Additional Commissioner of Central Tax Vs Vigneshwara Transport Company (Karnataka High Court)
SCN u/s 74 GST Valid even if based on Material from allegedly Illegal Search or from another Commissionerate-Karnataka HC
The Karnataka High Court held that proceedings u/s 74 of the CGST Act are independent adjudicatory proceedings & are not dependent on validity of search conducted u/s 67.
In this case, GST authorities investigated a fake invoicing & e-way bill manipulation racket involving a transporter. A show cause notice (SCN) u/s 74 alleging GST evasion of about ₹27.56 crore was issued based on materials including 1,964 e-way bills, statements & documents gathered during investigation by different GST Commissionerates.
The Single Judge had quashed the SCN holding that the search was conducted by officers lacking jurisdiction and therefore the notice was based on “borrowed satisfaction.” Refund of ₹50 lakh deposited during investigation was also directed.
The Division Bench set aside this order & held:
- Proceedings u/s 74 are independent & need not necessarily arise from search u/s 67.
- Material collected even during an allegedly illegal search is not automatically inadmissible, if it is relevant to the issue.
- Indian evidence law follows the principle that relevant evidence does not become inadmissible merely because it was obtained illegally (relying on Pooran Mal v. Director of Inspection).
- There is no bar under GST law preventing reliance on material gathered by another Commissionerate during coordinated investigations.
- Once the assessee receives all materials with the SCN, he can challenge relevancy & admissibility during adjudication, rather than through writ at the SCN stage.
- Therefore, interference with the SCN by writ court at the threshold is premature.
Accordingly, the High Court allowed the Revenue’s appeal, restored the show cause notice, dismissed the writ petition, and granted the assessee time to file reply to the SCN.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
Heard Sri Shishira Amarnath, learned counsel for the appellants-Revenue and Sri Y. Pranay Sharma, learned counsel for the respondent-Assessee.
