The Karnataka High Court has dismissed a writ petition challenging the arrest of a GST-registered proprietor under Section 69 of the Central Goods and Services Tax Act, 2017 (CGST Act). The judgment clarifies that parallel investigations by State and Central GST authorities do not invalidate proceedings, and arrest is lawful if grounded in credible evidence of tax evasion exceeding ₹5 crores.
Background & Facts
The Dispute
The petitioner, Mohammed Kamran, proprietor of M/s M.K. Traders, was arrested by the Directorate General of Goods and Services Tax Intelligence (DGGI) on 16.09.2025 for allegedly availing fake Input Tax Credit (ITC) of ₹21.11 crores without actual supply of goods or services. The arrest followed a search conducted on 10.09.2025 under Section 67 of the CGST Act, during which the petitioner obstructed proceedings, fled the premises, and allegedly destroyed evidence.
Key Facts
- The petitioner obtained GST registration for M/s M.K. Traders (GSTIN: 29IRZPK8080E1ZT) on 01.02.2025, dealing in ferrous scrap.
- On 14.05.2025, the Commercial Tax Officer (Enforcement) initiated an investigation into discrepancies in GST payments by the petitioner and associated firms (M/s A.R. Steels, M/s N.M.G. Traders, and M/s U.K. Steel Traders).
- On 17.06.2025, the State GST authorities issued a notice demanding production of invoices and documents. The petitioner responded on 09.09.2025, submitting partial records.
- On 10.09.2025, the DGGI conducted searches at the petitioner’s residential and business premises based on intelligence inputs indicating fake invoices issued by fictitious suppliers. During the search:
- The petitioner obstructed proceedings, fled the premises, and allegedly destroyed digital evidence (a hard disk).
- Six mobile phones and one laptop were seized from the petitioner at Kempegowda International Airport on 16.09.2025.
- Two FIRs (Crime Nos. 0161/2025 and 0162/2025) were registered for offences under Sections 132, 208, 210, 212, 214, 218, 221, 224, 238, 351(1), and 352 of the Bharatiya Nyaya Sanhita (BNS).
Procedural History
- 10.09.2025: DGGI conducts search; petitioner obstructs proceedings and flees.
- 16.09.2025: Petitioner arrested at Kempegowda International Airport under Section 69 of the CGST Act for offences under Sections 132(1)(b), 132(1)(c), 132(1)(f), 134, and 135 of the CGST Act.
- Grounds of arrest: Fraudulent availment of ITC of ₹21.11 crores without supply of goods/services.
- Reasons for arrest: Preventing tampering with evidence, further offences, witness intimidation, and flight risk.
- 16.09.2025: Petitioner produced before the Special Court for Economic Offences; remand order passed.
- 13.11.2025: DGGI files prosecution complaint under Section 223 of the Bharatiya Nagarik Suraksha Sanhita (BNSS).
- 25.11.2025: Court takes cognizance of the complaint.
- 28.03.2026: Present writ petition filed under Article 226 of the Constitution seeking quashing of proceedings and release of the petitioner.
Relief Sought
The petitioner sought:
- Quashing of the complaint dated 12.11.2025 and proceedings in Crime No. 34/2025.
- Quashing of the arrest dated 16.09.2025 and remand order dated 16.09.2025.
- Quashing of the cognizance order dated 25.11.2025.
- Immediate release from custody.
The Legal Issue
The central questions were:
- Whether parallel proceedings by State and Central GST authorities on the same set of facts violate Section 6(2)(b) of the CGST Act and render the arrest illegal?
- Whether the petitioner’s arrest complied with Article 22 of the Constitution and Section 47 of the BNSS, including furnishing written grounds of arrest?
Arguments Presented
For the Petitioner
- Parallel Proceedings: Relied on Armour Security (India) Limited v. Commissioner, CGST, Delhi East Commissionerate (2025 SCC OnLine SC 1700) to argue that parallel proceedings by State and Central GST authorities violate Section 6(2)(b) of the CGST Act.
- Arrest Violations: Contended that the petitioner was arrested without furnishing written grounds of arrest, violating Article 22 of the Constitution and Section 47 of the BNSS. The arrest was not communicated to relatives, and the petitioner was denied statutory bail under Section 187(3) of the BNSS.
- Notice Requirement: Argued that the petitioner ought to have been issued a notice prior to arrest, as the offences under Section 132 of the CGST Act are punishable by a maximum of 5 years’ imprisonment.
For the Respondents
- Parallel Proceedings: Submitted that the State GST authorities were investigating discrepancies in GST payments, while the DGGI was probing a larger supply chain involving 140 suppliers and multi-fold revenue evasion. The investigations, though arising from the same facts, pertained to distinct subject-matters, permissible under Armour Security. The State GST investigation was transferred to the DGGI in accordance with the judgment.
- Arrest Justification: Argued that the arrest was necessitated due to the petitioner’s non-cooperation, obstruction of search proceedings, and flight from the premises. The DGGI had credible intelligence indicating fake invoices and ITC fraud exceeding ₹5 crores, justifying arrest under Section 69(1) of the CGST Act.
- Grounds of Arrest: Contended that written grounds of arrest were duly furnished and acknowledged by the petitioner. The arrest complied with Article 22 of the Constitution and the guidelines issued by the Central Board of Indirect Taxes and Customs (CBIC).
The Court's Analysis
Parallel Proceedings
The Court examined Section 6(2)(b) of the CGST Act, which bars initiation of proceedings on the "same subject-matter" by another tax authority. Relying on Armour Security, the Court held:
"The expression ‘subject-matter’ contemplates proceedings directed towards determining the taxpayer's liability or contravention, encompassing the alleged offence or non-compliance together with the relief or demand sought by the Revenue, as articulated in the show-cause notice through its charges, grounds, and quantification of demand."
The Court applied the twofold test laid down in Armour Security:
- Whether the authority has already proceeded on an identical liability or offence on the same facts.
- Whether the demand or relief sought is identical.
The Court found that the State GST authorities were investigating discrepancies in GST payments, while the DGGI was probing a larger supply chain involving fake invoices and ITC fraud. Though the investigations arose from the same facts, they pertained to distinct subject-matters, and the bar under Section 6(2)(b) was not attracted. The State GST investigation was transferred to the DGGI in accordance with Armour Security.
Legality of Arrest
The Court analyzed the compliance of the petitioner’s arrest with Article 22 of the Constitution and Section 47 of the BNSS, which mandate furnishing written grounds of arrest. The Court relied on:
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Supreme Court Judgments:
- Pankaj Bansal v. Union of India (2023): Held that grounds of arrest must be communicated in writing.
- Prabir Purkayastha v. State (NCT of Delhi) (2024): Distinguished between ‘reasons for arrest’ (general) and ‘grounds of arrest’ (specific to the accused).
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CBIC Guidelines:
- Instruction No. 01/2025-GST (dated 13.01.2025) mandates that grounds of arrest must be explained to the arrested person and furnished in writing as an annexure to the arrest memo.
- The arrest memo must record compliance with these requirements.
The Court found that the arrest memo and grounds of arrest were duly communicated to the petitioner and acknowledged by him. The grounds detailed:
- Fraudulent availment of ITC of ₹21.11 crores without supply of goods/services.
- Involvement of fictitious suppliers with cancelled GST registrations.
- Non-cooperation, obstruction, and flight during search proceedings.
The Court held that the arrest complied with the CBIC guidelines and the Supreme Court judgments, including Radhika Agarwal v. Union of India (2025), which emphasized that arrest must be based on credible evidence and not mere suspicion.
Mens Rea and Gravity of Offence
The Court noted that the petitioner’s offences under Section 132(1)(c) of the CGST Act (availing ITC without supply of goods/services) involved mens rea and evasion exceeding ₹5 crores, making the offences cognizable and non-bailable under Section 132(5). The petitioner’s conduct - obstruction, flight, and destruction of evidence - demonstrated a culpable mental state and justified custodial interrogation.
The Verdict
The Court dismissed the writ petition
