lakh, passing ₹4,322 lakh; A.R. Steel availed ₹3,223.61 lakh, passing ₹2,842 lakh.
  • Alleged Fraud: The investigation concluded that the entities were fictitious or non‑operational, that invoices were fabricated, and that fake Input Tax Credit (ITC) of approximately ₹21.11 crore was claimed by Kamran – ₹2.53 crore from cancelled suppliers and ₹18.58 crore from N.M.G. Traders.
  • Arrest: On 16‑09‑2025 at 06:30 hrs, Kamran was arrested at Kempegowda International Airport under Section 69 of the CGST Act. An arrest memo (CBIC‑DIN‑202509DSS0000021262E) signed by Senior Intelligence Officer Ashok Kumar Yadav detailed the grounds of arrest, communicated them to Kamran and his mother, and complied with the 2025 Instruction No. 01/2025‑GST requiring written grounds and acknowledgment.
  • Legal Contentions:
  • Petitioner’s Argument: Parallel investigations by State and Central GST authorities violated Section 6(2)(b) of the CGST Act (as interpreted in Armour Security (India) Ltd. v. Commissioner, CGST, Delhi 2025 SCC OnLine SC 1700). Arrest was illegal for lack of prior notice and for being non‑cognizable/non‑bailable.
  • Respondents’ Argument: Arrest was justified due to non‑cooperation, flight risk, and risk of evidence tampering. Parallel investigations are permissible because the State inquiry was transferred to the Central authority; the proceedings are not “initiated” under the meaning of Section 6(2)(b) until a showcause notice is issued. The Apex Court’s Armour Security judgment allows intelligence‑based enforcement by any authority.
  • Judicial Guidance Cited: Extensive excerpts from Armour Security outlining the “subject‑matter” test, the distinction between inquiry and formal proceedings, and the two‑fold test for parallelism.
  • Statutory Framework:
  • Section 132(1)(c) CGST Act – fraudulent availing of ITC without invoice, punishable with up to five years’ imprisonment and fine where the amount exceeds ₹500 lakh.
  • Section 132(5) – such offences are cognizable and non‑bailable.
  • Section 69(1) – authorises arrest where the Commissioner has reason to believe the offence under Section 132 has been committed.
  • Guidelines: Instruction No. 01/2025‑GST (amending Instruction No. 02/2022‑23) mandates written grounds of arrest and acknowledgment; the arrest memo complied with these requirements.
  • Court’s Reasoning:

1. The State GST investigation was lawfully transferred to the Central GST authority; therefore, no “same subject‑matter” violation occurs.

2. The arrest complied with the 2025 Instruction and Supreme Court precedents (Kshiti Ghiladiyal v. DG DGGI, Pankaj Bansal, Prabir Purkayastha), satisfying the requirement of “grounds of arrest” and “reasons for arrest”.

3. The amount of alleged fraudulent ITC (₹21.11 crore) exceeds the ₹500 lakh threshold, making the offence cognizable and non‑bailable, justifying arrest under Section 69.

4. The petitioner’s claim of abuse of process is rejected because the investigations are distinct inquiries, not formal adjudicatory proceedings, and the Apex Court’s Armour Security decision supports the Central authority’s action.

Final Outcome

  • The writ petition is dismissed. The Court refuses to quash the private complaint, the arrest of Mohammed Kamran, the remand order, and the Order of Cognizance. The investigation and custodial interrogation are allowed to continue.

Topics: GST Fraud, Parallel Investigation