From Sonic Retro
The Shovel Claw is an upgrade available to Knuckles the Echidna in both Sonic Adventure and Sonic Adventure 2 which gives the character the ability to dig in the ground and through walls in levels (and in the case of Sonic Adventure, adventure fields.)
After Knuckles' fight with Chaos 2, go to the valley next to Tails' workshop in Mystic Ruins. Enter the cave there and go into the first cave therein. You will see a Baby Kiki and a gate will lock Knuckles into an area where the Shovel Claw upgrade sits.
Sonic Adventure 2
In order to get the Shovel Claw upgrade in Sonic Adventure 2, the Pumpkin Hill stage needs to be accessible; from the start of the level, look straight ahead and go to the first platform; it is connected by a narrow walkway. The Shovel Claw upgrade is required to finish the level.