Facts of the Case:
In this case, the respondent-assessee, a registered transporter under the GST laws, was subjected to investigation relating to alleged large-scale GST evasion through manipulation of invoices and e-way bills and clandestine movement of goods. The investigation initially conducted by the Mangaluru Commissionerate unearthed materials suggesting involvement of multiple entities across jurisdictions. Based on the material received and further investigation, including issuance of summons and recording of statements, the jurisdictional proper officer issued a show cause notice under Section 74 of the CGST Act alleging GST evasion of substantial magnitude. During investigation, the assessee deposited ₹50 lakhs, and bank accounts were provisionally attached under Section 83 to safeguard revenue.
The assessee challenged the show cause notice in a writ petition contending that Materials gathered in such proceedings were illegal and inadmissible. The show cause notice was founded on “borrowed satisfaction.”
Issue:
Whether proceedings under Section 74 of the CGST Act are dependent upon validity of search and seizure under Section 67. Whether material gathered during allegedly illegal or jurisdictionally defective search can be relied upon for issuance of show cause notice. Whether officers of one Commissionerate can share investigation material with jurisdictional officers of another Commissionerate. Whether refund of investigation deposit and return of seized material was legally sustainable.
Held that:
The Court held that Section 74 of the CGST Act is an independent adjudicatory provision that empowers the proper officer to initiate proceedings wherever tax is not paid, short paid, or ITC is wrongly availed due to fraud or suppression. The statutory scheme does not make initiation of Section 74 proceedings conditional upon action under Section 67. At best, search proceedings may provide material, but they are not a jurisdictional prerequisite. Rejecting the assessee’s contention, the Court ruled that even assuming infirmities in search and seizure, such defects do not automatically invalidate proceedings under Section 74.
On the admissibility of evidence, the Court relied on the Supreme Court ruling in Pooran Mal, which authoritatively held that evidence relevant to the matter in issue does not become inadmissible merely because it was obtained through an illegal search. Indian law does not incorporate a blanket exclusionary rule rejecting improperly obtained evidence unless a statute expressly mandates such exclusion. The CGST Act contains no such prohibition.
The Court clarified that Section 74 requires the proper officer to have material indicating tax evasion. The provision does not restrict the source from which such material may originate. The assessee was furnished all relied-upon documents and had full opportunity to contest admissibility and relevance during adjudication.
Thus, objections regarding evidentiary value fall within adjudication, not writ jurisdiction.
On jurisdictional objection, the Court held that GST investigations frequently involve multi-state operations and coordinated enforcement. Officers investigating entities within their territorial jurisdiction can lawfully gather material that may implicate persons outside their jurisdiction. Such material can validly be transferred to the jurisdictional proper officer.
The Court also noted that coordinated investigations were conducted across locations and that seizures were not confined to a single territorial unit. Therefore, the finding that the entire investigation lacked jurisdiction was factually unsustainable.
Case Name: Additional Commissioner of Central Tax, Bengaluru, Commissioner of Central Tax, Trade Centre, Principal Commissioner of Central Tax Bengaluru Versus M/s. Vigneshwara Transport Company.dated 11.03.2026
To read the complete 2026 Taxo.online 629
