Case Title: M/s. Vigneshwara Transport Company v. Additional Commissioner of Central Tax & Ors
Court: High Court of Karnataka, Bengaluru
Petition No.: W.P. No. 18305 of 2023 (T-RES)
Date of Judgment: 28 November 2024
Category: Jurisdiction – Show Cause Notice – Proper Officer – Refund of pre-deposit
Relevant Sections: Sections 2(91), 3, 5, 67, 70, and 74 of the CGST Act, 2017 and corresponding provisions of the KGST Act, 2017
Facts (Paras 1–9):
The petitioner, M/s. Vigneshwara Transport Company, engaged in transport of arecanut, was investigated under the CGST and KGST Acts for alleged supply of goods to Gutkha manufacturers without paying GST. The investigation and search were conducted by Respondent No. 2 (Commissioner of Central Tax, Mangaluru), who seized documents and extracted a payment of ₹50 lakh under protest. Subsequently, the case was transferred to Respondent No. 3, a proper officer under the law, who issued a show cause notice dated 11.04.2023 under Section 74 based on the previous investigation.
The petitioner challenged the notice, arguing that the earlier investigation was conducted without jurisdiction by an improper officer and therefore, the resultant show cause notice and all derived proceedings were void.
Questions for Determination (Para 7):
Whether a show cause notice issued by a proper officer under Section 74 of the CGST Act, based on an investigation, search, and seizure conducted by an improper officer, is valid in law.
Court’s Observations (Paras 10–15):
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The Revenue argued that despite the initial irregularity, the notice was valid since it was issued by a proper officer, relying on Pooran Mal v. Director of Inspection [(1974) 1 SCC 345].
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The petitioner countered, citing C. Ramaiah Reddy v. ACIT [2012 20 taxmann.com 781 (Karnataka)] and Vinit Kumar v. CBI [2019 SCC OnLine Bom 3155], to argue that an investigation by an unauthorized officer is void ab initio, and any proceeding based on it cannot stand.
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The Court examined Sections 2(91), 3, 5, and 67 of the CGST Act and held that only a “proper officer” can initiate inspection, search, and seizure under Section 67.
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The investigation by Respondent No. 2, not being a proper officer, was thus without jurisdiction. Any proceedings or notices based on such investigation lacked legal sanctity.
Judgment (Paras 16–End):
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The show cause notice dated 11.04.2023 issued by Respondent No. 1 was quashed.
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The respondents were directed to refund ₹50,00,000 (paid under protest) and return the seized materials within eight weeks.
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Liberty was reserved for the proper officer to initiate fresh proceedings in accordance with law.
Between Fine Lines (Practical Takeaway):
If GST investigations are initiated or searches are carried out by officers not authorized (“improper officers”), any subsequent notice or demand—no matter if issued by a proper officer—is rendered invalid. Taxpayers can contest such proceedings and claim refund of amounts collected during such invalid investigations.
Summary of Cases Referred
| Case Name | Citation | Principle Laid Down |
|---|---|---|
| Pooran Mal v. Director of Inspection | (1974) 1 SCC 345 | Evidence obtained in illegal search can still be used if relevant; however, not applicable under GST where jurisdiction is statutory. |
| C. Ramaiah Reddy v. ACIT | [2012] 20 taxmann.com 781 (Karnataka) | If search and seizure are illegal or by an unauthorized officer, subsequent proceedings are void ab initio. |
| Vinit Kumar v. CBI | 2019 SCC OnLine Bom 3155 | Executive action violating fundamental rights or conducted without authority cannot justify evidentiary use. |
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