Court Dismisses Petition Challenging Arrest and Proceedings, Affirms Legality of Dual Investigations by State and Central GST Authorities Following Apex Court Guidelines
In a significant judgment dated 7th July 2026, the Karnataka High Court dismissed a petition filed by Shri Mohammed Kamran, proprietor of M/s M.K. Traders, challenging his arrest and the ongoing prosecution related to a large-scale Goods and Services Tax (GST) fraud involving fake Input Tax Credit (ITC) worth over Rs 21 crores. The judgment was delivered by Justice M. Nagaprasanna and reaffirms the investigative and enforcement powers of the GST authorities in tackling complex tax evasion schemes.
The petitioner, Shri Kamran, was arrested by the Directorate General of GST Intelligence (DGGI) on 16th September 2025 under Section 69(1) of the Central Goods and Services Tax Act, 2017 (CGST Act) for offences punishable under Section 132(1)(c) relating to fraudulent availment of ITC without actual receipt of goods or services. The investigation revealed an elaborate network involving fictitious firms such as M/s N.M.G. Traders, M/s U.K. Steel Traders, and M/s A.R. Steels, with which the petitioner was closely linked. The probe uncovered deliberate obstruction of search operations, destruction of evidence, and the petitioner’s attempt to flee, indicating a risk of tampering with evidence and influencing witnesses.
The petitioner contended that the arrest was illegal and challenged the parallel investigations conducted by both State and Central GST authorities, alleging violation of Section 6(2)(b) of the CGST Act, which prohibits multiple proceedings on the same subject matter. The defense also argued procedural lapses including failure to provide grounds of arrest and non-compliance with constitutional safeguards under Article 22.
The Court, after meticulous examination of voluminous evidence and the investigation process, upheld the arrest’s legality. It was observed that the grounds and reasons for arrest were duly explained and furnished in writing to the petitioner, with acknowledgment taken, in compliance with the guidelines issued by the GST Investigation Wing and Supreme Court precedents including Radhika Agarwal v. Union of India (2025) and Vihaan Kumar v. State of Haryana (2025). The judgment emphasized that the offences were cognizable and non-bailable as the quantum of tax evaded exceeded Rs 5 crores, justifying custodial interrogation to prevent further evidence tampering.
On the issue of parallel proceedings, the Court relied heavily on the Supreme Court’s ruling in Armour Security (India) Limited v. Commissioner, CGST (2025 SCC Online SC 1700), which clarified that “subject-matter” refers to the specific tax liability or contravention detailed in a show-cause notice. The Court held that the investigations by State and Central GST authorities pertained to distinct subject matters and that the State GST investigation was duly transferred to the Central GST authorities. Thus, parallel proceedings were permissible and did not constitute an abuse of process.
The Court also underscored the importance of cooperation by the accused in GST investigations and rejected the petitioner’s claim of arbitrary arrest without proper notice. It held that the arrest was not routine or mechanical but necessitated by the accused’s conduct, including obstructing search operations and absconding.
This judgment reinforces the procedural safeguards and the lawful exercise of arrest powers under the CGST Act while affirming the legitimacy of coordinated multi-agency investigations to combat sophisticated tax frauds. It also provides clarity on the scope of parallel investigations and the interpretation of “subject-matter” under GST law.
Bottom line:-
GST Law - Investigation involving availing and passing fake Input Tax Credit (ITC) - Arrest of accused under Section 69(1) of CGST Act, 2017 justified due to non-cooperation, obstruction of search, and large tax evasion - Grounds of arrest and procedure complied with as per Apex Court guidelines - Parallel proceedings by State and Central GST authorities permissible if subject-matter distinct - Apex Court judgment in Armour Security (2025 SCC Online SC 1700) followed - Petition challenging arrest and proceedings dismissed.
Statutory provision(s):
Central Goods and Services Tax Act, 2017 Sections 6(2)(b), 69(1), 132(1)(c), 132(5)
This comprehensive news report summarizes the key facts, legal issues, procedural compliance, and judicial reasoning in the Karnataka High Court's decision in Shri Mohammed Kamran v. Senior Intelligence Officer, DGGI, highlighting the importance of compliance with GST investigation protocols and the continued fight against fake ITC scams.
