Delayed GST SCN remains valid: Karnataka HC ₹27.56 Cr Evasion Dispute to Proceed [Read Order]
Even if evidence was collected in an allegedly irregular search, it can still be used, since Indian law admits relevant evidence regardless of how it was obtained.
In a recent The Karnataka High Court has upheld the validity of a delayed GST show cause notice issued under Section 74 of the Central Goods and Services Act (CGST) against the Company, paving the way for adjudication of an alleged ₹27.56 crore tax evasion dispute.
The writ appeal was filed by the Revenue authorities challenging the Single Judge’s order that had quashed the notice against Vigneshwara Transport Company, directed the refund of ₹50 lakhs, and ordered the return of seized documents.
The matter arose after the Mangaluru Commissionerate conducted searches alleging manipulation of invoices and e-way bills to evade Goods and Services Tax (GST). The company argued that the officers were not “proper officers” under the law, and the evidence gathered was invalid. The Single Judge accepted this contention, holding that the notice was based on “borrowed satisfaction.”
Counsel for the Revenue, Shishira Amarnath, contended that the show cause notice was independently issued by the Bengaluru North-West Commissionerate, which had jurisdiction, and that even if some material was collected by officers lacking authority, it retained evidentiary value. He stressed that Section 74 of the CGST Act is an independent provision, not conditional upon the legality of a search under Section 67.
On the other hand, counsel for the assessee, Pranay Sharma, argued that proceedings under Section 74 must be founded only on lawfully collected material. It was also stated that searches violating statutory safeguards under the Code of Criminal Procedure(Cr.P.C) and infringed Article 21 of the Constitution.
After considering submissions, the Division Bench of Justice S.G. Pandit and Justice K.V. Aravind observed that Indian law admits relevant evidence even if obtained through illegal search or seizure, citing the Supreme Court’s decision in Pooran Mal v. Director of Inspection (1974). The Court held that Section 74 confers substantive power to issue notices independently, and neither Section 67 nor Section 74 bars reliance on such material.
The High Court set aside the Single Judge’s order, restored the show cause notice, and directed the assessee to file its reply within 15 days, allowing adjudication to proceed.
Accordingly, the writ appeal was allowed.
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