Facts of the Case:
In this case, the respondent- assessee engaged in the business of transportation of goods, was subjected to investigation by the GST authorities. The investigation conducted by the Mangaluru Commissionerate revealed alleged manipulation of invoices and e-way bills, along with clandestine removal of goods involving substantial GST evasion. The material gathered during such investigation was shared with the Bengaluru Commissionerate, which subsequently issued a show cause notice under Section 74 of the CGST Act.
The assessee challenged the show cause notice before the High Court, primarily on the ground that the investigation, search, and seizure were conducted by officers who were not “proper officers” having jurisdiction over the assessee. It was contended that the entire material collected was without jurisdiction and therefore could not form the basis of proceedings under Section 74. The learned Single Judge accepted this contention, quashed the show cause notice, ordered refund of ₹50 lakhs deposited during investigation, and directed return of seized documents, while granting liberty to initiate fresh proceedings.
Aggrieved by this decision, the Revenue preferred an intra-court appeal contending that the show cause notice was based on independent material and that even otherwise, material collected during investigation, even if disputed could be relied upon for initiating proceedings.
Issue:
Whether proceedings under Section 74 of the CGST Act are dependent upon or vitiated by alleged illegality in search and seizure under Section 67. Whether evidence obtained through allegedly illegal search and seizure is inadmissible in GST proceedings.
Held that:
The Court held that proceedings under Section 74 of the CGST Act constitute an independent adjudicatory mechanism and are not contingent upon the validity of inspection, search, or seizure conducted under Section 67. It was observed that even if there were alleged infirmities or jurisdictional defects in the search proceedings, the same would not, by itself, invalidate the initiation of proceedings under Section 74, so long as there exists relevant material indicating tax evasion.
The Court emphasized that the statute does not prescribe that such material must originate only from a validly conducted search or from a jurisdictionally competent officer. What is material is the existence of relevant evidence forming the basis of the show cause notice.
Reliance placed upon the principle laid down in Pooran Mal v. Director of Inspection, the Court reiterated that under Indian law, admissibility of evidence depends on its relevance and not on the legality of the manner in which it was obtained. Thus, material collected during search and seizure even if alleged to be irregular or without jurisdiction can still be relied upon in adjudication proceedings, subject to scrutiny of its evidentiary value. The Court further held that there is no prohibition under the CGST Act preventing the proper officer from relying upon materials gathered by officers of another Commissionerate, especially in cases involving coordinated investigations across multiple jurisdictions.
Consequently, the order of the Single Judge quashing the show cause notice and directing refund and return of seized materials was set aside, and the Revenue was permitted to proceed with the adjudication in accordance with law.
Case Name: Additional Commissioner of Central Tax v. Vigneshwara Transport Company dated 11.03.2026
To read the complete judgement 2026 Taxo.online 629
