AMIT BAJAJ ADVOCATE

Introduction

In recent times, the GST Department in Punjab has intensified its enforcement activities by conducting frequent raids under Section 67 of the Central Goods and Services Tax Act, 2017 (CGST Act) and the Punjab Goods and Services Tax Act, 2017 (Punjab GST Act). During such raids, it has become commonplace for the authorities to seize loose sheets, WhatsApp chats, and digital data, and subsequently initiate coercive action alleging unaccounted supplies of goods or services.

However, a pertinent question arises — can loose papers and uncorroborated digital messages be treated as conclusive evidence of undisclosed transactions under the law?

The answer lies in the landmark decision of the Hon’ble Supreme Court in Common Cause (A Registered Society) v. Union of India, [2017] 394 ITR 220 (SC), wherein the apex court elaborated on the evidentiary value of such materials.

Factual Background of the Supreme Court Case

In this case, searches were conducted on the Sahara and Birla groups by investigating agencies. Materials seized included random sheets, loose papers, computer printouts, pen drives, and hard disks which allegedly contained incriminating entries pointing to possible pay-offs to high-ranking public officials.

The Petitioners prayed for investigation against various individuals based on such material. However, the Supreme Court refused to order any investigation and laid down important principles that are equally applicable in the context of tax laws such as GST.

Key Legal Principles Laid Down

1. Loose Papers Not Admissible Under Section 34 of the Indian Evidence Act

The Court held that loose sheets of paper have no evidentiary value unless they are shown to be part of regularly maintained books of account. As per Section 34 of the Indian Evidence Act, entries in books of account are relevant only if they are maintained in the regular course of business.

“Loose sheets of papers are wholly irrelevant as evidence being not admissible under Section 34… being of no evidentiary value.” — Para 20, Common Cause Judgment

This reasoning was based on the earlier decision in C.B.I. v. V.C. Shukla (1998) 3 SCC 410, where the Court had drawn a clear distinction between books of account and scraps of paper or personal notes.

2. Requirement of Corroborative Evidence

Even if entries are made in proper books of account, they cannot alone be used to fasten liability. There must be independent corroborative evidence to support those entries.

This aligns with the Supreme Court’s observation:

“The statement made therein shall not alone be sufficient evidence to charge any person with liability… independent evidence is necessary as to the trustworthiness of those entries.” — V.C. Shukla Case

Thus, merely finding a WhatsApp message or handwritten note indicating a sale or payment cannot be taken as conclusive evidence of a supply of goods or services under GST law.

3. Investigation Cannot Be Based on Inadmissible Material

The Court cautioned against initiating investigations or criminal proceedings based solely on inadmissible, unauthenticated material, such as loose papers or unverified digital records.

“There has to be some relevant and admissible evidence and some cogent reason… supported by other circumstances.” — Para 21, Common Cause Judgment

This protects taxpayers from arbitrary action based on unverified, possibly fabricated entries.

4. Loose Papers and WhatsApp Chats Not Maintained in the Course of Business

In the GST context, WhatsApp chats or notes scribbled during day-to-day activities may represent casual calculations, discussions, or projections, and unless they are backed by invoices, e-way bills, ledger entries, or bank records, they cannot be used to infer actual taxable supplies.

The Income Tax Settlement Commission, whose observations were accepted by the Supreme Court, held in the Sahara case that:

“The department has no evidence to prove that entries in these loose papers and electronic data were kept regularly during the course of business…” — Para 22, Common Cause Judgment

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Implications for GST Raids in Punjab and Beyond

Given the ruling of the Supreme Court, certain legal safeguards must be respected by GST officers during search and seizure operations:

 Due Diligence Before Drawing Conclusions

Officers must not treat every scribbled figure or informal communication as proof of undisclosed supply. They must examine whether:

        •       The document was maintained regularly.

        •       There is any corroborative evidence (e.g., stock movement, cash trail, invoice, recipient statement).

❌ No Blind Reliance on WhatsApp or Personal Notes

WhatsApp chats, Excel files, or calculations found on devices during a raid must be linked with actual business transactions before forming a basis for tax liability.

Protection from Arbitrary Action

In the absence of credible, corroborated evidence, initiating proceedings or making tax demands solely based on loose documents may violate the taxpayer’s right to fair investigation and due process under Articles 14 and 21 of the Constitution.

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Relevant Case Law

          •       Common Cause v. Union of India (2017) 394 ITR 220 (SC)

          •       C.B.I. v. V.C. Shukla (1998) 3 SCC 410

          •       State of Haryana v. Bhajan Lal 1992 Supp (1) SCC 335 – Laid down the test for quashing FIRs filed on the basis of legally insufficient material.

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Conclusion

The Supreme Court’s verdict in Common Cause v. Union of India serves as a crucial judicial precedent to prevent the misuse of unverified and inadmissible material during tax enforcement actions.

For businesses in Punjab and across India, this ruling reinforces the principle that substance must prevail over form, and truth must be established through legally admissible and corroborated evidence — not mere conjectures or random entries.

As GST enforcement continues to evolve, it is essential for both taxpayers and authorities to act within the framework of law and constitutional safeguards.