Allahabad High Court Quashes BNSS Case Where CGST/UPGST Special Mechanism Already Invoked

1. Background of the Dispute

The Allahabad High Court in Kapil Chugh Vs State of U.P. examined whether criminal prosecution under the Bharatiya Nyaya Sanhita, 2023 (BNSS) could proceed in a matter already governed by the special statutory scheme of the CGST Act, 2017 and UPGST Act, 2017. The allegations related to:

  • Forged and fabricated GST documents
  • Bogus supplies and sham transactions
  • Wrongful availment and passing of input tax credit (ITC)

The prosecution was initiated vide Case Crime No. 287 of 2025, culminating in Case No. 4647 of 2026 under various provisions of BNSS. The assessee (applicant), Kapil Chugh, sought quashing of:

  • Charge sheet dated 10.06.2026
  • Cognizance order dated 17.06.2026
  • Entire proceedings in Case No. 4647 of 2026, insofar as they related to him

The central legal issue was whether, where a special fiscal enactment like the CGST Act, 2017 sets up a complete framework for investigation and prosecution (notably under Section 132), the general criminal law can still be invoked for the same set of facts.

2. Prayer Before the Court

The application under Section 528 BNSS requested the Court to:

  • Quash the charge sheet dated 10.06.2026
  • Quash the cognizance order dated 17.06.2026 of the Additional Chief Judicial Magistrate, Gautam Budh Nagar
  • Set aside the entire proceedings of Case No. 4647 of 2026 (State of U.P. v. Kapil Chugh) arising from Case Crime No. 287 of 2025
  • Proceedings had been instituted under Sections 318(4), 338, 336(3), 340(2), 345(2) and 61(2) BNSS at Police Station Kasna, District Gautam Budh Nagar

3. Factual Matrix as Projected by the Applicant

3.1 FIR and Adjudication Context

The FIR dated 05.12.2025 was lodged by the Assistant Commissioner, State Tax Division-7, Uttar Pradesh, against one Pramod Vijay Khullar, stated to be the proprietor of M/s Multicom International. The key allegations were:

  • Use of forged documentation
  • Availment and passing on of bogus ITC
  • Causing a loss of Rs. 156 crore to the State exchequer

It was noted that:

  • The alleged amounts were already reflected in earlier DRC-07 issued from the office of the complainant authority
  • At the business address of M/s Multicom International, no firm was found upon physical verification

Parallelly, a detailed adjudication under GST law had been initiated earlier:

  • A Show Cause Notice dated 16.11.2022 issued by the Additional Director, DGGI, Zonal Unit Ahmedabad under Section 74 of the CGST Act, 2017 read with Section 74 of the UPGST Act, 2017, Section 20 of IGST Act, 2017 and Section 11 of CGST (Compensation to State) Act, 2017
  • The notice proposed recovery of:
    • Input tax credit of Rs. 78,05,91,663/-
    • Excess ITC of Rs. 9,98,76,269/- from M/s Multicom International
  • It also proposed penalty under Section 74 or Section 122(1)/122(2)(b) of the CGST Act, 2017

The applicant pointed out that the Show Cause Notice itself did not propose penal consequences specifically against him as a noticee.

Subsequently, the adjudicating authority, Additional Commissioner, Office of Principal Commissioner, CGST & Central Excise, Lucknow, by order dated 06.06.2024:

  • Exonerated the applicant for lack of direct evidence establishing his involvement
  • Dropped proceedings against him

Despite this, more than a year and a half later, the Assistant Commissioner, State Tax, Division-17, Gautam Budh Nagar, lodged a complaint dated 14.11.2025 against Pramod Vijay Khullar, alleging that he:

  • Utilized and passed on ITC on the strength of forged and fabricated invoices
  • Did so without actual movement of goods
  • Thereby caused wrongful loss of Rs. 1,56,88,48,954/- to Government revenue based on an adjudication order in Form DRC-07

This complaint led to the registration of the present FIR.

3.2 Applicant’s Exoneration and Subsequent Criminal Action

The applicant’s main planks were:

  • The adjudication order dated 06.06.2024 exonerated him; no material linked him to M/s Multicom International in a culpable manner
  • Despite the FIR being directed against M/s Multicom International and its proprietor, neither the firm nor the proprietor were named as accused in the subsequent charge sheet dated 10.06.2026
  • Instead, the applicant alone was arrayed as an accused, although he claimed no association with the said firm

He argued:

  • Since the DRC-07 was the result of proceedings under the CGST Act, 2017, it was impermissible to ground a fresh general criminal prosecution under BNSS on the same factual canvas
  • The investigating agency failed to appreciate that the GST law is a special code dealing specifically with such offences

3.3 Arrests, Custody and Earlier Habeas Corpus

The applicant narrated the sequence leading to his custodial detention:

  • He arrived in India on 19.04.2026
  • He was arrested by DGGI, Ahmedabad, on the strength of a Look Out Circular dated 24.02.2026
  • The arrest memo stated that he was suspected of offences under clauses (a), (b), (c) or (d) of Section 132(1) of the CGST Act, 2017

DGGI, Ahmedabad Zonal Unit (AZU) had:

  • Relied on evidence from multiple Show Cause Notices and orders-in-original
  • Included M/s Multicom International among 45 entities whose transactions were scrutinized
  • Initiated proceedings against the applicant much before the GST-related FIR dated 05.12.2025

Crucially, the applicant had been exonerated in SCN proceedings concerning M/s Multicom International.