The Karnataka High Court, in Mohammed Kamran v. The Senior Intelligence Officer, DGGI & Others, delivered an important judgment addressing the scope of parallel GST investigations by State GST and Central GST authorities, the legality of arrest under the CGST Act, and the application of the Supreme Court’s decision in Armour Security (India) Ltd. The Court dismissed the writ petition and upheld the DGGI’s investigation, arrest, and prosecution against the petitioner.
The petitioner challenged his arrest, the criminal complaint filed by the Directorate General of GST Intelligence (DGGI), and the continuation of prosecution on the ground that the State GST authorities had already initiated investigation regarding the same transactions. The petitioner also alleged violation of constitutional safeguards during arrest and argued that parallel proceedings were impermissible under Section 6(2)(b) of the CGST Act.
Key Legal Issues
The judgment primarily examines whether parallel investigations by State GST and Central GST authorities are barred merely because one authority has commenced inquiry. The Court analysed the recent Supreme Court ruling in Armour Security (India) Ltd. v. Commissioner, CGST, which clarified the scope of Section 6(2)(b) of the CGST Act.
The Court held that mere inquiry, summons, search or collection of evidence does not amount to “initiation of proceedings.” Proceedings commence only upon issuance of a show cause notice. Consequently, intelligence-based investigations may continue until the stage contemplated by law, and where overlapping investigations exist, the authorities are expected to coordinate and transfer the matter to one investigating agency. In the present case, the State GST authorities had transferred the investigation to the DGGI, eliminating any objection regarding parallel proceedings.
Legality of Arrest under the CGST Act
The petitioner also questioned the legality of his arrest under Sections 69 and 132 of the CGST Act. The Court examined the arrest memo, grounds of arrest, reasons to believe and the detailed allegations recorded by the DGGI relating to fraudulent availment of input tax credit through alleged fake invoices and non-existent suppliers.
After analysing the arrest records, the Court held that the authorities had complied with the safeguards prescribed by the Supreme Court in Radhika Agarwal v. Union of India, Prabir Purkayastha, Pankaj Bansal, and the CBIC Instructions governing GST arrests. The Court found that written grounds of arrest had been supplied, the arrest was supported by recorded reasons to believe, and the statutory procedure had been followed. Therefore, the arrest could not be termed illegal.
Significance of the Judgment
The decision provides important guidance on several recurring GST enforcement issues, including:
- Interpretation of Section 6(2)(b) regarding parallel proceedings.
- Distinction between intelligence-based investigation and adjudicatory proceedings.
- Transfer of investigation between State GST and Central GST authorities.
- Judicial scrutiny of GST arrests under Sections 69 and 132.
- Compliance with constitutional safeguards during arrest.
- Application of CBIC arrest guidelines and Supreme Court precedents.
The judgment reinforces that GST investigations may initially proceed simultaneously for intelligence purposes, but once the matter crystallises, coordination between tax authorities is necessary to prevent duplicate adjudication.