The Karnataka High Court has rejected a challenge to criminal proceedings initiated by the Directorate General of GST Intelligence (DGGI), holding that allegations of parallel investigations by the Central GST (CGST) and State GST (SGST) authorities do not, by themselves, justify quashing a prosecution and declined to interfere with the DGGI’s fake Input Tax Credit (ITC) fraud case involving alleged tax evasion exceeding ₹21 crore, while also upholding the legality of the arrest and subsequent criminal proceedings initiated under the Central Goods and Services Tax Act, 2017.

The bench of Justice M. Nagaprasanna examined the Supreme Court’s ruling in Armour Security and observed that preliminary intelligence gathering or inquiry does not automatically amount to “proceedings” within the meaning of Section 6(2)(b). The DGGI had also stated that, following commencement of its prosecution, the State investigation had been transferred to the Central authorities.

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A writ petition was filed seeking to set aside the criminal complaint, declare his September 16, 2025 arrest illegal, quash the cognizance taken by the Special Court for Economic Offences, and secure his release. 

According to the DGGI, Kamran and three associated entities—M.K. Traders, A.R. Steel, N.M.G. Traders and U.K. Steel Traders—formed part of a syndicate engaged in availing and passing on fraudulent ITC through fake invoices without actual movement of goods.

The investigation was initiated after intelligence inputs generated through the Business Intelligence and Fraud Analytics platform allegedly revealed suspicious GST return patterns, common digital footprints, shared contact information and transactions involving entities whose GST registrations had been cancelled. Searches were subsequently conducted at business and residential premises linked to the entities. 

The DGGI alleged that the syndicate had collectively facilitated GST evasion exceeding ₹100 crore, while Kamran himself had fraudulently availed ITC worth approximately ₹21.11 crore. Investigators described him as the “mastermind” behind the network, alleging that he exercised operational control over multiple firms and orchestrated the fraudulent transactions. 

The prosecution claimed that during searches conducted in September 2025, officers encountered resistance, obstruction and attempts to destroy evidence. According to the remand application, Kamran allegedly fled from the search premises with assistance from family members and associates, while digital evidence and documents were purportedly removed or concealed.

The DGGI further alleged that searches at registered business premises revealed several locations to be locked or non-operational, strengthening suspicions that the firms existed primarily to facilitate fake ITC claims. During Kamran’s arrest at Bengaluru’s Kempegowda International Airport on September 16, 2025, investigators seized six mobile phones and a laptop. 

Kamran challenged the proceedings primarily on two grounds.

First, he argued that the State GST authorities had already initiated proceedings into the same transactions before the DGGI commenced its investigation. Relying on Section 6(2)(b) of the CGST Act and the Supreme Court’s decision in Armour Security (India) Ltd. v. Commissioner, CGST, he contended that simultaneous investigations by State and Central GST authorities on identical facts were impermissible.

Secondly, he alleged serious procedural irregularities in his arrest. According to the petition, he was arrested without furnishing the grounds of arrest, without proper communication to his relatives, and without compliance with constitutional safeguards under Article 22 and provisions of the Bharatiya Nagarik Suraksha Sanhita (BNSS). He also argued that, since the alleged offences carried a maximum punishment of five years, he ought to have been issued notice before arrest. 

The DGGI maintained that the investigation arose from independent intelligence concerning a wider network involving approximately 140 suppliers and a much larger chain of alleged fraudulent transactions.

It argued that the earlier inquiry by the State GST authorities was limited to discrepancies in tax payment, whereas the DGGI investigation targeted an organised fake invoice racket uncovered through intelligence analysis.

The department also asserted that Kamran’s conduct—including alleged attempts to evade investigation, destruction of evidence and non-cooperation—made custodial interrogation necessary. It further maintained that the grounds of arrest were duly supplied in writing and that his mother had been informed of his arrest in compliance with legal requirements. 

The Court identified two principal issues: whether the criminal proceedings initiated by the DGGI deserved to be quashed; and whether the arrest of the petitioner suffered from legal infirmities sufficient to invalidate the prosecution. 

In examining the first issue, the Court noted that the State GST authorities had initially begun an inquiry into discrepancies in GST payments before the DGGI later commenced its own investigation following receipt of independent intelligence inputs suggesting a much broader fake invoice network.

After considering the rival submissions and the material placed on record, the High Court declined to quash either the criminal complaint or the prosecution launched by the DGGI.

The Court also rejected the challenge to Kamran’s arrest, holding that the contentions raised did not justify judicial interference with the ongoing criminal proceedings at that stage.

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