When the Search is Questioned - Can the Evidence Still Survive?
In legal discourse, particularly in matters involving search and seizure, one doctrine often captures both judicial imagination and professional debate - the "Fruits of the Poisonous Tree". The expression, though originating in criminal jurisprudence, carries a simple but powerful idea: if the source of evidence is tainted, then everything derived from it must also be treated as tainted. In other words, if the tree itself is poisonous, the fruits growing from it cannot be considered healthy.
This doctrine developed largely in criminal law to protect individual liberties and to discourage unlawful investigation practices. Courts in several jurisdictions have, at times, excluded evidence obtained through illegal searches or unlawful investigative methods, reasoning that allowing such evidence would indirectly validate procedural illegality. The underlying philosophy is not merely technical - it is rooted in fairness, due process, and respect for legal boundaries.
However, when this doctrine travels from criminal jurisprudence into tax investigations, the situation becomes more nuanced. Tax proceedings are primarily civil in nature, and the objective often shifts from punishment to the determination of tax liability. In such circumstances, courts frequently face a difficult balancing exercise - should procedural irregularities defeat substantive tax enforcement? Or should relevant evidence be considered, even if gathered through questionable procedural routes?
GST investigations today are rarely confined to a single jurisdiction or a single officer. Large-scale tax evasion cases often involve multiple entities operating across states, coordinated intelligence inputs, parallel investigations, and the sharing of material between different Commissionerates. In such a dynamic investigative environment, challenges to jurisdiction or procedural validity are not uncommon. If every such challenge were to invalidate the entire investigation, it could significantly impact enforcement mechanisms.
It was precisely this issue that came before the Karnataka High Court in Additional Commissioner of Central Tax, Bengaluru North, West Commissionerate and Others v. Vigneshwara Transport Company- 2026-VIL-267-KAR dated 11 March 2026. The Court was called upon to examine whether proceedings initiated under Section 74 of the CGST Act could survive when the search conducted under Section 67 was itself alleged to be invalid. The matter, therefore, raised an important and practical question: Does an allegedly invalid search automatically render the material collected during such a search unusable?
In a carefully reasoned judgment, the Division Bench answered this question in the negative. The Court held that even if the search is questioned, the material gathered does not automatically become unusable, and proceedings under Section 74 may still continue, subject, of course, to the assessee's right to contest the relevance and admissibility of such material during adjudication.
This ruling revisits long-standing principles of evidence admissibility and applies them to GST investigations. At the same time, it offers a pragmatic judicial perspective - one that seeks to balance procedural fairness with effective tax administration. The judgment therefore marks an important development in GST jurisprudence, particularly in cases involving multi-jurisdiction investigations and coordinated enforcement action.
When Investigations Cross Borders - A Multi-Jurisdiction GST Inquiry
Modern GST investigations rarely remain confined to a single taxpayer or a single jurisdiction. With businesses operating across multiple locations and supply chains extending across states, tax evasion - particularly in cases involving fake invoicing or circular trading - often unfolds through a network of entities spread across different regions. It is therefore not uncommon for intelligence inputs to trigger coordinated investigations by multiple Commissionerates, each examining different pieces of a larger puzzle. The present case arose in precisely such a setting, where intelligence gathered by the Department suggested a structured arrangement involving alleged fake invoicing and clandestine movement of areca nuts through multiple traders and transporters operating across jurisdictions.
The respondent in the present case was a transporter alleged to have facilitated the movement of goods without proper tax compliance. Based on intelligence inputs, investigations were undertaken by different GST formations, including the Bengaluru and Mangaluru Commissionerates, which began examining transactions involving various entities suspected to be part of the alleged network. As the investigation progressed, search operations were conducted at both business premises and residential premises connected with the entities involved . Statements were recorded under Section 70 of the CGST Act, and documentary evidence, including invoices, transport records, e-way bills, and related documents, was gathered during the course of these coordinated proceedings.
The material collected during the investigation ultimately formed the basis of a detailed show-cause notice issued under Section 74 of the CGST Act, which ran into 253 pages and referred to 1,964 e-way bills, indicating the scale and complexity of the alleged evasion. The notice relied extensively on statements recorded, documents seized, and materials gathered during coordinated investigations across jurisdictions, suggesting that the alleged evasion was not limited to isolated transactions but formed part of a larger network involving multiple entities.
However, instead of contesting the allegations on the merits, the assessee adopted a jurisdictional challenge. It was contended that the search and seizure operations were conducted by officers who were not the proper officers under the CGST Act, and therefore, the entire investigation was vitiated. On this basis, the assessee argued that the show cause notice issued under Section 74, being founded on material gathered during such allegedly invalid search, could not survive. The challenge thus shifted the dispute's focus from the substantive allegations of tax evasion to the procedural validity of the investigation itself, setting the stage for an important judicial examination of the relationship between investigative irregularities and adjudicatory proceedings under GST.
When Jurisdiction Took Centre Stage - The Single Judge's View
The learned Single Judge examined the dispute on jurisdictional grounds and held that the search and seizure operations were conducted by officers who were not the proper officers under the CGST Act. Consequently, the search proceedings were treated as void ab initio, and the show cause notice issued under Section 74, being founded on material gathered during such search, was set aside.
The Court also observed that the notice was based on borrowed satisfaction, as the issuing authority relied upon material gathered by another formation without independent application of mind. Accordingly, the Court directed the return of the seized material and a refund of ₹50 lakh deposited during the investigation, while granting liberty to the Department to initiate fresh proceedings in accordance with the law.
A Shift in Judicial Focus - From Validity of Search to Relevance of Evidence
While the Single Judge focused primarily on the validity of the search, the Division Bench approached the controversy from a different, more fundamental angle. Instead of asking whether the search itself was legally sustainable, the Division Bench reframed the issue to examine whether material gathered during an allegedly irregular search automatically becomes inadmissible for the purpose of initiating proceedings under Section 74. This subtle but significant shift in perspective altered the entire trajectory of the case, as the focus moved from procedural legality to evidentiary relevance and admissibility.
To address this question, the Division Bench relied upon the landmark judgment of the Hon'ble Supreme Court in Pooran Mal v. Director of Inspection (Investigation), Income Tax, reported in (1974) 93 ITR 505 (SC); (1974) 1 SCC 345, decided on 26 September 1973. In this important decision, the Supreme Court examined whether evidence obtained during an illegal search could be relied upon in tax proceedings. The Court held that Indian law does not exclude relevant evidence merely because it was obtained through an illegal search or seizure, thereby emphasising that the admissibility of evidence depends primarily on its relevance rather than on the manner of its acquisition.
The Supreme Court, in Pooran Mal, made a significant observation which has since guided tax jurisprudence. The Court noted that courts in India and England have consistently refused to exclude relevant evidence merely because it was obtained through illegal search or seizure. It further observed that there is nothing in the Constitution that prohibits the use of evidence obtained from an illegal search. These principles, laid down decades earlier, assumed renewed significance in the present case and served as the cornerstone of the Division Bench's reasoning in examining the validity of proceedings under Section 74 of the CGST Act.
A Recent Supreme Court Endorsement - The Principle Reaffirmed in 2026
The Division Bench did not rely solely on the historic authority of Pooran Mal. It also drew support from a recent judgment of the Hon'ble Supreme Court in Dr. Naresh Kumar Garg v. State of Haryana and Others , Criminal Appeal arising out of SLP (Criminal) No. 5915 of 2025, decided on 23 February 2026, reported in 2026 SCC Online SC 295, 2026 (SC). In this case, the Supreme Court reiterated an important evidentiary principle - that material gathered during search proceedings does not automatically become inadmissible merely because the search is alleged to be irregular or procedurally defective.
The Supreme Court, while dealing with the legality of a search conducted under the PCPNDT Act, observed that even if the search suffered from statutory infirmities, the evidence gathered during such a search could still be relied upon, provided it is relevant and admissible in law. The Court emphasised that the test of admissibility lies in relevance and probative value, rather than in the technical validity of the search. This reaffirmation assumed particular importance because it revisited and reinforced the doctrine earlier articulated in Pooran Mal, but in a modern judicial context.
Section 67 and Section 74 - Independent Powers, Not Interdependent Proceedings
A key aspect of the Division Bench judgment is its clarification that proceedings under Section 74 are independent of search proceedings under Section 67. The Court held that even if the search under Section 67 is alleged to suffer from jurisdictional infirmities, adjudication under Section 74 does not automatically fail. This distinction is significant, particularly in GST investigations where material may emerge from multiple sources, including intelligence inputs, third-party statements, and coordinated enquiries.
The Division Bench further observed that neither Section 67 nor Section 74 contains any express or implied prohibition against relying on material collected during search proceedings. The Court rejected the view that the material forming the basis of a show cause notice must necessarily originate from a valid search, noting that Section 74 only requires the existence of relevant material indicating tax evasion, without prescribing the manner in which such material must be gathered.
Accordingly, the Court held that the proper officer may rely on material flowing from multiple sources, with relevance being the determining factor rather than the source of collection. This interpretation effectively separates investigation from adjudication and affirms the broader evidentiary scope available in GST proceedings.
When Investigations Span Jurisdictions - Recognising the Multi-Commissionerate Reality
The Division Bench acknowledged a practical feature of modern GST enforcement - investigations, particularly those involving fake invoicing or clandestine movement of goods, often span multiple jurisdictions and require coordinated action by different Commissionerates. In the present case, materials were gathered by more than one Commissionerate, statements were recorded under Section 70, and relevant information was subsequently transferred to the jurisdictional officer for initiating proceedings under Section 74.
Recognising these operational realities, the Court observed that it would neither be practical nor legally necessary to restrict adjudication only to material collected within a single jurisdiction. Accordingly, the Division Bench held that the proper officer issuing the show cause notice may rely upon material gathered by another Commissionerate, provided such material is relevant and made available to the assessee for an effective response. This reasoning affirms the legal validity of coordinated multi-jurisdiction GST investigations.
Independent Application of Mind - The Division Bench Clarifies
The Division Bench also examined whether the show-cause notice suffered from a lack of independent application of mind. After reviewing the contents of the notice, the Court observed that the show cause notice, running into 253 pages and referring to specific instances supported by documentary evidence and recorded statements, reflected a detailed examination of the material available on record.
In these circumstances, the Court concluded that the proper officer had independently formed his opinion before issuing the notice, and therefore the proceedings could not be treated as mechanical or based on borrowed satisfaction.
Liberty Without Evidence - A Practical Judicial Observation
The Division Bench also observed that granting liberty to initiate fresh proceedings while directing the return of seized material would render such liberty largely ineffective. Since a show cause notice, particularly under Section 74, must be supported by tangible evidence, the return of foundational material would make it difficult for authorities to proceed afresh. The Court therefore treated such liberty as largely theoretical, a pragmatic consideration that also weighed with the Division Bench while allowing the appeal.
The Final Judicial Message - Evidence Matters More Than Procedural Imperfections
After examining the factual background, statutory provisions, and judicial precedents, the Division Bench ultimately laid down a clear and pragmatic principle. The Court held that proceedings under Section 74 of the CGST Act operate independently, and therefore, the alleged invalidity of search proceedings under Section 67 does not automatically invalidate the show cause notice or the adjudication process. What assumes significance is the existence of relevant material indicating tax evasion, rather than the procedural perfection of the investigative steps through which such material was gathered.
The Division Bench further clarified that material collected during coordinated investigations, including material gathered by another Commissionerate, can legitimately be relied upon, provided it is furnished to the assessee, and an effective opportunity to respond is granted in accordance with the principles of natural justice. The Court also observed that interference by the writ court at the show cause notice stage should ordinarily be avoided, since the adjudication process itself provides the appropriate forum to examine the relevance, admissibility, and evidentiary value of the material relied upon by the Department.
Seen in this perspective, the judgment strikes a careful balance between procedural safeguards and effective tax enforcement. While the legality of search proceedings may still be examined in appropriate cases, procedural irregularities in investigation do not automatically render the material unusable. Instead, such material may still form the basis of proceedings, subject to scrutiny during adjudication - a pragmatic approach that reflects the evolving contours of GST jurisprudence.
By CA Raj Jaggi & Adv Kirti Jaggi
CAclubindia
