DGGI Criminal Proceedings Quashed: Karnataka High Court Rules Against Parallel GST Investigations
Background and Overview
The Karnataka High Court, in the matter of Mohammed Kamran Vs Senior Intelligence Officer, delivered a significant ruling addressing the jurisdictional boundaries between State GST authorities and the Directorate General of GST Intelligence (DGGI) under the GST legislative framework. The core question before the Court was whether the DGGI could lawfully initiate an independent criminal investigation — and subsequently arrest an assessee — when the State GST authorities had already assumed jurisdiction over the very same transactions and the investigation was still ongoing.
The petitioner, proprietor of M/s M.K. Traders, a Mysuru-based enterprise dealing in iron and steel scrap, had obtained GST registration and was engaged in procurement of scrap from various suppliers and onward supply to registered steel manufacturers. The case raises fundamental questions about the permissibility of concurrent investigations under the CGST Act, 2017, the constitutional validity of the arrest, and whether the filing of a partial investigation report to deny statutory bail was sustainable in law.
Factual Matrix
State GST Authorities Initiate Investigation First
On 14-05-2025, the Commercial Tax Officer and the Joint Commissioner of Commercial Taxes (respondents 3 and 4) commenced an investigation concerning business dealings between M/s M.K. Traders and three other entities — M/s A.R. Steels, M/s N.M.G. Traders, and M/s U.K. Steel Traders. This was followed by a physical inspection of the assessee's business premises on 17-06-2025, and thereafter a formal notice was issued alleging gross discrepancies in GST payment and demanding production of invoices and other commercial records.
The assessee responded to this summons — issued under Section 70 of the CGST/KGST Act — through a detailed letter dated 09-09-2025, submitting the following categories of documents before the Commercial Tax Officer:
- Inward supply invoices and e-way bills from October 2021 to December 2021 and October 2024 to June 2025
- Outward supply invoices and e-way bills for corresponding periods
- Weighment slips and lorry receipts for outward supplies
- Bank statements for the relevant period from Axis Bank
This response demonstrated active participation in the State-level investigation, which remained pending and incomplete at the time the DGGI stepped in.
DGGI Enters the Picture: Simultaneous Investigation Commenced
While the State GST investigation was still underway, the DGGI received specific intelligence through its Business Intelligence and Fraud Analytics (BIFA) platform, flagging the assessee and his associate firms for allegedly receiving invoices from fictitious and non-existent suppliers without any actual movement of goods or services. The intelligence generated an early warning category report based on analysis of:
- GST return data and e-way bills
- Common IP addresses used for filing returns across multiple entities
- Cancelled GST registrations
- Suspicious linkages between suppliers and recipients
The four entities primarily identified under this analysis were:
| Entity | GSTIN | ITC Availed (₹ in Lakh) | ITC Passed (₹ in Lakh) |
|---|---|---|---|
| M/s U.K. Steel Traders | 29NSDPS9559A1ZY | 3785.64 | 4,322 |
| M/s N.M.G. Traders | 29EMIPA3360K1ZW | 4976.23 | 4,652 |
| M/s M.K. Traders | 29IRZPK8080E1ZT | 2178.73 | 1,886 |
| M/s A.R. Steel | 29AHBPA2384H1ZJ | 3223.61 | 2,842 |
Note: The cumulative alleged evasion across all four entities exceeded ₹100 crore, according to the DGGI's remand application.
Searches, Arrest, and Criminal Proceedings
Based on the intelligence, the DGGI conducted simultaneous searches on 10-09-2025 at the registered business premises and residential addresses of all four proprietors under Section 67 of the CGST Act, 2017. During these searches, the DGGI alleged that the assessee obstructed proceedings, fled the premises, and that family members attempted to destroy digital evidence including CCTV hard disks and mobile phones.
On 15-09-2025, the assessee was directed to appear before the DGGI for personal interrogation. When the assessee arrived at Kempegowda International Airport, Bengaluru, he was searched and six mobile phones along with one Dell Inspiron laptop were seized. He was formally arrested at 6:30 a.m. on 16-09-2025 and produced before the Special Court for Economic Offences, Bengaluru, at 8:55 p.m. the same day.
A prosecution complaint was subsequently filed on 13-11-2025 before the jurisdictional Court under Section 223 of the BNSS for offences punishable under Sections 132(1)(b), 132(1)(c), 132(1)(f) read with Sections 134 and 135 of the CGST Act, 2017, registered as Crime No. 34/2025 in PCR No. 280 of 2025.