Illegality in Section 67 Search Won’t Invalidate GST SCN | HC

Illegality in Section 67

Case Details: Additional Commissioner of Central Tax vs. Vigneshwara Transport Company - [2026] 185 taxmann.com 487 (Karnataka)

Judiciary and Counsel Details

  • S.G. Pandit & K. V. Aravind, JJ.
  • Shishira Amarnath, Adv. for the Appellant.
  • Pranay Sharma Y., Adv. for the Respondent.

Facts of the Case

The respondent-assessee was subjected to an investigation for alleged invoice manipulation, e-way bill irregularities, and clandestine removal of goods. Based on information gathered through summons and inquiry, a show cause notice (SCN) was issued under Section 74 of the CGST Act and Karnataka GST Act alleging tax evasion. The assessee challenged the notice in writ proceedings contending that the underlying search and investigation under Section 67 suffered from procedural irregularities, lack of jurisdiction, and borrowed satisfaction, and therefore the notice and reliance on such material were invalid. It was further submitted that incriminating material, including e-way bills and statements collected during search, could not be used in adjudication when the search itself was alleged to be illegal. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that Section 74 of the CGST Act permits initiation of adjudication proceedings on the basis of material in possession of the proper officer irrespective of its source, and does not make adjudication contingent upon the legality or outcome of proceedings under Section 67. It held that alleged procedural defects in search or investigation do not vitiate a valid SCN when substantive material exists and is furnished to the assessee, who can contest its relevancy and admissibility during adjudication. It further held that reliance on material collected through summons or search and its transmission to the jurisdictional officer does not amount to impermissible borrowed satisfaction when independently examined and incorporated in the notice. It was concluded that interference at the stage of SCN is premature where an effective opportunity of reply is available. Accordingly, the writ appeal was allowed and the challenge to the SCN was rejected.

List of Cases Reviewed

  • Order of Single Judge of High Court of Karnataka in W.P. No.18305/2023 (T-RES) dated 28.11.2024 (para 14) reversed
  • Dr. Naresh Kumar Garg v. State of Haryana 2026 SCC Online SC 295 (para 12)
  • Pooran Mal v. Director of Inspection [1974] 93 ITR 505 (SC) (para 12), followed

List of Cases Referred to

The post Illegality in Section 67 Search Won’t Invalidate GST SCN | HC appeared first on Taxmann Blog.

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