Delhi High Court Says Admissibility Of Electronic Evidence In GST Dispute Must Be Decided By Appellate Authority

The Delhi High Court has refused to entertain a writ petition challenging a GST demand on the ground that it was based on inadmissible third-party electronic evidence, holding that questions relating to the admissibility, authenticity, and evidentiary value of electronic records are matters to be examined by the statutory appellate authority and not in writ jurisdiction.

The Division Bench of Justices Anil Kshetrapal and Shail Jain dismissed a petition challenging an order passed under Section 74 of the CGST Act confirming demands exceeding ₹1.5 crore along with interest and penalty.

"...The evidentiary value to be attached to each of the materials relied upon by the Respondents, and the legality of the conclusions ultimately drawn by the adjudicating authority are all matters which fall squarely within the province of the statutory appellate authority," it held.

The demand was based on an investigation in which the department relied upon electronic data allegedly recovered from the laptop of a third party, loose papers and statements recorded during the investigation.

Petitioner contended that the impugned order violated the principles of natural justice as the adjudicating authority had failed to consider its detailed reply and had denied an effective opportunity of hearing.

It further argued that the demand rested on electronic records recovered from a third party whose authenticity and admissibility had not been established in accordance with law. It was also submitted that no opportunity of cross-examination of the persons whose statements were relied upon had been granted.

Petitioner lastly contended that proceedings for the period in question were impermissible since the relevant period had already been subjected to statutory audit under Section 65 of the CGST Act.

At the outset, the High Court rejected the grounds alleging violation of natural justice, citing that Petitioner had admittedly participated in the adjudication proceedings through its authorised representative and had submitted a detailed written reply.

“The grievance of the Petitioner, in substance, is not one of absence of opportunity but of the manner in which the adjudicating authority appreciated the defence put forth by the Petitioner. Such a grievance, by itself, does not amount to a violation of the principles of natural justice so as to justify invocation of the extraordinary jurisdiction of this Court under Article 226 of the Constitution of India,” Court said.

So far as challenge to the electronic evidence is concerned, the Court held that Petitioner's contentions that electronic records were inadmissible for want of compliance with Section 63 of the Bharatiya Sakshya Adhiniyam, 2023, that the forensic report failed to establish the authenticity of the records, and that cross-examination had been wrongly denied— all went to the evidentiary foundation and merits of the adjudication.

It observed,

"Whether the statutory requirements governing admissibility of electronic evidence stand complied with, whether the chain of custody has been satisfactorily established, whether the forensic examination sufficiently authenticates the electronic records and what evidentiary value is liable to be attached thereto are all matters which directly bear upon the merits of the adjudication. This Court does not consider it appropriate to pronounce upon any of the aforesaid issues in exercise of its writ jurisdiction..."

The Bench further observed that questions relating to the admissibility of electronic material, denial of cross-examination, evidentiary value of investigation records and the impact of the earlier statutory audit would require appreciation of disputed facts and evidence, an exercise that falls within the jurisdiction of the appellate authority under Section 107 of the CGST Act.

As such, the Court dismissed the petition.

For Petitioner: Advocates Tanmay Mehta,  S. Islam, Lalit valecha, Rashmi Gagoi, Aqsa khan

For Respondents: Advocates Shubham Tyagi, SSC, CBIC with Advocate Navruti Ojha